4.2.8.05 Dependent YA - reduction for parental income
Summary
The 'reduction for parental income' applies if a YA recipient's parental income is in excess of the parental income free area and/or if a parent receives maintenance for the purpose of maintaining the YA recipient. The maintenance income test (MIT) does not count maintenance received for other children in the family.
The MIT commenced on 1 January 2017. It cannot affect a person's rate of YA prior to this date.
The MIT will only reduce a recipient's YA rate by a maximum of the MIT reducible amount (MITRA). The MITRA is updated each July when the FTB rates are indexed. It represents the difference between the base FTB Part A child rate* and the maximum FTB Part A child rate* (as calculated on a fortnightly equivalent basis). No matter how much maintenance is paid to support a YA recipient, this maintenance will not reduce a person's YA rate beyond the cap of the MITRA.
If parental income reduces the YA payment rate by more than the MITRA, then maintenance income (MI) will not reduce the rate of YA any further.
*Note 1: The base FTB Part A child rate is the amount that would be the base FTB Part A child rate within the meaning of the FAAct, if the person were an FTB child of a parent of the person. The maximum FTB Part A child rate is the amount specified in FAAct Schedule 1 clause 7, item 2 in column 2 of the table. The amount is indexed under FAAct Schedule 4. The fortnightly equivalent value of each component is the annual value of each, divided by 365 then multiplied by 14.
Act reference: FAAct Schedule 1 clause 7 Standard rate, Schedule 1 clause 8 Base FTB child rate, Schedule 4 Indexation and adjustment of amounts
Policy reference: SS Guide 4.2.8.20 Dependent YA - maintenance income test, 4.2.8.10 Dependent YA - parental income test
Applying the reduction for parental income & the personal income test
The rate of YA paid to a dependent young person is the lower of that produced by the operation of the reduction for parental income and the personal income test.
Table 1: Applying the reduction for parental income & the personal income test
The following table shows the steps involved in applying the reduction for parental income and the personal income test.
| Step | Action |
|---|---|
| 1 | Determine the individual's maximum fortnightly payment rate. |
| 2 | Calculate the personal income test reduction amount (4.2.8.50). |
| 3 | Calculate the reduction for parental income (see Table 2: Calculating the reduction for parental income). |
| 4 | Reduce the maximum fortnightly payment rate (from step 1) by the greater of:
|
Act reference: SSAct section 1067G-A1 Method of calculating rate
Policy reference: SS Guide 4.2.8.50 Full-time students - personal income test, limits & student income bank
Reduction to the rate of YA for parental income
If a YA claimant/recipient is dependent (3.2.5.10), the fortnightly rate of payment may be reduced by parental income.
To calculate the claimant's/recipient's reduction for parental income use Table 2.
Table 2: Calculating the rate reduction for parental income
| Step | Action |
|---|---|
| 1 | Work out the MITRA by subtracting the fortnightly equivalent value of the base FTB Part A child rate from the maximum FTB Part A child rate (see Note 1). |
| 2 | Apply the parental income test (4.2.8.10) to work out the parental income test result (PITR) for the claimant/recipient. |
| 3 | If the PITR is equal to or more than the MITRA, the claimant/recipient's reduction for parental income is the PITR. |
| 4 | If the PITR is less than the claimant/recipient's MITRA, apply the MIT (4.2.8.20) to work out the maintenance income test result (MITR) for the claimant/recipient. |
| 5 | Add the PITR to the MITR to get the claimant/recipient's notional reduction. |
| 6 | If the notional reduction is less than or equal to the MITRA, the claimant/recipient's reduction for parental income is the notional reduction. |
| 7 | If the notional reduction is more than the MITRA, the claimant/recipient's reduction for parental income is the MITRA. |
Example: Rates and thresholds used are as at 1 January 2023.
Jeanie, 18, is a dependent YA recipient who earns no personal income. Jeanie's parents are separated. Jeanie lives with her mother who earns $60,000, her father pays her mother $5,000 in maintenance each year to support Jeanie.
Jeanie's maximum fortnightly YA rate is $389.40.
The MITRA that applies to Jeanie is the maximum FTB Part A child rate ($257.46 per fortnight) minus the base FTB Part A child rate ($63.56 per fortnight) = $193.90.
Jeanie's PITR is:
- parental income ($60,000.00) minus the parental income free area ($58,108.00) = the parental income excess ($1,892.00)
- the parental income excess ($1,892.00) x 0.20 = $378.40 (annual reduction for parental income) divided by 26 = $14.60 (rounded to the nearest 10c) this is the PITR.
As the PITR ($14.60) is less than the MITRA ($193.90) the MIT applies.
As Jeanie is an only child her maintenance income free area (MIFA) is 'the first child MIFA' ($1,752.00).
Jeanie's MITR is:
- MI ($5,000.00) minus the applicable MIFA ($1,752.00) = MI excess ($3,248.00)
- the MI excess ($3,248.00) x 0.50 = $1,624.00 (annual reduction for MI) divided by 26 = $62.46 this is the MITR.
Jeanie's notional reduction for parental income is PITR ($14.60) + MITR ($62.46) = $77.06.
As the notional reduction ($77.06) is less than the MITRA ($193.90), Jeanie's reduction for parental income is $77.06.
Therefore Jeanie's YA rate will be:
- YA maximum rate ($389.40) minus reduction for parental income ($77.06) = $312.34 per fortnight.