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

Category

Description

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How to apply a fortnightly reduction due to the PIT

Note: examples may not contain current rates.

Formula used in calculation

• Step 1 - (combined annual parental income - Parental Income Free Area (PIFA))
• Step 2 - divide amount from Step 1 (disregarding any cents) by 130 (this number has been arrived at by applying the 20 cent reduction and then dividing by 26 fortnights) to get the 20% family taper at a fortnightly rate
• Step 3 - calculate the individual's Maximum Payment Rate (MPR) (before any PIT calculations):
• the MPR for YA and ABSTUDY includes basic benefit for YA or the Living Allowance component for ABSTUDY, Rent Assistance, Pharmaceutical Allowance and Youth Disability Supplement
• the MPR for ABSTUDY Group 2 School Fees Allowance is the full amount of the means tested component payable prior to any reduction due to income
• the MPR for Assistance for Isolated Children is made up of the Additional Boarding Allowance component
• Step 4 - total the pooled MPR for each person within the family pool who has parental income in common
• Step 5 - calculate the Maximum notional Family Tax Benefit (FTB) rate (as applied to Youth Payments only) (MNFR) for all the children in the family pool. See the Process page in Family Tax Benefit (FTB) Part A (Method 1)
• Step 6 - to calculate the fortnightly MNFR contributions to the family pool divide the yearly FTB A figure by 365, round to 2 decimal points and times by 14. The result is the fortnightly MNFR rate
• Step 7 - calculate the Family Pool Maximum rate. Total the pooled MPR from step 4 and the MNFR from Step 6. This will be the Family Pool maximum rate. Income Portion Percentage
• Step 8 - calculate the child's family pool percentage. Divide the individual's MPR from Step 3 by the Family Pool Maximum Rate from Step 7. The result will be required to be changed to a percentage
• Step 9 - calculate the child's payment reduction for YA/ABY or AIC. Multiply the fortnightly taper reduction from Step 2 by the family pool percentage from Step 8. The result will be the PIT reduction amount
• Step 10 - calculate the child's payment entitlement. Minus the PIT reduction amount from the customer maximum fortnightly entitlement. The result will be the amount of payment of YA/ABY/AIC that the customer will receive

2

Apply the formula to an example

Example: Youth Allowance customer living at home with a sibling aged 13 years in 37% shared care.

Note: the example below is using the PIFA from 2020 of $54,677. For the current PIFA, see Parental Income Test (PIT) - Youth Allowance (YA).

• Step 1 - calculate the excess parental income. Subtract the PIFA from the combined parental income ($83,212 - $54,677.00 = $28,535.00). The excess parental income is $28,535.00
• Step 2 - calculate the fortnightly taper reduction. Divide Step 1 calculation result by 130. ($28,535.00 / 130 = $219.50) The fortnightly taper reduction is $219.50
• Step 3 - calculate Child A's individual Maximum Payment Rate (MPR). YA Basic Rate + Energy Supplement ($304.60 + $4.60 = $309.20). The individual MPR is $309.20
• Step 4 - calculate the pooled MPR. The pooled MPR is the total of all Income Support Payment (ISP), ABSTUDY and AIC recipients. As there is only one sibling receiving an ISP, the pooled MPR is $309.20 (Child A's MPR)
• Step 5 - calculate the Maximum notional Family Tax Benefit (FTB) rate (as applied to Youth Payments only) (MNFR). The MNFR is the calculation used for the family pool contribution for all siblings receiving/attracting FTB A. (In this scenario there is one sibling aged 13 years in 37% shared care) The rate is calculated using Calculating Family Tax Benefit (FTB) Part A (Method 1).
  Part A child rate $6,427.65 x percentage of family assistance 29% = $1,864.02
  Energy Supplement Part A $116.80 x percentage of family assistance 29% = $33.87
  Total $1,897.89
  Note: there is difference between shared care percentage and the percentage as applied to the FTB rate. See Percentage of shared care used for family assistance. It is calculated once, regardless of how many relevant siblings there are, and then applied when working out the Parental Income Test Result for each YA/ ABSTUDY claimant/recipient with parental income in common with those siblings
• Step 6 - to calculate the fortnightly MNFR contribution to the family pool divide the yearly FTB A figure by 365. ($1,897.89 / 365 = $5.1997) round to 2 decimal points $5.20 and multiply by 14. ($5.20 x 14 = $72.80). The fortnightly MNFR is $72.80
• Step 7 - calculate the Family Pool Maximum Rate. Total the pooled MPR from Step 4 and the MNFR from step 5 ($309.20 + $72.80 = $382.00). The Family Pool Maximum Rate is $382.00
• Step 8 - calculate Child A's family pool percentage. Divide the individual MPR from Step 3 by the Family Pool Maximum Rate from Step 6 ($309.20 / $375.94 = 0.8225). Change the calculation result into a %. The family pool percentage is 82.25%
• Step 9 - calculate Child A's payment reduction. Multiply the fortnightly taper reduction from Step 2 by their family pool percentage from Step 7 ($219.50 x 82.25% = $180.54). Child A's payment reduction is $180.54
• Step 10 - calculate Child A's payment rate. Subtract Child A's individual MPR from Step 3 from Child A's payment reduction from Step 8. ($309.20 - $180.54= $128.66)
  Due to parental income, Child A's rate of payment (YA Basic Rate + Energy Supplement) will be $128.66per fortnight

Category

Description

1

Social Security Payments

• Age Pension
• Austudy payment
• Benefit PP (partnered)
• Bereavement Allowance (until 25/06/2020)
• Carer Payment
• Disability Support Pension
• JobSeeker Payment (from 20/03/2020)
• Mature Age Allowance
• Mature Age Partner Allowance
• Newstart Allowance (until 19/03/2020)
• Pension PP (single)
• Sickness Allowance (until 19/03/2020)
• Special Benefit
• Widow B pension (until 19/03/2020)
• Wife pension (until 19/03/2020)

2

Department of Veteran's Affairs Payments

• Compensation for an armed services widow who has a dependent child
• Compensation of armed services widow who has no dependent children
• Defence widow's pension - if the widow has a dependent child
• Defence widow's pension - if the widow has no dependent children
• Income support supplement
• Service pension (age)
• Service pension (carer)
• Service pension (invalidity)
• Service pension (partner) - if partner is receiving service pension (age)
• Veteran Payment
• War widow's pension - if the widow has a dependent child
• War widow's pension - if the widow has no dependent children
• Service pension (partner) - if partner is receiving an invalidity service pension

Category

Description

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Parents serving an Income Maintenance Period (IMP)

Q: Parent is serving an Income Maintenance Period (IMP) - is the Parental Income Test (PIT) applied?

A: If a parent has applied for an income support payment and is currently serving an IMP which reduces their pay rate to zero - they are not taken to be receiving an income support payment.

Module L of the Youth Allowance (YA) rate calculator states that receipt of certain payments means the PIT is not applied. However, if the parent has an IMP, they are not actually receiving the payment yet. In these cases, the PIT will apply until the end of the IMP.

There are situations which override this rule.

When a person is subject to an IMP, and if there is another dependent child (in addition to the student claiming YA) for whom the parents receive family assistance then the family assistance is increased to the maximum rate (because the partner has claimed an income support payment) and the parent is eligible for a Health Care Card (HCC). If the parent of an ABSTUDY customer holds a valid HCC they are exempt from the application of the PIT.

2

Establishing if the parental income has increased by at least 25% (Reverse Current Income Assessment)

Jessica calls to advise of an increase in parental income in the current tax year. The Service Officer will need to 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).

Jessica's combined parental income for the base tax year (2013/2014) was $52,350.

Jessica's combined parental income for the current financial year (2014/2015) is $76,910.

Using the formula provided in Step 1 in the Parental Income Test reduction table, determine what percentage the parental income has increased by:

• (Current tax year income - base tax year income) = xx. Divide xx by base year income and multiply by 100. For example:
• $76,910 - $52,350 = $24,560
• ($24,560 / $52,350) x 100 = 46.91
• therefore, the parental income has increased by 46.91% in comparison to the base tax year

The Service Officer must make sure the current year income is at least 25% higher than the PIFA. To determine this, use the formula below and that is also supplied in Step 1 in the Parental Income Test reduction table:

• (Current tax year income - PIFA) = xx. Divide xx by the PIFA and multiply by 100. Note: as at 1 January 2016, the PIFA is $51,027
• $76,910 - $51,027 = $25,883
• ($25,883 / $51,027) x 100 = 50.72
• the parental income is 50.72% higher than the 2016 PIFA. Therefore, as there has been an increase of at least 25% above the base tax year and the PIFA, Jessica will be assessed on the basis of this higher parental income from 1 October in the current year. This is called a Reverse Current Income Assessment

3

Scenario - parents refusing to provide income details

Rachelle is an 18 year old job seeker who has applied for YA. Rachelle's parents are required to complete the section of the claim form which asks questions about parental income. Rachelle's parent refuses to complete this part of the form because they do not want to disclose their financial circumstances to Rachelle or Services Australia. They believe that Rachelle is entitled to income support because Rachelle is 18 years old and therefore old enough to be independent. Rachelle's other parent supports their stand and is also refusing to provide the information. Rachelle lives at home and says that there is no breakdown in the child - parental relationship.

Rachelle contacts the agency to advise of the circumstances surrounding the non-completion of the form.

Details of the parents' financial circumstances are not required if Rachelle meets any of the independence criteria as set out in the Social Security Act. See Independence for Youth Allowance (YA) customers.

Evidence will need to be provided to support Rachelle's claim of independence. If, at a later date, Rachelle does not continue to meet the independence criteria, details of the parents' financial circumstances will be required if payments are to continue.

If Rachelle is not independent, Services Australia does not need to ask for full details of the parents' financial circumstances if an exemption from the application of the Parental Income Tests applies (if, for example, the parents are receiving a certain social security benefit or pension or DVA payment). To determine this, the parents will need to answer a few general questions. This can be done online or via the Mod JY form. If the exemption no longer applies in the future, the full details of the parent's financial circumstances would be required to determine continuing entitlement to YA.

If Rachelle is not independent and not exempt from the Parental Income Test, Rachelle cannot qualify for payment unless the Services Australia is able to determine the effect, if any, that the Parental Income Tests have on the rate of YA.

If the parents still refuse to provide the required information, the Service Officer will discuss the reasons and provide answers to any questions. For example, the parents may be concerned that the agency will disclose information to third parties. The Service Officer will explain that the Privacy and Confidentiality provisions prevent such disclosure.

Note: Services Australia may be required, by Commonwealth legislation, to provide information in special circumstances. This includes providing information to the Australian Taxation Office (ATO) about income and taxation matters.

If parents continue to refuse to provide details about their financial circumstances, the claim will be rejected as the delegate cannot be satisfied that YA is payable.

Rachelle will be advised of appeal rights.