4.2.7 DRA income test

Summary

This topic describes the income test for DRA. The test is used in determining the rate of DRA.

Act reference: SSAct section 1061KC Rate of DRA

Policy reference: SS Guide 3.7.6.20 Determining the rate of DRA

Income test for a DRA claimant

A person's DRA payment rate will be nil if their income is greater than a certain amount (the 'income cut-off rate'). The DRA income test is used to determine that amount.

If the claimant is 22 years old and over, the income cut-off rate is worked out according to the following formula:

  • income cut-off rate = [maximum rate − (B × Z)] ÷ Y + (A + B).

Where:

  • the maximum rate is the MBR of NSA that would be payable to the claimant if they qualified for NSA and it was payable to them
  • A is the ordinary income free area for NSA. As at 20 September 2019, this amount is $104
  • B is the boundary between the lower and upper range reductions for ordinary income reduction. As at 20 September 2019, this amount is $150
  • Y is the percentage used in the calculation of the upper range reduction, expressed as a fraction. As at 20 September 2019, this is 0.6 (0.4 Principal Carer)
  • Z is the percentage used in the calculation of the lower range reduction, expressed as a fraction. As at 20 September 2019, this is 0.5 (0.4 Principal Carer).

If the claimant is under 22 years, the income cut-off rate is worked out according to the following formula:

  • income cut-off rate = [maximum rate - (D × X)] ÷ W + (C + D).

Where:

  • the maximum rate is the MBR of YA that would be payable to the claimant if they qualified for YA and it was payable to them
  • C is the ordinary income free area for YA. As at 1 January 2019, this amount is $143
  • D is the boundary between the lower and upper range reductions for ordinary income reduction. As at 1 January 2019, this amount is $107
  • X is the percentage used in the calculation of the lower range reduction, expressed as a fraction. As at 1 January 2019, this amount is 0.5
  • W is the percentage used in the calculation of the upper range reduction, expressed as a fraction. As at 1 January 2019, this amount is 0.6.

Act reference: SSAct section 1068-G12 Ordinary income free area (NSA), section 1068-G15 Lower range reduction (NSA), section 1068-G16 Upper range reduction (NSA), section 1067G-H29 Ordinary income free area (YA), section 1067G-H32 Lower range reduction (YA), section 1067G-H33 Upper range reduction (YA)

Last reviewed: 20 September 2019