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 an 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 an 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, the individual is generally entitled to the maximum rate of FTB Part A. However, the individual's FTB Part A rate may still be reduced by the application of the maintenance income test (3.1.7) and the MAT (3.1.5) during these periods.
Note: FTB Part A remains subject to the income test for any periods that 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 2011-12 income year, Boris received newstart allowance 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 estimated ATI of $47,000 applies.
Based on 70 days at the maximum rate, 295 days at an income tested rate, 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 the 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 free area) × 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 that an individual and/or their partner receive an income support payment at a rate above nil (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 income year that the individual and their partner do not receive an income support payment, or are serving an employment income nil rate period and their rate of income support is nil, the primary earner income test must be met. For the purposes of the income test, the primary earner's ATI for the entire income 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 or were serving an employment income nil rate period.
Example: Sam and Olivia have 2 children under the age of 5. From July to August 2020, Sam receives income support totalling about $1,600. On 1 September, Sam starts a new job earning an income that is above the FTB Part B primary earner income limit for the year, and begins an employment income nil rate period. During the period July to August, the primary earner income test does not apply because Sam was receiving income support at a rate above nil. 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 only. However, during the period September to June, the primary earner income test applies because Sam was not receiving income support at a rate above nil. This means that the family is not eligible for FTB Part B during this period because Sam's ATI for the income year, including earned income and income support, is above the FTB Part B 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 supplement
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, an income test still applies to the FTB Part A supplement (6.4.1.30).