4.3.4.40 Hardship Provisions for the IMP

Summary

This topic provides information about the following:

  • determining whether the IMP can be waived,
  • assessing severe financial hardship,
  • assessing reasonable costs of living,
  • assessing unavoidable or reasonable expenditure,
  • determining when the waiver starts.

Waiving the IMP

The whole, or any part, of a person's IMP may be waived if the person meets the following criteria:

  • the person is in severe financial hardship, AND
  • the person is in severe financial hardship because of unavoidable or reasonable expenditure, AND
  • the unavoidable or reasonable expenditure was incurred while the person was serving the IMP.

Assessing severe financial hardship

Severe financial hardship is assessed using the severe financial hardship test (1.1.S.125) set out in the SSAct section 19C. Under section 19C a person who is not a member of a couple is in severe financial hardship if their total liquid assets are less than the fortnightly maximum payment rate that would be payable to the person, or if a member of a couple, less than twice the person's fortnightly maximum payment rate that would be payable.

Determining whether a person is in severe financial hardship due to unavoidable or reasonable expenditure

To decide whether a person is in severe financial hardship due to unavoidable or reasonable expenditure incurred during the IMP the following assessment is made.

Step Procedure
1 Establish whether the person is single or a member of a couple and whether the person is in severe financial hardship.
2 Assess the value of the person's total liquid assets at the date of commencement of their IMP. The person's total liquid assets will be calculated differently if they are a member of a couple - as outlined in 'Assessing severe financial hardship'.
3 Assess the unavoidable or reasonable expenditure of the person by adding together:
  • the level of reasonable cost of living expenditure (cannot exceed the upper limit) applicable to the person's circumstances, incurred since the commencement of the IMP, and
  • any other unavoidable or reasonable expenditure incurred while serving the IMP. This may include any other costs that are determined as unavoidable or reasonable expenditure in the individual circumstances of the person.
4 Deduct the total amount at step 3 (unavoidable and reasonable expenditure) from the amount at step 2 (total liquid assets).
5 If the amount at step 4 still meets the severe financial hardship test, then the person is in severe financial hardship due to reasonable or unavoidable expenditure and they may have the remainder of their IMP waived.

However, if the amount at step 4 does not meet the severe financial hardship test, then NO part of the IMP can be waived. This is because the person's severe financial hardship must be due to unavoidable and reasonable expenditure to allow the IMP waiver provisions.

Exception: If the delegate is satisfied, based on the evidence provided, that the person is in severe financial hardship due to the portion of the person's expenditure that was unavoidable or reasonable, the delegate may waive the remainder of the person's IMP.

Assessing the value of liquid assets

The value of the person's liquid assets as at the commencement of their IMP must be determined in the first instance. Where the person's employment has ceased and they receive a termination or leave payment, their liquid assets will usually include the total gross amount of that termination or leave payment, as generally the IMP takes effect from the date their former employer pays the termination or leave payment. If the person has directed some or all of their termination payment to be made to another person, or the person's former employer has paid the termination payment into a line of credit account held by the person, the person's liquid assets should include their total gross termination payment (step 2), as the whole termination payment is still taken to have been received by the person in these circumstances. However, the delegate should then consider whether the person's expenditure of these amounts was unavoidable or reasonable (step 3).

Act reference: SSAct section 14A Social security benefit liquid assets test definitions

Policy reference: SS Guide 1.1.L.50 Liquid assets

Assessing reasonable costs of living

The following are legislated examples of expenses that would be considered as reasonable costs of living:

  • food,
  • rent or mortgage payments,
  • regular medical expenses,
  • rates, water and sewerage costs,
  • gas, electricity and telephone bills,
  • petrol for the person's vehicle,
  • public transport costs, and
  • any other cost the Secretary determines is a reasonable cost of living for the person.

For a person who is not a member of a couple, the amount considered reasonable to live on over a period cannot exceed the payment amount that the person would have been entitled to receive over that time, had the IMP or any other waiting periods not been applied. For a person who is a member of a couple, reasonable expenditure cannot exceed twice that amount. This calculation includes PhA, RA, ES, pension supplement and RAA, but not FTB. In addition, if the person had other income during that period, the limit for reasonable expenditure may be reduced.

Act reference: SSAct section 19C(5) Meaning of reasonable costs of living, section 19C(4) unavoidable or reasonable expenditure

Policy reference: SS Guide 1.1.U.20 Unavoidable or reasonable expenditure (NSA, YA, SA, PP, WA, Austudy Payment)

Assessing other unavoidable or reasonable expenditure

Unavoidable or reasonable expenditure includes:

  • the reasonable costs of living, PLUS
  • other unavoidable or reasonable expenditure (1.1.U.20).

The following are legislated examples of other expenses that would be considered unavoidable or reasonable expenditure:

  • repairs to, or replacement of, essential white goods in the person's home,
  • replacements for essential household goods stolen or lost through natural disaster when the cost is NOT the subject of an insurance policy,
  • funeral expenses,
  • essential repairs to the person's car or home,
  • essential medical expenses,
  • school expenses,
  • motor vehicle registration,
  • essential expenses associated with the birth or adoption of a child by the person,
  • premiums for vehicle or home insurance, and
  • any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.

Assessing any other costs determined to be unavoidable or reasonable expenditure

Under section 19C(4)(k), the delegate may consider any other costs, in addition to those listed above, to be unavoidable or reasonable in the individual circumstances of the person.

Examples of expenses that the delegate may determine are unavoidable or reasonable in a person's particular circumstances could include, but are not limited to, the following:

  • purchases to assist the person to gain employment, such as a suitable car, computer or appropriate work clothing,
  • initial purchases required for establishing a new residence, such as a rental bond or essential furniture and household goods,
  • child support payments,
  • essential veterinary expenses,
  • debt repayments, for example, where non-payment may further disadvantage the person or result in repossession of the person's home, loss of the person's license or imprisonment.

A delegate may also consider expenditure that usually would not be considered unavoidable or reasonable to be unavoidable or reasonable in the person's circumstances, because the person's financial judgment and decision-making capacity was severely impaired due to a diagnosed medical condition or because of coercion.

Example: The verified gambling expenditure of a person with a diagnosed gambling addiction could be considered unavoidable expenditure in some cases.

The following are examples of expenses that would NOT be considered as unavoidable or reasonable expenditure:

  • a family holiday,
  • purchasing furniture that is not essential such as an outdoor setting,
  • entertainment costs,
  • purchase/installation of a recreational swimming pool, and
  • paving a driveway.

The IMP may only be waived if the expenditure that has caused the person to be in severe financial hardship was unavoidable or reasonable, and this expenditure occurred while the IMP applies to the person. If the person is in severe financial hardship due to expenditure that is not considered unavoidable or reasonable, NO part of their IMP can be waived. This means that NO allowances or deductions can be made for any unavoidable or reasonable expenditure, including the reasonable costs of living, that the recipient has also incurred, and the recipient must serve their full IMP.

Act reference: SSAct section 19C(5) Meaning of reasonable costs of living, section 19C(4) unavoidable or reasonable expenditure

Policy reference: SS Guide 1.1.U.20 Unavoidable or reasonable expenditure (NSA, YA, SA, PP, WA, Austudy Payment)

Determining when the waiver starts

If the IMP can be waived, it is generally waived from the date that the person was considered to be in severe financial hardship, or the date on which the person requested the reassessment of their IMP, whichever is later.

Note: Once the delegate has determined that the IMP can be waived, the delegate may waive the whole or any part of the IMP as appropriate in the circumstances of the individual.

Last reviewed: 8 February 2016