1.1.I.82 Indexation factor
Note: The term 'indexation factor' is used in both indexation based on CPI as well as in calculating indexed incomes (estimate or actual) based on average weekly earnings (AWE).
Definition: indexation factor - indexed incomes
An indexation factor is used to calculate the indexed estimate or indexed actual income that may be used to establish the FTB payment rate where an instalment determination is in force.
Determining the indexation factor
The indexation factor is determined by dividing the AWE for the reference period in the most recent November by the AWE for the reference period in the highest previous November. If the 4th decimal place of the quotient is greater than 4, then round the 3rd decimal place up by 0.001 and express the quotient to 3 decimal places. If the 4th decimal place is not greater than 4, leave the quotient as calculated to 3 decimal places. The indexation factor is the greater of either 1 or the quotient rounded to 3 decimal places.
Example 1: The number 1.32739 has a 4th decimal place that is less than 4. As a result the indexation factor is the greater of 1 or this number calculated to 3 decimal places, which is 1.327. If the original number was 1.32754 the 4th decimal place would be greater than 4 and thus the indexation factor would be 1.328.
Example 2: For the financial year 2014-15:
AWE for the reference period in the most recent November (November 2013) = $1,114.20
AWE for the reference period in the highest previous November (November 2012) = $1,081.30
Indexation factor = November 2013 ÷ November 2012
= 1,114.20 ÷ 1,081.30
Rounded to 4 decimal places = 1.0304
Rounded to 3 decimal places = 1.030
Indexation factor for 2014-15 = 1.030
Note: AWE means the amount published by the Australian Statistician in Average Weekly Earnings, published in February each year, under the headings 'Table 3: Average Weekly Earnings, Australia (Dollars) - Original'.
Act reference: FA(Admin)Act section 20A Indexed estimates, section 20B Indexed actual incomes
Policy reference: FA Guide 1.1.I.85 Indexed income - actual or estimate (FTB)
Definition: indexation factor - indexed FA rates & thresholds
An indexation factor is also used to calculate the adjusted rates and thresholds associated with FA payments in line with increases in CPI.