Treatment of compensation payments for ABSTUDY 108-03190020

ABSTUDY is not a compensation affected payment (CAP). The usual requirements do not apply for:

• claiming or obtaining compensation
• direct deduction assessments
• lump sum preclusion
• recovery rules that apply to most Services Australia income support payments

A Module C is not required for ABSTUDY as it is not a compensation affected payment (CAP) but may be required if the customer is receiving ABSTUDY Pension Education Supplement.

Where ABSTUDY Pension Education Supplement (PES) is paid with a:

• CAP, the PES is also regarded as a CAP
• payment that is not a CAP (such as ABSTUDY), the PES is not considered a CAP

See Compensation affected payments (CAP) for the list of compensation affected payments.

Assets

• Taxable payments are regarded for ABSTUDY as the assets of the person to whom the compensation payment was made
• Non-taxable payments are not regarded as an asset for ABSTUDY

Income

• Compensation lump sums do not affect ABSTUDY like other CAPs
• Income derived from investments made with compensation lump sum amounts may be assessable

The ABSTUDY child must be 16 or older for these assessments to apply. Examples of possible assessments include:

• deemed income where amounts are placed in savings or investments
• attribution income from a trust if the lump sum is placed in a trust under a court order

Taxable payments made on an ongoing, regular basis are regarded for ABSTUDY purposes as ordinary income of the person to whom the compensation payments are made. Ongoing taxable payments made to the:

• parent, are included as a component of parental income under the Parental Income Test (PIT)
• student or partner, are included as a component of ordinary income under the Personal Income Test and Partner Income Test

Non-taxable payments made on an ongoing, regular basis are disregarded for ABSTUDY.

Compensation payments are regarded as ordinary income for Abstudy purposes, and recorded on the Other Income (OIN) screen. Do not use Employment Income Details (EAN) screen to record periodic compensation paid as part of a customer’s wages. It is not employment income and to do so may result in an incorrect payment as well as incorrectly allowing an Income Bank/Working Credit offset.

Record compensation details in a DOC where the customer:

• is receiving ongoing periodic payments and
• claims or is in receipt of ABSTUDY

Do not assess the following compensatory payments as income or assets for ABSTUDY purposes at the time of receipt:

• Compensation payments made for criminal injuries, discrimination or workplace harassment
• Compensation for non-economic loss
• Death benefits
• Compensation for war injuries
• One-off $7000 compensation payments paid to Indigenous people employed under the former Community Wages Scheme on Queensland settlements and reserves between 1975 and 1986
• One-off compensation payments paid by BHP distributed to Indigenous people by the IBN Corporation (a foundation set up for the Innawonga, Banjyma and Niapaili peoples) that represent compensation for loss of Native Title rights

Compensatory payments are treated as exempt income and should be recorded on OINS. See Exempt lump sums for further information about these exempt payments and coding instructions.

The References page contains a link to the ABSTUDY Policy Manual.