Applying the Parental Income Test (PIT) for ABSTUDY and Youth Allowance (YA) 108-02010020

Is the customer considered to be independent for the purposes of ABSTUDY or YA?

• Yes, the customer is independent; this procedure does not apply. If unsure, see:
• Independence for Youth Allowance (YA) customers
• Procedure ends here
• No, the customer is a dependent ABSTUDY or YA customer. Go to Step 2

Check the parent details and update as required within the customer's record.

If the customer is claiming:

• YA, go to the PIT Parent Section (NPPS) screen via Super Key
• ABSTUDY online or via Assisted Customer Claim (ACC), select Relationships
• ABSTUDY via the ABSTUDY Claiming Tool or paper claim, update the PIT Parent Selection (NPPS) screen as required

If the customer is claiming or receiving YA or ABSTUDY and the PIT link requires updating, see Creating, updating and ending Parental Income Test (PIT) links with dependent student, Australian Apprentice and job seeker recipients or claimants.

The parent's Customer Reference Numbers (CRN) and Tax File Numbers (TFN) (or TFN exemption) must show on the Relationship Summary (NRS) screen/known parent/guardian relationship line for the customer to be paid YA or ABSTUDY.

Note: NRS is only available in Customer First. Services Officers will need to go to the parent(s)/guardian(s) record and check TFN/TFS against the PAR Service Reason.

If no CRN exists for the parent(s)/guardian(s), see Creating, updating and ending Parental Income Test (PIT) links with dependent student, Australian Apprentice and job seeker recipients or claimants.

If there is no TFN for the parent(s)/guardian(s) showing on the TFN/TFS screen, the parent(s)/guardian(s) must be asked to provide their TFN, or provide a valid TFN exemption reason.

If no TFN, or TFN exemption, has been provided by the parent(s)/guardian(s) and the customer is:

• a YA customer, the claim will automatically reject Failed to Supply Documents (FSD)
• a current YA customer, the payments will cancel Parent TFN not provided (PTF)
• an ABSTUDY customer, all reasonable efforts should be explored to assist the parent to obtain the TFN. See Tax File Number (TFN) for ABSTUDY

Other dependants will include siblings:

• receiving:
• ABSTUDY
• Assistance for Isolated Children (AIC) Scheme (Additional Boarding Allowance) students, or
• YA
• who meet the definition of an FTB child aged 0 - 15 or 16-19 years and in full-time secondary study
• who are regular care children and whose parent(s) have verified rent recorded

These dependant customers will be included in the family pool of children for calculation of the PIT reduction amount.

Are there any other dependants in the family to be included in the family pool?

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

For more information on how to code siblings details, see Changes which may affect the Parental Income Test (PIT).

If the customer is claiming YA or ABSTUDY, dependent siblings sharing a common parent with the customer are automatically linked when PIT links are created.

If other siblings are being included as part of the family unit, and the siblings have not been linked on the PIT Sibling Selection (NPSS) screen, see Linking sibling records with customers/students/Australian Apprentices/job seekers - Parental Income Test (PIT).

• For YA and ABSTUDY customers, a PIT exemption applies if a parent(s)/guardian(s) satisfies one of the following:
• Receives a social security payment or a payment paid by the Department of Veterans' Affairs (DVA) listed in Module L of Section 1067G of the Social Security Act 1991 (for example, Service Pension, Income Support Supplement (ISS), Veteran Payment)
• Receives ABSTUDY Living Allowance
• Receives Farm Household Allowance (FHA)
• For ABSTUDY, a Health Care Card (HCC)
• For YA, an exemption does not apply if the customer's parent's income support is:
• in an employment income nil rate period
• in an income review period, or
• cancelled or suspended
• For ABSTUDY an exemption does not apply:
• for a period after the expiry date on the card
• where a parent holds an HCC because they receive a social security Mobility Allowance (MOB) or Carer Allowance (CA) (for a disabled child)
• if the applicant or the applicant's partner is not receiving an income support payment and holds only a Pensioner Concession Card (PCC) or a Commonwealth Seniors Health Card (CSHC)
• if a parent only holds a Low Income Heath Card (only for ABSTUDY Living Allowance customers), or
• if the customer's parent is in an employment income nil rate period

Note: for YA and ABSTUDY: a recent change in parental circumstances may trigger a review or request of Parental Income details, see Changes which may affect the Parental Income Test (PIT).

Does the parent(s)/guardian(s) meet one of these conditions for a PIT exemption?

• Yes, go to Step 6
• No, see Table 2, Step 1

For most PIT exemption categories, the system will automatically update the PIT exemption reason. The links need to be updated and correct on the:

• Household Income and Assets (NHI) screen in Customer First
• Manage Parental Income (NHI) screen in Process Direct

Exceptions: for approved Department of Veterans' Affairs (DVA) payments, the system will automatically update the NHI screen/table with the PIT exemption reason as long as the DVA payment is coded on the Veterans Affairs Pension (DVA) screen on the parent/guardian record. If it is not, the parent/guardian record will need to be manually coded/updated. Not all DVA payments which can be coded on the parent's DVA screen provide a PIT exemption.

See Payments from the Department of Veterans' Affairs (DVA) and referrals to the DVA Clearance Team.

For ABSTUDY where a PIT exemption applies because parent(s)/guardian(s) hold an HCC based on receipt of maximum rate FTB Part A, a manual PIT exemption may need to be coded on the system:

• check the Future Activity List (FAL) screen to make sure an auto review is present. The auto review should be maturing on the day before the Health Care Card Auto exemption is due to stop
• if no auto review is present on the FAL screen, in Customer First, create a manual review on the Review Registration (RVR) screen and complete the fields as follows:
• Service Reason: ABY
• Review Reason: REV (Manual Review)
• Due Date: 7 days before the expiry date of the HCC
• Source: INT
• Date of Receipt: today's date
• Notes: Check continued eligibility for PIT exemption based on the parent(s)/guardian(s) being in receipt of a HCC. Return to OB 108-02010020 for action
• Keywords: #NSSBRU
• Workgroup: leave blank
• Position: leave blank
• Transfer to Region: ABS
• The review will mature on the Due Date coded in the RVR activity. Workload Management will allocate the review for manual action

If the customer is claiming:

• YA, go to the Manage Parental Income (NHI) screen in Process Direct
• ABSTUDY online or via ACC, select the Relationships icon in Process Direct
• ABSTUDY via the ABSTUDY Claiming Tool or paper claim, update the PIT Parent Selection (NPPS) screen as required

Check the NHI screen has an appropriate PIT exemption reason showing in the PIT Exempt Rsn: field. If the details do not match, the parent(s)/guardian(s) record may need adjusting.

Note: if verified income details are supplied for all linked parent(s)/guardians(s), including where actual income is available on the FAO Income for Previous Year (FIPY) screen, code details on the NHI screen. This will avoid having to request the parental income details again if the parents' circumstances change and the PIT exemption no longer applies. Go to Table 3, Step 1.

Step-parents: If the customer has a step-parent, staff should consider this in the assessment. See Background for further information.

If a dependant claimant was receiving YA/ABSTUDY/AIC in the same year, the parent(s)/guardians(s) do not need to provide parental income details if they have previously been provided.

Collect information of the parent(s)/guardian(s) combined income for the base and/or current tax year. The base tax year is the financial tax year ending in June of the previous calendar year, for example, for 2023 the base tax year is the 2021-22 financial year.

Combined parental income equals the sum of:

• taxable income:
• includes taxable income less any allowable deductions, if it is below or above the tax-free threshold
• a negative taxable income amount is counted as zero. The Australian Taxation Office (ATO) consider a loss as meaning the person has no taxable income and often taxation losses can be deducted from future taxable income. A tax loss cannot be offset against the other components of parental income
• if the parent is self-employed or a sole trader, Services Australia accepts the figure on their Tax Notice of Assessment (NOA) for the purposes of PIT
• adjusted employer provided reportable fringe benefits, including salary sacrifice, as shown on the customer's group certificate:
• exempt reportable fringe benefits are automatically converted to the lower adjusted amount using the fringe benefits tax rate
• other reportable fringe benefits are not converted. 100 per cent is included in parental income
• reportable superannuation contributions
• target foreign income (except if received as a gift from an immediate family member)
• total net investment losses
• tax free pensions and benefits are included in the PIT. Use TXGS for payments made under the Centrelink program, or obtain information from parents if received from another government department or agency
• less maintenance paid

Parental income should be advised online. See Completing Parent(s)/Guardian(s) details for the Base Tax Year and Current Tax Year (MOD JY) for more information.

If the parent/s have received income from overseas, the foreign income must be converted to Australian Dollars (AUD), see Foreign currency and exchange rates.

Verification of combined parental income is required:

• for all new YA/ABSTUDY claims, or
• where an estimate of parental income was previously provided and a PIT estimate review/letter is issued to obtain actual taxable income from the customer's parents

If the declared amount precludes payment of YA, verification is not required. If the claim is being assessed:

• before 1 September, record the income as an estimate and allow the system to reject or cancel Parental Income too High (PIH). If the claim rejection is finalised before the review date, the request for verification will not issue. Code the review date as:
• 14 days after the date the claim is processed, or
• 1 September, if the claim is being processed in the 14 days before 1 September
• after 1 September and the system will not accept an estimate:
• delete provisional data from the NHI screen
• reject the claim Failed to Supply Documents (FSD)
• if evidence of parental income is the only document the customer failed to provide, create a Fast Note - select Auto text, use Generic > Claims > YAL rejected FSD for TNAs

See Documents accepted as evidence of parental income.

Estimates may be accepted where the parent(s)/guardian(s) have not provided, or are unable to provide, verification.

For new claims, the parent/guardian may indicate in their MOD JY they have received their NOA but not supply evidence. Service Officers must update:

• NHI with Estimate: field Y, and
• Review Date: field as 14 days after the claim is processed except where the YA start date is more than 14 days after the date the claim is processed, in this case, code the start date + 1 day

Estimates cannot be accepted after 1 September of the calendar year following the base tax year.

Service Officers must make 2 genuine attempts to contact the parent(s)/guardian(s) to request the information verbally.

If contact attempts are unsuccessful, make a request for information. See Requesting information (CLK), go to Step 2.

See Youth Allowance (YA) and ABSTUDY Parental Income Test (PIT) reviews or Dealing with ABSTUDY customer enquiries about annual Parental Income Test (PIT) reviews.

When an estimate is recorded:

• a reminder letter automatically issues on the review date recorded on the NHI screen
• the customer's payment auto suspends 21 days later if:
• verification is not provided, or
• the estimate review date is not extended

This verification procedure applies to:

• new claims
• change of circumstances (such as change of parent) and current/reverse year assessments.
  For verification of parental income for the annual PIT review, see Youth Allowance (YA) and ABSTUDY Parental Income Test (PIT) reviews

Is further information required?

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

If further information is required from the parent(s)/guardian(s), see Request for information (CLK).

For review activities:

• Service Officers must not code any information at this point
• the correct procedure is to hold the review activity:
• go to the Activity List (AL) screen in the customer's record
• key H (Hold) in the field to the left of the PIT Review: Youth Allowance/NSS form for YA customers ABSTUDY/ISS form for ABSTUDY customers
• select [Enter]
• on the Activity Details (AY) screen key the due date for the requested information in the Resubmit Date: field (usually 14 days in the future)
• in the Notes: field type a brief description of what has been requested
• select [Enter]

For new claims, the claim will automatically be placed on hold.

If the information is:

• returned, go to Step 3
• not returned, go to Step 4

Has the parent(s)/guardian(s) indicated that their income has substantially changed since the base tax year?

• Increase - if a parent(s)/guardian(s) or customer advises of an increase in parental income in the current tax year, establish if the parental income has increased by at least 25% in comparison with the base tax year. It must also be at least 25% higher than the Parental Income Free Area (PIFA). For the current PIFA, see Parental Income Test (PIT) - Youth Allowance (YA). See Increase or decrease in the Parental Income for YA, ABY and AIC
• Decrease - if the parent(s)/guardian(s) or the customer have advised that the income has decreased substantially since the base year, and is likely to last for at least 2 years, they should provide details:
• in the advise Parental Income online, or
• complete a MOD JY. See Completing Parent(s)/Guardian(s) details for the Base Tax Year and Current Tax Year (MOD JY) for more information
• see Increase or decrease in parental income for Youth Allowance (YA), ABSTUDY and Assistance for Isolated Children (AIC) Scheme
• No change, see Table3, Step 1

If the requested information has not been returned by the due date, and the activity being actioned is:

• a change of circumstance (such as change of parent) or an increase or decrease in parental income assessment for an ABSTUDY customer, the customer cannot continue to be paid their means tested living allowance or the income tested component of School Fee Allowance Group 2, but they continue to be eligible for other ABSTUDY payments. Record zero income on the NHI screen from the change of circumstances date, to stop the ABSTUDY payments which are affected by the Parental Income Test
• a change of circumstance (such as change of parent) or an increase or decrease in parental income assessment for YA customer cancel the customer using the Failed to supply documents (FSD) code using the appropriate procedure below:
• Cancellation of Austudy or Youth Allowance (YA) students and Australian Apprentices
• Coding a cancellation (for Youth Allowance job seekers)
• a new claim, and a Request for Information (RFI) letter has been issued, and the customer has not uploaded the requested information to the task by the due date, the system will attempt to reject the claim using the Failed to supply documents (FSD) code, see Circumstance Change Monitor (CCM). If the attempt to reject the claim fails and it has been allocated to a Service Officer, manually reject the claim using the FSD code

If assessing and coding:

• YA or ABSTUDY claims lodged online, Assisted Customer Claim or via an SY001, use the Manage Parental Income (NHI) table in Process Direct
• Otherwise, use the Household Income and Assets (NHI) screen in Customer First

Code the Event Date. To determine the Event Date, see Event date for Parental Income.

When coding NHI for a new claim:

• use a date on or before date of qualification in the year of grant
• check information is correct and assessing the correct tax year

In Process Direct, this date defaults to the date of lodgement of the claim.

Code the Financial Year Ending: as the base year, or the current year if a current year assessment can be granted.

Code for each parent(s)/guardian(s) separately their Taxable income assessed by the Australian Taxation Office. Or an estimate of taxable income that the agency is able to accept as an estimate.

A new NHI page must be inserted unless correcting existing parental income details for a financial year.

• If the parent(s)/guardian(s) have declared that their, and their partner's, parental income from all sources is $0, and:
• they have not indicated a substantial reduction in their income in the year following the base tax year which will last at least 2 years, or
• they advised that there are no other dependent siblings with information recorded on their siblings’ NHI screen which contradicts the $0 income declared on the online or paper MOD JY, or
• there is no actual income on the parent/guardian(s) FAO Income for Previous year (FIPY) screen which contradicts the $0 income declared on the online or paper MOD JY, Go to Step 3

If the parent has not provided the actual parental income, and/or the estimate provided is not reasonable, the NHI must remain coded as $0:

• go to the NHI screen
• in the Taxable Income: field, delete any entry for the relevant parent(s)/guardian(s) leaving the field blank
• the system will automatically populate the Taxable Income: field with $0
• finalise the activity ensuring the outcome is correct

If the parental income is an estimate code Y in the Estimate: field, enter the date the parent/guardian anticipates that their Taxation Notice of Assessment will be available in the Review Date: field.

If parental income is recorded with an estimate and they have now provided the actual parental income, see Assessing and coding parental income for ABSTUDY, Assistance for Isolated Children (AIC) Scheme and Youth Allowance (YA).

If the customer is PIT exempt, and the parental income provided is an estimate, do not record any income on the NHI screen. If a customer has 2 PIT parents but only one with a PIT exempt reason, the system may populate income of $1 for the other parent. To make sure no combined income is recorded, and the review form will issue if the exempt parent loses their exemption, code the following on the non-exempt parent's NHI screen:

• in the Taxable Income: field, delete any entry for the relevant parent(s)/guardian(s) leaving the field blank
• the system will automatically populate the Taxable Income: field with $0
• finalise the activity ensuring the outcome is correct

Is other parental income available/provided?

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

For some claims or PIT activities in Process Direct, and some PIT activities processed in Customer First, $1 may automatically be coded by the system in the Taxable Income: field on the Manage Parental Income screen or the Household Income and Assets (NHI) screen.

The following workaround may need to be undertaken by Service Officers when assessing taxable income to stop the system from:

• incorrectly rejecting or cancelling YA with the PIA (Parental Income & Assets Not Provided) reason, or
• stopping the payment of ABSTUDY Living Allowance, or
• incorrectly adding unnecessary $1 amounts to the overall parental income test calculation result

Determine the action to take based on if the customer is being assessed against one parent or 2, and those parents' taxable income and all remaining income test components which form part of the PIT:

At least one parent must have at least $1 of taxable income recorded.

• If the assessment is against one parent and their income is less than $1, code $1 in the Taxable Income field
• If the assessment is against one parent and their income is $1 or more, code the actual income as advised or verified
• If the assessment is against 2 parents and both parents' income is less than $1, code $1 for each
• If the assessment is against 2 parents and one parent's income is less than $1 and the other is $1 or more, code $1 for the parent with zero income and the actual income as advised or verified for the parent with income

Go to Step 5.

If other income is available from the FIPY screen or provided by the parent(s)/guardian(s), record the details on the NHI screen:

• Overseas income: income earned outside Australia that is not taxable in Australia.
  Note: the Australian Dollar value can be manually calculated by dividing the foreign currency amount by the exchange rate at 1 July of the relevant financial year.
• Go to the Foreign Exchange Summary (RDFXS) screen
• In Process Direct, select the Relevant Country or Currency
  Select Search
• In Customer First, select S for the relevant currency and scroll down to find the historical rates on the Foreign Exchange Details (RDFXD) screen
• Maintenance paid: amount paid as child support or to support a previous partner
• Net Investment Loss: total net investment losses
• Reportable super: reportable superannuation contributions
• Tax free pensions/benefits: total of all applicable amounts received
• Exempt reportable fringe benefits: the reportable fringe benefit amount, as recorded on a customer's group certificate, should be advised and recorded. Once recorded, this is automatically converted to the lower adjusted amount using the fringe benefits tax rate (see field help)
• Other reportable fringe benefits: the reportable fringe benefit amount, as recorded on a customer's group certificate, should be advised and recorded. Once recorded, this amount will not be converted. 100 per cent will be included in parental income

Note:

• assessments made before 1 January 2016 also included Maintenance Received as a component of income
• if processing update within Process Direct, each parent CRN in the Manage Parental Income (NHI) screen should be selected to view and compare actual parental income figures from the parent record

Service Officer must make sure the record is correctly documented. See Online Document Recording (ODR).