Exempt income 108-04080010

There are 4 broad categories of exempt income:

• Allowances paid with employment income, for example:
• allowance for out of pocket expenses
• amounts paid to the provider of accommodation for international students. Note: take care when assessing payments received to cover expenses because not all are exempt. The Department of Social Services (DSS) has confirmed payments received from My Place Foundation Inc. for reimbursement of expenses incurred in caring for a disabled person, will be assessed as ordinary income. This is unless the carer provides evidence (receipts) that the money is a reimbursement for expenses directly related to caring for the disabled person
• Income received as special financial assistance, for example, natural disaster trusts, payments from medically acquired HIV trusts
• Other legislated income exempt from assessment, for example:
• free board and lodging
• Parental Leave Pay (PPL) and Dad and Partner Pay (DAP) for children who were born or entered care before 1 October 2016
• child income
• private health fund rebate
• defence force reservist's income
• a subsidy made by the Commonwealth, a state or territory or an authority of the Commonwealth or of a state or territory to or on behalf of the person who pays or who is liable to pay rent
• See Resources for further examples and information
• Other specifically approved income exempt from assessment, for example, approved scholarships awarded outside Australia, income from welfare reform pilots, UK Council Tax Benefit. See Resources for further examples

Note: although these types of income are exempt for social security purposes, they may be taxable and must be included in a customer's adjusted taxable income for family assistance payments. Recommend the customer check with the Australian Taxation Office (ATO) if their type of income must be declared for taxation purposes.

Although exempt income is disregarded as income:

• the amount received may be an assessable asset
• if the funds are invested, deeming provisions apply

For example, if a customer receives funds covered by exempt income provisions, for example, Australian Government Disaster Recovery Payment (AGDRP), the payment is not assessed as income. If the customer deposits these funds in a bank account, the total balance of the account is considered an asset and is deemed under the Income Test.

For customers claiming a Low Income Health Care Card (LIC), there are certain payments that are assessable, whereas they are exempt for income support customers. See Low Income Health Care Card (LIC) income test.

This procedure does not cover compensation for loss or damage of principal home.

The value of emergency recovery or similar assistance is exempt income.

The Australian Government Disaster Recovery Payment (AGDRP) and Disaster Recovery Payment (DRP) is exempt under the Social Security Act 1991 section 8(8) (a) and section 8 (8)(c) exempts income received from emergency relief or similar assistance.

Payments exempt under this section include:

• State government financial assistance to victims of bushfires
• Bali Emergency Relief
• Drought financial assistance
• Flood financial assistance
• Funeral/memorial assistance
• Income Recovery Subsidy (cannot be paid to a customer, but can be exempt for partner)
• Victorian Government Emergency Personal Hardship Grant
• Victorian Government Temporary Living Expenses Grant
• Victorian Government Reestablishment Grant
• Victorian Government Emergency Business Grant/Clean Up and Restoration Grant/Supplementary Grant
• Charity Appeal Fund Compassion and Bereavement Payment
• Charity Appeal Fund Initial Home Dislocation Payment
• Charity Appeal Fund Severe Injury Payment
• Permanently Impaired Gift
• Financial Hardship and in Need of Permanent Accommodation Gift
• Covid-19 Disaster Payment
• Pandemic Leave Disaster Payment
• Status Resolution Support Services (SRSS)

Note: this list is not exhaustive.

Some of these payments are also exempt from the Assets Test and deeming as they are considered compensation for the loss of and damage to buildings and personal effects. They are assessed in a similar way to insurance payouts (see below). These include:

• Victorian Government Reestablishment Grant
• Victorian Government Emergency Business Grant, Clean Up and Restoration Grant, Supplementary Grant
• Charity Appeal Fund Initial Home Dislocation Payment
• Financial Hardship and in Need of a Permanent Accommodation Gift
• Queensland Premiers Relief Fund

Insurance payouts received as compensation for the loss of or damage to buildings and personal effects, are exempt as income.

If these payouts, grants or gifts when received are held as a financial investment, the financial investment and any interest earned is not deemed under the Income Test for up to 12 months after the person receives the payment.

Under the Assets Test, the grant would be exempt under paragraph 1118(s) of the Social Security Act 1991, which provides for exemption of payments of insurance or compensation for the loss of or damage to buildings and personal effects for up to 12 months, or longer.

The Income Test and Assets Test exemption may be extended past 12 months if the person can show they intended to spend the compensation or insurance payment on repairs within 12 months, but they were not able to do so for reasons beyond their control.

Some payments received are exempt from the Income Test, if received as special financial assistance. Payments from trust funds that pay assistance to people suffering losses from natural disasters, are one-time relief payments and are not regarded as income for social security purposes, for example the NSW Bushfire Appeal.

Note: concessional/low interest loans are not income.

Cash received by a customer from the sale of an asset is not assessed as income, for example, a garage sale, firearms buyback scheme. The customer's assessable assets may need adjusting due to the sale. Any cash in bank accounts is subject to deeming provisions.

Different rules apply to an approved SDT. A SDT's income is exempt from the Income Test. The SDT's assets are exempt from the Assets Test if the assets are not over the concessional asset limit, this procedure does not cover SDTs.

Customers who receive Equity or Merit based Scholarships have a portion of their total scholarship income exempt from being treated as income under the personal and partner Income Tests for all social security payments.

Relocation Scholarship paid by Centrelink is entirely exempt from the Income Test.

NDIS funds paid by the National Disability Insurance Agency (NDIA), if received periodically or as a lump sum (including interest accrued), which are deposited into an account specifically for the purpose of managing the customer's NDIS plan, are exempt from the Income and Assets Tests and deeming. They are not required to be reported or if reported must not be taken into account in the income and asset assessment.