6.4.2.20 Income test exemptions for individuals in receipt of income support
Summary
This topic outlines how FTB Part A and FTB Part B are exempt from the income test for ATI (1.1.A.20) for periods during the relevant income year (1.1.R.23) when the individual (1.1.I.90) and/or their partner receive income support payments.
Exempting periods on income support - FTB Part A
Amounts of FTB Part A paid during a period when the individual and/or their partner (1.1.P.30) receive an income support payment (1.1.I.50) at a rate above nil are not subject to income reconciliation. For these periods, an individual receives the maximum rate of payment.
An individual's FTB Part A entitlement may still be reduced by the application of the maintenance income test and the MAT (1.1.C.20) even for the periods they also receive an income support payment at a rate above nil.
Note: FTB Part A remains subject to the income test if the individual is serving an employment income nil rate period and their rate of income support is nil.
Example: Boris and Natasha have a 14 year old son and do not pay rent. For the first 70 days of the income year 2011-12 Boris received newstart allowance (NSA) (at a rate above nil) and FTB Part A at the maximum rate. For the other 295 days of the year Boris and Natasha's ATI was $47,000.
Based on 70 days at the maximum rate, 295 days at an income tested rate based on an estimated ATI of $47,000 and one child aged 14, Boris will be paid:
- A: 70 days at the maximum rate = $5,580.85 ÷ 365 × 70 = $1,070.30
- B: 295 days at the income tested rate = ($47,000 − $46,355) × 0.2 = $129.00
- C: $5,580.85 − $129.00 = $5,451.85
- D: $5,451.85 ÷ 365 × 295 = $4,406.29
Explanation of above calculation:
- A: FTB Part A entitlement for 70 days = (maximum rate ÷ 365) × 70
- B: FTB Part A entitlement for 295 days = (ATI − FTB Part A lower income threshold) × 0.2
- C: Maximum rate − B
- D: (C ÷ 365) × 295
Boris receives $1,070.30 for the first 70 days of the income year and $4,406.29 for the remaining 295 days. Altogether, Boris receives $5,476.59 for the entire income year.
Where an individual enters an employment income nil rate period relating to their income support payment, their FTB Part A is no longer exempt from the income test.
Act reference: FAAct Schedule 1 clause 38L Application of income test to pension and benefit recipients and their partners, Schedule 1 clause 10 Effect of certain maintenance rights, Schedule 1 clause 20 Effect of maintenance income on FTB rate
Policy reference: FA Guide 3.1.1.10 Calculating a rate of FTB - overview, 3.2.8.20 Estimate following cancellation of income support payment or during employment income nil rate period, 6.4.1.30 Reconciliation process, 6.4.2.30 FTB reconciliation due to maintenance income, 6.4.2.40 Impact of maintenance action test on FTB reconciliation
SS Guide 3.1.12 Employment income nil rate period
Exempting periods on income support - FTB Part B
FTB Part B is exempt from the primary earner income test for any period when an individual and/or their partner receive an income support payment (see 3.1.9.20 for details on the primary earner income test). Therefore, the primary earner is 'quarantined' for the income test during this time.
However, for any periods of the financial year the individual and their partner do not receive an income support payment, the primary earner income test must be met. For the purposes of the income test, the primary earner's ATI for the entire financial year is considered, including any income support payments received. If the primary earner's ATI is above the primary earner income limit, the family is not eligible for FTB Part B during any period the primary earner or their partner did not receive an income support payment.
Example: Sam has 2 children under the age of 5. From July to August 2020, Sam receives income support totalling about $1,600. On 1 September, he starts a new job which gives him an income of $99,000 for the year. During the period July to August, the primary earner income test does not apply because Sam was receiving income support. This means that during the period July to August, the family eligibility for FTB Part B will be assessed under the secondary earner income test. However, during the period September to June, the primary earner income test applies because Sam was not receiving income support. This means that the family is not eligible for FTB Part B during this period because Sam's ATI for the financial year, including earned income and income support, is above the primary earner income limit.
Note: The secondary earner income test for FTB Part B applies regardless of whether the primary earner or secondary earner is receiving an income support payment. (See 3.1.9.20 for details on the secondary earner income test.)
Act reference: FAAct Schedule 1 clause 28B(2) However, subclause (1) does not apply while the individual, or the individual's partner, is receiving …
Eligibility for the FTB Part A supplements
While an FTB Part A recipient who is also receiving an income support payment at a rate above nil is able to receive the maximum rate of FTB Part A free of the income test for the period in which they receive the income support payment at a rate above nil, an income test still applies to the FTB Part A supplement at the end of the income year.