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Assessing income for Farm Household Allowance (FHA) 002-20102102

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Parts of this process are completed by Smart Centre FHA processing staff.

This document outlines the assessment of income for FHA. The assessment of FHA income tests are linked to those used for social security benefits and allowances. There are importance differences for FHA.

On this page:

FHA customer contacts about their income

FHA customer contacts about forced disposal of livestock

Assessment of overall operating loss of the farm enterprise (farm business loss) reduction from 14 November 2020

Assessing and recording farm business loss reduction before 14 November 2020

FHA customer contacts about their income

Table 1

Expand table

Step

Action

1

Income test

Money received from the forced sale and/or disposal of livestock may be exempt from the income test for FHA customers, see Table 2.

If the customer is reporting employment income, go to Step 12.

To assess:

  • business income, go to Step 2
  • trust and company income, go to Step 9
  • overall operating loss of the farm enterprise (previously known as farm business losses) from 14 November 2020, see Table 3
  • loans to a trust or company that may not be subject to deeming, go to Step 11

Otherwise, view income assessment details. Ordinary income may include income from the farm business, employment income, income from financial investments, one-off lump sums and non-farm business income.

To view ordinary income for the customer (and their partner), review details on relevant screens. For help in:

2

Business income

From 1 July 2024, the actual income from the latest tax return/s will be used for the claim and assessment under the income test, unless the customer has notified of a reasonable change of circumstances is expected to affect FHA payment eligibility, this includes the reassessment of the offset.

Code actual business income using details from the tax return and financials Assessing and coding the Business details for sole traders and partnerships MOD F. Go to Step 7.

3

Change of circumstances

If customer is advising of a change of circumstances, an estimate should only be accepted if:

  • the change of circumstance was due to a notifiable event (e.g. flood, fire, disease or pests) and
  • changing their income from being assessed on their latest income tax returns would be beneficial to their rate of FHA

Customers can provide a profit and loss statement to have their entitlement to FHA reassessed.

Estimates must include business income for the financial year to date, plus projected financial year.

The estimate can be accepted verbally if:

  • not involved in private trust and/or company
  • no change to customer or partner rate or eligibility to payment (including total overall operating losses)

Can the customer provide a verbal estimate now?

4

Request for information (RFI)

Customers should determine the current year estimate by considering:

  • the known business income for the financial year to date, and
  • an estimate of the expected business income and expenditure for the rest of the financial year

Tell the customer:

  • they will need to provide an estimated profit and loss statement for the relevant financial year see Requesting information (CLK)
  • if they have not responded by the due date, their payment may be suspended. Make sure all options to reply are discussed including online and Express Plus

When the activity comes off hold, if the customer has:

5

Check all estimates are reasonable

Confirm:

  • calculations are correct,
  • profit and loss is for the full financial year and
  • the estimate is considered reasonable
  • The customer must agree to adjust the estimate if errors or omissions are identified.

When the estimate differs substantially from the income shown on the latest financial statements provided, for the estimate to be considered reasonable the customer must explain the variation, for example:

  • reduced livestock numbers due to drought or floods
  • reduced fruit volumes due to storm
  • disease or pest outbreak
  • change in commodity price
  • change in climatic conditions
  • restructure of the business
  • increases in expenses due to circumstances out of farmers control (example: fertiliser, fuel)
  • increase in estimate regardless of amount

An interim profit and loss statement does not correctly reflect a farm enterprise annual income due to seasonal income/expenses.

Is the estimate considered reasonable?

  • Yes, go to Step 6
  • No, tell the customer they will continue to be assessed on the income from their tax return. Procedure ends here

6

Estimate is considered reasonable

Is the customer involved in private trust or company?

7

Record business income

Update the Real Estate and Business (REBS) and FHA Business Financials (FBF) screens in the one activity using the FHA workflow.

  • Select the Income and Asset and FHA Business Financial tasks from the FHA workflow Task Selector
  • The income or loss from the farm business and any related businesses needs to be offset against each other to determine the net income
  • Key the net value of Farm Business Income or Losses under the appropriate FPT/FST business on the REBS screen with the start date
  • The DOV recorded on the REBS screen for:
    • new claims, is the start date of FHA payments
    • current customers providing a revised estimate, is the date of notification
  • If customer has provided financials see Assessing and coding the Business details for sole traders and partnerships MOD F
  • FHA does not have Notification Handler (NOHL) rules in place. When a retrospective FHA update generates a favourable outcome, it must be recorded using the Date of Receipt (DOR) rather than the Date of Event (DOV).
  • Income: Total net farm income
  • % Income (C/P): key as per business structure
  • Frequency: ANN

For a related farm business:

  • zero the existing farm related income keyed as non-farming income, if applicable. For example, NST, NPT the same date as the Farm Business Income/Losses

For help coding, see Code the Business Income and Assets details.

Does the customer have income from trust or company?

8

Coding income from Trust or company entity

Check if the customer has income from a trust or company structure.

If the customer or partner has any non-farm trust and company income coded on REBS, zero off this income from 14 November 2020.

Use the FHA Trust and Company (FBI) task in Process Direct to code all trust and company income from the CAO assessment DOC.

If 2 entries are required, code them in separate work items. The most recent entry must be coded first. Once the assessment is finalised, use the FHA workflow to add the second entry.

In the customer record:

  • Select FHA workflow > Farmer Data Task Selector and FHA Business Financial tasks
  • Select Add to insert the trust and company income details:
  • Add Date of event (DOV) for:
    • new claims. Select Edit and key the correct date
    • current customers, use the date of change
  • Code the customer's share of total net farm income and total net non-farm income from all trust and company entities
  • Select Save

If the customer is partnered, go to the partner's record via the relationship link and update the partner's share of the total net ordinary income and total net ordinary income from all trust and company entities. If the partner’s share is $0, this must still be keyed on the partner's record.

9

Recording FBF - if actual or income estimate is assessed

FHA Business Financials (FBF) screen will show the customer is being assessed on their actual income, unless there has been a change of circumstances.

To record an actual or estimated income on the FBF screen complete these sections:

  • Expected lodgement month: Confirm when the customer is expected to lodge their tax returns for the requesting financial year. This information may be available in the SU694, Private Trust details (MOD PT) or Private Company Details (MOD PC):
    • if this information is not available and the customer cannot verbally confirm the date, use May of the next financial year, and
    • record a DOC on the customer’s record for the FHCO to follow up to confirm the expected lodgement date
  • Requesting Financial Year: The year the customer is providing an estimate for (24/25 will display as 2025)
  • Business name: Business on the Real Estate and Business (REBS) screen appear in the dropdown menu. For trust and company income use (Other)
  • Start Date: The start date will be the day it was keyed on the REBS screen
  • End Date: key ‘31/12/9999’
  • Estimate/Actual: source of the current farm business income

If the customer has more than one business, only one business needs to be updated.

For partnered customers where the partner is claiming as the partner of a farmer:

  • select OTH for the business name, and
  • key May as the expected lodgement month if an expected lodgement month has not already been provided

Record the details in Fast Note - select Auto Text, use Rural > Update > FHA business income update.

10

Exemption from deeming rules - certain loans

A loan from the beneficiary of a trust to that trust, or from a shareholder of a company to that company, is exempt from deeming rules if all the following applies, the:

  • loan was used to purchase farm or farm business assets owned by the trustee of the trust or company
  • underlying assets of the entity are illiquid in nature (the liquid assets held by the entity are not sufficient to repay the loan), and
  • beneficiary loan value does not exceed the original cost of the asset

Refer these cases to a Complex Assessment Officer (CAO).

Any beneficiary loan assessed as a farm asset and not a financial asset is not deemed.

Procedure ends here.

11

Reporting requirements

Customers can report via:

  • A self service option is available online
  • A self service option is available using phone self service
  • by calling the Farmer Assistance hotline

Genuine attempts must be made to transition customers to report via self service options before assisted reporting is completed, unless an Exception applies.

Does the customer (or their partner) have income from employment?

  • Yes, the customer must report every 2 weeks
  • No, the customer must report every 6 weeks. Tell the customer they must notify within 14 days of changes in their circumstances that may affect their FHA payments

12

Assess and code employment income

As FHA is a stimulus reporting payment, all employment income paid must be reported fortnightly.

  • Working Credit provisions do not apply for FHA
  • Employment income nil rate provisions apply to FHA as under Social Security Law

If partnered, confirm apportionment coding is correct. See Table 3 > Step 5. For more details, see:

Does the customer have ordinary income?

13

Ordinary income

This is any amount earned, derived or received that was not produced by an activity of the farm enterprise or related farm business.

Income is assessed the same as Social Security payments, according to the type of income.

Examples include (but are not limited to):

  • off-farm employment
  • interest payments
  • rental income
  • business income that is not derived from the activities of the farm business (such as sale of shares or water assets owned by the farm business)
  • income from financial investments
  • foreign income
  • income from trusts and companies
  • profit from an unrelated business

Go to Step 14.

14

Assess and record income details

In the customer record select the FHA workflow > Income and Asset Task Selector

See:

15

Finalise assessment

After coding the relevant updates. Finalise the activity:

  • Social Service Plan (SSP):
  • tell the customer of any changes to their FHA entitlement due to the change in income. An automatic letter will be issued to advise of any FHA payment changes
  • record details on a DOC, including all income details and any significant decisions

FHA customer contacts about forced disposal of livestock

Table 2

Expand table

Step

Action

1

Customer Contact

Customers can advise verbally or via a new claim that they have:

  • received income from the forced disposal of livestock, and
  • the income was received on or after 1 July 2019, and
  • they have or intend to deposit the proceeds into a Farm Management Deposit (FMD)

If the customer:

  • meets all the above criteria, go to Step 2
  • does not meet the above criteria
    • the exemption will not apply
    • the income received from forced disposal of livestock must still be recorded, go to Step 2
  • is contacting about a previous exemption decision for a forced disposal of livestock, normal review and appeal provisions apply. Procedure ends here

2

Confirm forced disposal of livestock and FMD

Obtain verbal confirmation from the customer, (verification is not needed) about the:

  • date the forced disposal of livestock income was received
  • net amount of the forced disposal of livestock income
  • income the customer has deposited or will deposit (if any) from the forced disposal of livestock income into an FMD. Include the amount deposited
  • expected impact of the forced disposal of livestock and any alterations needed to the customer's current farm business income estimate. Obtain the new estimate, if required

Has the customer provided all the required details?

  • Yes, for a:
    • change of circumstances or a new claim with no trust and company, go to Step 4
    • new claim with a trust and company assessment, go to Step 3
    • to correct previously coded FDL income, go to Step 5
  • No:
    • tell the customer to call back with the required details
    • record details on a DOC on the customer's record
    • procedure ends here

3

Trust and company assessments

For FHA customers from 1 July 2019. Income from the forced disposal of livestock received by a trust or company operating a farm enterprise, may be exempt from the income test.

If the Complex Assessment Officer (CAO) identifies forced disposal of livestock. The CAO must review the claim to determine if any of this amount was or is intended to be deposited into an FMD. Follow up may be required to determine whose name the FMD is held in.

The CAO assessment DOC must contain the:

  • net amount of income received from the forced disposal of livestock
  • amount deposited or intended to be deposited into an FMD
  • name of the person who holds or will hold the FMD
  • adjusted income estimate for the trust and company with the exemption applied

To implement the CAO decision, go to Step 4.

4

Adding new forced disposal of livestock income

Code in Process Direct where the customer has or intends to deposit forced disposal of livestock income into an FMD.

Only the amount the customer has deposited or intends to deposit in an FMD will be exempted income.

In the customer record, select the FHA workflow > Farmer Data Task Selector > Farm Business Income:

  • in the Forced Disposal of Livestock subtask, select Add:
    • Net Profit Amount, key the total net profit of the forced disposal of livestock income
    • Date, key the income from forced disposal of livestock was received
    • Date of Notification
    • Confirmed FMD Amt - key the amount actually deposited into an FMD
    • Intended FMD Amt - key the amount the customer intends to deposit into an FMD
    • Financial year (auto populated)

To finalise the update:

  • select Assess
  • in the Update Header Data, key:
    • Receipt Date, the date the customer notifies
    • Channel, the channel the detail was received
  • select Save

Go to Step 6.

5

Correcting previously advised forced disposal of livestock income

To correct previously advised forced disposal of livestock income:

  • select Edit next to the line that requires correction
  • update the relevant data
  • select Save

To finalise the update:

  • select Assess
  • in the Update Header Data, key:
    • Receipt Date, the date the customer notifies
    • Channel, the channel the detail was received
  • select Save

Go to Step 6.

6

Farm business income estimate

Where the Forced Disposal of Livestock subtask has been coded, and the FHA Business Financials (FBF) screen shows the customer is being paid on an estimate, the REBS must include a corresponding update. This must be updated even if the customer advises the estimate amount will not change.

When determining the new estimate, tell the customer to consider:

  • including the net income received from the forced disposal of livestock, and
  • excluding the amount of the exemption applied to the amount intended or deposited into an FMD

7

Coding Farm Management Deposit (FMD)

Use the FHA Income and Asset workflow to record the amount received from the forced disposal of livestock.

Select Savings Summary and in these fields:

  • Add Direct Investment Account (SVDI)
  • Investment Type Code, select Direct investment
  • Investment Name, key ‘Farm Management Deposit’. This field is free text
  • Account number, leave blank if no account number has been provided
  • Type, key type of investment (for example, OTH)
  • Balance, key balance of the FMD
  • %Owned Client/Partner, key percentage owned by the customer and their partner
  • Event Date, key the date the FMD was created
  • Source, key the source of the information. For example, PHO, INT
  • DOR, key the date of receipt of the information

Finalise the workflow.

It may be necessary to make several entries on this screen, depending on how the customer has distributed the money. The customer may hold some of the sale money as cash, in a personal or business bank account as well as the FMD.

8

Check for an outstanding Change of Circumstance (CoC) interaction activity

Complete all coding for the:

  • forced disposal of livestock income
  • farm business income estimate
  • FMD

Check that:

  • all outstanding (CoC) activities are completed
  • all the updates are applied to the customer and their partner's record

To search for and action an outstanding CoC activity, see Change of circumstance for Farm Household Allowance (FHA).

9

Finalise assessment

Once all coding is completed:

  • if the assessment results in a rate change or change in entitlement, a new SSP generates and will finalise as part of the activity
  • if the result is no change in rate, the last SSP shows. See Table 2 of Change of circumstance for Farm Household Allowance (FHA)

Record details on a DOC. Use Fast Note - select Auto text, use Rural > Update > Forced Disposal of Livestock.

If the income from the forced disposal of livestock and FMD results in the cancellation of the customer's FHA, record significant decision details on a DOC.


Assessment of overall operating loss of the farm enterprise (farm business loss) reduction from 14 November 2020

Parts of this process are completed by Smart Centre FHA processing staff.

Table 3: outlines the process for the allowable reduction of overall operating losses from 14 November 2020 and applies to updates with a date of effect on or after 14 November 2020.

Expand table

Step

Action

1

Check current overall operating loss details

Overall Operating losses reduce the assessable amount of ordinary income. Ordinary income can include (but not limited to):

  • off farm employment
  • rental income
  • unrelated business income
  • deeming
  • foreign income
  • income from trusts and companies

Some compensation payments cannot be reduced by overall operating losses see Treating periodic compensation payments as a direct deduction or income.

To check the current overall operating loss details, view on:

  • REBS/BUS, and/or
  • the Farm Business income (FBI) trust and company task in Process Direct

Go to Step 2.

2

Farm Business income

The income or loss from the farm business and any related business are offset against each other to determine the net income.

Is the assessable farm business income less than zero?

3

Maximum allowable reduction

The maximum allowable reduction is the lowest of the:

  • reduction threshold of $100,000, or
  • overall operating loss for the financial year, or
  • ordinary income amount earned for the financial year

Partnered customers:

If both members of the couple meet the eligibility criteria, the offset can be applied to:

  • each person, or
  • one person's income

If the allowable reduction is applied to each member of the couple, the combined amount for both partners cannot exceed the maximum allowable reduction.

To determine the allowance reduction, consider the total value of the overall operating loss, including related farm income. See the Resources page for examples.

Go to Step 4.

4

Single or partnered customer

If the customer is:

  • Single, no further action needed. The overall operating loss is automatically applied to their rate of FHA
  • Partnered, the customer and partner will need to elect how the overall operating loss is to be apportioned, the total cannot exceed 100%. Go to Step 5

5

Apportioning maximum allowable reduction

The customer and their partner can decide how much of the allowable reduction each person claims.

For example, the customer may have been claiming 100% of the allowable reduction to reduce their assessable ordinary income and their partner has not claimed any. As their partner has started part-time work off the farm, they may now wish to claim a portion of the allowable reduction each.

Code Farm Business Loss Apportionment (FBI) to record the requested percentage on each person's record:

  • select the FHA workflow > Farmer Data Task Selector > Farm Business Income (FBI) task. Select Add
  • record the requested percentages

Review the details and finalise the update:

  • select Assess
  • Update Header Data:
    • Receipt Date, the date the customer notifies
    • Channel, the channel the detail was received
  • select Save

The combined percentage must not exceed 100%.

The allowable reduction is apportioned throughout the financial year so that a regular amount of income will be offset each day.

Go to Step 6.

6

Finalise assessment

Tell the customer:

  • the effect of the apportionment being updated affects their ordinary income. The allowable reduction is apportioned throughout the financial year at a daily rate
  • of any change to the amount that can be used to reduce their or their partner's ordinary income. Include if they are no longer eligible for an allowable reduction

Records details on a DOC using the relevant Fast Note.

Procedure ends here.

7

Not eligible for allowable reduction

The customer is not eligible for the overall operating loss allowable reduction as their combined farm business net income is positive.

If the customer's circumstances change and the combined farm business net is at a loss, discuss providing an estimate profit and loss.

The overall operating losses will be reassessed.

Record details on a DOC.


Assessing and recording farm business loss reduction before 14 November 2020

For Smart Centre FHA Processing Officers.

Table 4: outlines the process for assessing and recording the allowable reduction for farm business losses before 14 November 2020. It should only be followed where corrections or updates are required with a date of effect earlier than 14 November 2020.

Expand table

Step

Action

1

Check current farm business loss details

Check the FHA Disregarded Income Summary screen in Process Direct for:

  • DOCs
  • allowance reduction, and
  • amount of allowable reduction applied so far in the financial year

Open the record of the person who earns the ordinary income (even if they have not claimed FHA):

  • if both members of a couple are claiming a portion of the allowable reduction, run the task on both customer records
  • select the FHA BIR workflow to open the Disregarded Income (FDI) task

Go to Step 2.

2

Changes to allowable reduction split

If the customer:

  • advises the farm income for the current financial year has changed (business income estimate reviewed), go to Step 9
  • and their partner each receive FHA, and want to change how their maximum allowable reduction is split for the financial year, go to Step 10

Otherwise, go to Step 3.

3

What is considered ordinary income

Ordinary income can include (but is not limited to):

  • off-farm employment
  • rental income
  • unrelated business income
  • deeming
  • foreign income
  • income from trusts and companies

Exception: compensation payments cannot be reduced by farm business losses

Go to Step 4.

4

Related Farm Business

Does the customer have a related farm business?

  • Yes:
    • The income or loss from the farm business and any related businesses need to be offset against each other to determine the net income.
    • See the Resources page for calculation examples
    • go to Step 5
  • No, go to Step 5

5

Farm loss

Check the customer's record to determine the amount of the net farm income from the farm business and related farm business.

To view the customer's current business income estimate in Customer First select:

  • CRN/BP link in Customer Header
  • Circumstances Data tab on the Customer Summary screen
  • FHA Specific Overview twisty
  • Business income

Is the ordinary income of the farm business for the current financial year less than zero?

6

Maximum allowable reduction

The maximum allowable reduction is the lowest of the:

  • reduction threshold of $100,000, or
  • Farm Business Loss for the financial year, or
  • ordinary income amount earned for the financial year

Partnered customers:

If both members of the couple meet the eligibility criteria, the offset can be applied to:

  • each person, or
  • one person's income

If the allowable reduction is applied to each member of the couple, the combined amount for both partners cannot exceed the maximum allowable reduction.

To determine the allowable reduction, consider the total value of the farm business loss, including related farm income. See the Resources page for examples.

To record the allowable reduction amount, go to Step 8.

7

Not eligible for allowable reduction

The customer is not eligible for the farm business loss allowable reduction as their combined farm business net income is positive.

Tell the customer why they are not eligible for the allowable reduction. If the customer's circumstances change and the combined farm business net is at a loss, they can ask for a reassessment under the farm business losses rules at any time.

Record details on a DOC.

8

Farm related Business

Does the customer have a related farm business?

  • Yes:
    • The income or loss from the farm business and any related businesses need to be offset against each other to determine the net income. See the Resources page for calculation examples
    • Key the net value of Farm Business Income or Losses under the appropriate FPT/FST business on the REBS screen with the start date
    • Zero the existing farm related income coded as non-farming income. For example, NST, NPT the same date as the Farm Business Income/Losses
    • Record the net assessable income figure in Process Direct
    • Complete all updates, go to Step 9
  • No, go to Step 9

9

Farm income changed

Check if the farm business income estimate needs updating after the farm business loss assessment.

To update the customer's farm business income estimate for the financial year, use the FHA workflow > Farmer Data Task Selector > Farm Business Income task. The new farm business income estimate must be recorded on REBS from the date of notification.

Record the customer's reasonable business income estimate.

Is the ordinary income of the farm business still less than zero?

10

Record details - eligible for allowable reduction

To apply the allowable reduction in Process Direct:

  • Open the record of the customer who earns the off-farm income (even if they have not claimed FHA). If both members of a couple are claiming a portion of the allowable reduction, the task needs to be run on both customer records
  • Select the FHA BIR workflow to open the Disregarded Income (FDI) task

To update the offset details:

  • Select Add
  • Record the start date, for a new claim use the start date of payment
  • If the allowable reduction is assessed after the claim is granted, this is considered a notification of a change of circumstances and coded from the date of notification. The date of effect is based on whether the determination is favourable or unfavourable
    • Favourable determinations - from the date of decision backdate the later of 13 weeks or 16 December 2019
      If the customer has given a new farm business estimate, the estimate is not backdated 13 weeks. See the Resources page for an example
    • Unfavourable determination - the date of the decision is the date of effect.
      For the new financial year review, this is 1 July of the relevant financial year
  • Record end date as 30 June of the relevant financial year. Customers must notify of changes in circumstances which may affect their rate of payment
    • If the customer is no longer eligible for the allowable reduction during the financial year, the end date is updated to reflect the actual period of eligibility for the allowable reduction
    • When the customer provides their business income estimate for a new financial year, eligibility for the allowable reduction is reassessed and, if applicable, the end date recorded to reflect the new financial year
  • Record annual allowable reduction amount. For partnered customers this is their selected portion of the total allowable reduction
  • Select reason code Other
  • Review the estimate details and finalise the update:
    • Select Assess
    • Updated Header Data:
    • Receipt date, key the date the customer notifies
    • Channel, key the channel the detail was received
    • Select Save

The system will automatically apply the allowable reduction to ordinary income, up to their maximum allowable reduction for the financial year.

Go to Step 12.

11

Update details - no longer eligible for allowable reduction

Update the income offset in Process Direct:

  • Open the record of the person who had the offset applied
  • Select the FHA BIR workflow to launch the Disregarded Income (FDI) task

To end date offset details,

  • Select Edit
  • Record the new end date. This is the date of the decision that the customer is no longer eligible for the offset

Review the details and finalise the update:

  • Select Assess
  • In the Update Header Data, key:
    • Receipt Date, the date the customer notifies
    • Channel, the channel the detail was received
  • Select Save

Go to Step 12.

12

Finalise assessment

Coding FDI will not automatically reassess the latest SSP. Complete a Manual reassessment. If partnered, complete a manual reassessment on both records. To assess Social Service Plans, see Change of circumstance for Farm Household Allowance (FHA).

Tell the customer:

  • the effect of the allowable reduction being applied to their ordinary income. Include the allowable reduction is apportioned throughout the financial year at a daily rate
  • of any change to the amount that can be used to reduce their or their partner's ordinary income, including if they are no longer eligible for an allowable reduction

Record details on a DOC using the relevant Fast Note:

  • FBL Income Reduction Assessed if the customer is still eligible for an allowable reduction, or
  • FBL Income Reduction Ceased if the allowable reduction has ceased