Family taper for the Parental Income Test (PIT) 108-02010080

The contribution to the family pool of a Family Tax Benefit (FTB) child or regular care child is the Maximum notional Family Tax Benefit (FTB) rate.

The 20% taper is then applied to the child's share of the parental income above the threshold. This means the rate of payment is reduced by 20 cents for each dollar of the child's share of their parents' income above the threshold.

Scenario

Dodi is 17, lives at home and is in Year 12. Dodi's parents combined annual income is $83,212.00.

Step 1 - Calculate the excess parental income.

Subtract the Parental Income Free Area (PIFA) from the combined parental income ($83,212.00 - $55,626.00 = $27,586.00). The excess parental income is $27,586.00.

Step 2 - Calculate the fortnightly taper reduction.

Divide step 1 calculation result by 130. ($27,586.00/130 = $212.20) The fortnightly taper reduction is $212.20.
Note: dividing by 130 is equivalent to dividing by 26 (for 26 fortnights in a year) and dividing again by 5 (so the parental income test result is only 20 cents for each dollar of the excess).

Step 3 - Calculate Dodi's individual Maximum Payment Rate (MPR).

YA Basic Rate + Energy Supplement ($303.20 + $3.90 = $307.10). Dodi's individual MPR is $307.10.

Step 4 - Calculate Dodi's payment rate.

Subtract the fortnightly taper rate from step 2 from Dodi's MPR from step 3. ($307.10 - $212.20 = $94.90). Under the parental income test Dodi's rate of payment (YA Basic Rate + Energy Supplement) will be $94.90 per fortnight.

Scenario

Harry and William are siblings. Their parents' combined income is $83,212.00 per annum.

Harry is 19 and applying for YA.

William is 13 and meets the definition of a FTB child in shared care of the parent(s) - 37%.

Harry lives at home and is studying full-time. Harry is not entitled to Pharmaceutical Allowance (PhA), Youth Disability Supplement (YDS) or Rent Assistance (RA), and has no personal income.

To work out the PIT reduction amount for Harry, apply the following calculation:

Step 1 - Calculate the excess parental income.

Subtract the Parental Income Free Area (PIFA) from the combined parental income ($83,212.00 - $55,626.00 = $27,586.00). The excess parental income is $27,586.00.

Step 2 - Calculate the fortnightly taper reduction.

Divide step 1 calculation result by 130. ($27,586.00/130 = $212.20) The fortnightly taper reduction is $212.20.
Note: dividing by 130 is equivalent to dividing by 26 (for 26 fortnights in a year) and dividing again by 5 (so the parental income test result is only 20 cents for each dollar of the excess).

Step 3 - Calculate Harry's individual Maximum Payment Rate (MPR).

YA Basic Rate + Energy Supplement ($354.60 + $4.60 = $359.20). Harry's MPR is $359.20.

Step 4 - Calculate the 'pooled' MPR.

The 'pooled' MPR is the combined payments for YA, ABSTUDY and AIC Additional Boarding Allowance dependent recipients in the family pool. As there is only one sibling receiving an ISP, the 'pooled' MPR is $359.20 (Harry's MPR).

Step 5 - Calculate the Maximum Notional Family Rate (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 (including the FTB Part A supplement only where parental income is under $80,000.00) using the Family Tax Benefit (FTB) Part A (Method 1) calculation.

FTB Part A child rate $6,486.05 x Percentage of FTB 29% = $1,880.95.

Note: FTB Part A Supplement is not included in the FTB Part A child rate for this example as parental income is above $80,000.00. There is also a difference between shared care percentage and the percentage of FTB applied to the FTB rate. See Percentage of shared care used for family assistance.

* Energy Supplement Part A $116.80 x Percentage of FTB 29% = $33.872.

Note: the Energy Supplement is not included in the MNFR for FTB recipients who are not grandfathered as at 20 March 2017. See Energy Supplement for Family Tax Benefit (FTB) recipients.

Total $1,914.82.

Step 6 - Calculate the fortnightly MNFR contribution to the family pool.

Divide the total figure from Step 5 by 365. ($1,914.82/365 = $5.2460), round to two decimal places and multiply by 14. ($5.24 x 14 = $73.4436). The fortnightly MNFR is $73.4436.

Step 7 - Calculate the Family Pool Maximum Rate.

Total the 'pooled' MPR from step 4 and the MNFR from step 5 ($359.20 + $73.4436 = $432.56) The Family Pool Maximum Rate is $432.56.

Step 8 - Calculate Harry's family pool percentage.

Divide the individual MPR from Step 3 by the Family Pool Maximum Rate from Step 7 ($359.20 / $432.56 x 100); Harry's family pool percentage is 83.04%.

Step 9 - Calculate Harry's payment reduction.

Multiply the fortnightly taper reduction from step 2 by their family pool percentage from step 8 ($212.20 x 83.04% = $176.21). Harry's payment reduction is $176.21.

Step 10 - Calculate Harry's payment rate.

Subtract Harry's individual MPR from step 3 from Harry's payment reduction from step 9. ($359.20 - $176.21 = $182.99). Under the parental income test Harry's rate of payment (YA Basic Rate + Energy Supplement) will be $182.99 per fortnight.

Scenario

Carlene and Cathy are siblings. Their parents' combined income is $65,000.00 per annum. Carlene and Cathy do not have any income of their own. Carlene's sibling Cathy is 16 and boarding away from home while studying and receiving ABSTUDY at the away from home rate.

Cathy is also in receipt of School Fees Allowance (SFA) Group 2.

In Carlene's case

Carlene's individual Maximum Payment Rate (MPR) is ABSTUDY Living Allowance + Energy Supplement = $307.10.

The pooled MPR for the family includes both Carlene's and Cathy's basic benefit, Energy Supplements and Cathy's Rent Assistance.

$303.20 + $3.90 + $512.50 + $7.00 + $139.60 = $966.20.

The Income portion percentage is calculated as individual MPR/pooled MPR = 31.79%.

($65,000.00 - $55,626.00)/130

= ($9,374.00/130)

= $72.10 x 31.79%

= $22.92

This is the PIT reduction for Carlene's payment. Carlene's basic benefit will be $303.20 - $22.92 = $280.28.

In Cathy's case

To ensure the parental income reduction is applied evenly to both components of Cathy's payment, the SFA Group 2 is treated as a separate calculation.

Basic benefit calculation

Cathy's individual MPR includes the basic payment of $512.50, Rent Assistance (RA) of $139.60 and Energy Supplement $7.00. This means Cathy's individual MPR = $659.10.

As above, the pooled MPR for the family is $966.20.

The income portion percentage is individual MPR/pooled MPR = 68.21%,

= ($65,000.00 - $55,626.00)/130

= $9,374.00/130

= $72.10 x 68.21%

= $49.18

This is the PIT reduction for Cathy's basic benefit and the rate will be:

$512.50 - $49.18 = $463.32

School Fees Allowance (SFA) Group 2 Calculation

In this case the individual MPR is the SFA Group 2 payment only = $94.12.

As above, the pooled MPR for the family is $966.20.

The income portion percentage is individual MPR/pooled MPR = 9.74%.

= ($65,000.00 - $55.626.00)/130

= $9374.00/130

= $72.10 x 9.74%

= $7.02

Cathy's SFA Group 2 payment will be $94.12 - $7.02 = $87.10.