Income Test for partnered allowance customers 108-01020020

Is the customer in receipt of employment income?

• Yes, go to Step 2
• No, go to Step 3

Check the Adjusted Income: field on the Working Credit Balance Explanation (WCBE) screen on the Entitlement Period Start Day (EPSD) and each subsequent change point in the entitlement period which determines the income to be used in the rate calculation, see Working credits.

Does the customer have a partner who is receiving a pension?

Note: Partners in the 6 fortnight employment income nil rate period are considered to be in receipt of a pension. Partners who are suspended or cancelled – 'returned to work' (RTW) are not considered to be in receipt of a pension.

• Yes, go to Step 4
• No, go to Step 5

Where a customer's partner is receiving a social security pension, a Department of Veterans' Affairs (DVA) Service Pension, Veteran Payment or Income Support Supplement (ISS), or a rehabilitation allowance, the Income Test is applied to the combined total ordinary incomes.

Where the partner is receiving a pension, calculate the total ordinary income by performing the following tasks:

• If the pension partner is of Age Pension age and in receipt of a pension (excluding PPS) they may be entitled to the Work Bonus. Note: the Work Bonus is not used in the customer's transitional rules calculation but partners may still benefit by the reduction in total income
• Add the total gross ordinary income, minus any deductions for the Work Bonus of both partners together
• Divide the result by two to establish the personal income allocation
• If the customer is entitled to Working Credit, check the Adjusted Income: field on the Working Credit Balance Explanation (WCBE) screen on the Entitlement Period Start Day (EPSD) and each subsequent change point in the entitlement period which determines the income to be used in the rate calculation, see Working credits
• Deduct any direct deduction income for either party. Note: the direct deduction income amount is subtracted from the customer or partner's rate after the Income Test has been applied. Defined New Zealand pensions are always a direct deduction and affect each member of the couple equally
• Apply the pension Income Test to the pensioner partner. Go to Step 6

A customer's maximum fortnightly rate of allowance may be reduced by the deductions of their partner's excess income as well as their own ordinary income excess. Partner income over the Partner Income Free Area reduces the customer's payments by 60 cents in the dollar.

Calculate total ordinary income by performing the following tasks:

• If the customer is entitled to Working Credit, check the Adjusted Income: field on the Working Credit Balance Explanation (WCBE) screen on the Entitlement Period Start Date and each subsequent change point in the entitlement period which determines the income to be used in the rate calculation, see Working credits
• Establish the Partner Income Free Area. The Partner Income Free Area is the maximum amount of total ordinary income a customer's partner may have without reducing the customer's payment
• Determine if the customer's own assessable ordinary income will reduce their rate of payment. Calculate the customer's total ordinary income before calculating the Partner Income Free Area

Determine the customer's fortnightly total ordinary income for the purposes of their Income Test:

If their partner is a pensioner, this is half the couple's combined income.

If their partner is not a pensioner, only use the customer's actual income at this stage.

• If the customer's assessable ordinary income is less than their own income free area of $150, there is no effect
• To record employment income, see Recording and correcting employment income details
• To record other types of income, see Coding income and assets
• Go to Step 9
• If the ordinary income is between $150 and $256 a fortnight, or between $150 and $250 a fortnight for YA (job seeker), go to Step 7
• If the ordinary income is above $256/$250, go to Step 8

The customer's payment will be reduced by 50 cents for each dollar of ordinary income above the income free area of $150 per fortnight up to and including $256/$250.

Income reduction amount = (ordinary income for the fortnight - $150)/2.

For example, if the ordinary income earned was $200 (or $400 where their partner is a pensioner), the income reduction amount would be ($200 - $150)/2 = $25.

Go to Step 9.

The customer's payment will be reduced by:

• 50 cents for each dollar of ordinary income between $150 and $256/$250
• and then 60 cents for each dollar of ordinary income above $256/$250

To calculate the income reduction amount for the fortnight, use the following formula:

• Other than YA customers,
• Income reduction amount = (ordinary income for the fortnight - $256) x 60% + $53
• YA (other) customers
• Income reduction amount = (ordinary income for the fortnight - $250) x 60% + $50
• The maximum rate of payment is then reduced by the income reduction amount and the resulting amount is the rate payable

Is the customer's partner receiving a social security benefit or social security pension?

• Yes:
• for social security benefit, see Step 1 in Table 2
• for social security pension, see Step 3 in Table 2
• No, see Step 2 in Table 2

If the partner is receiving a social security benefit, the Partner Income Free Area is the amount of the partner's income beyond which the benefit would not be payable to the partner.

This includes basic benefit, Rent Assistance, Energy Supplement and Pharmaceutical Allowance, if applicable.

• Check the partner's record for the maximum fortnightly rate

To establish the Partner Income Free Area:

• Partner 22 and over (Partner's maximum fortnightly rate - $53) divided by 0.6 plus $256
• Partner gets YA (job seeker) (Partner's maximum fortnightly rate - $50) divided by 0.6 plus $250
• Partner gets YA STU or APP (Partner's maximum fortnightly rate - $45) divided by 0.6 plus $524

The result is then rounded up to the next dollar.

Go to Step 3.

For a partner not receiving a social security benefit, the Partner Income Free Area is calculated on the maximum basic fortnightly rate of allowance that the partner would qualify for based on their age, including Energy Supplement, rounded up to the nearest dollar.

For example for a partner under 18, use the maximum fortnightly rate of YA (job seeker).

To establish the Partner Income Free Area apply the formula:

• Partner 22 and over (Maximum fortnightly rate - $53) divided by 0.6 plus $256
• Partner under 22 (Partner's maximum fortnightly rate - $50) divided by 0.6 plus $250

The result is then rounded up to the next dollar.

Do the customer and/or their partner have any direct deduction income amount?

• Yes, go to Step 4
• No, go to Step 5

The Income Test is applied first and then the direct deduction amount is taken off the individual's rate determined under the Income Test.

Example: for this example the customer is in receipt of $100 per fortnight in compensation payments that are subject to direct deduction. Maximum rate of allowance for this example is $565.40 per fortnight. Other income is $300 per fortnight.

An income assessment is calculated first then the direct deduction is applied.

• Income reduction amount = (ordinary income for the fortnight - $256) x 60% + $53
• Income reduction amount = ($300 - $256) x 60% + $53 = $79.40
• Maximum rate = ($573.30 - $79.40) - direct deduction of $100 = $393.90 per fortnight

Note: generally, for a pension/allowee couple, although the total ordinary income is combined and divided by half for the customer's personal income amount, direct deduction amounts are not halved. These will have a direct effect on the customer's individual rate entitlement. Customers/partners who receive a defined New Zealand pension will each have this income directly deducted equally from their respective payment. See New Zealand Agreement and foreign pension information.

Record the customer's and/or their partner's income.

• To record employment income, see:
• Recording and correcting employment income details, or
• Assessment of employment income for Parenting Payment Partnered (PPP) customers over Age Pension age. Note: this procedure is only applicable before 7 December 2020
• To record other types of income, see Coding income and assets

Is there partner excess income (not applicable if the partner is a pensioner)?

• Yes, go to Step 7
• No, record details on a DOC. Procedure ends here

To determine whether there has been a partner excess income, take the Partner Income Free Area from the partner's income and multiply by 0.6.

If there is excess total ordinary income, this will be the amount deducted from the customer's fortnightly payment.

Note: for a JobSeeker Payment (JSP) customer with a partner who has turned 22, receiving PPP, once the partner's PPP is cancelled due to income, the partner's income must be assessed under the allowance Income Test.

Customers are unable to use any Working Credits they have accrued as this can only be used for employment income.

Note: where the partner's income is assessed under the Student Income Bank (SIB) or the Australian Apprentice Income Bank for Youth Allowance or Austudy, the partner's income is the amount calculated after the income bank assessment.