The Guides to Social Policy Law is a collection of publications designed to assist decision makers administering social policy law. The information contained in this publication is intended only as a guide to relevant legislation/policy. The information is accurate as at the date listed at the bottom of the page, but may be subject to change. To discuss individual circumstances please contact Services Australia.

3.6.7.32 Assessment of income for CA

Summary

This topic describes the income test for qualification for CA that applies from 20 September 2018 for claimants and current recipients. Their ATI, and that of their current partner (where applicable), must be below $250,000 per annum to qualify for payment. Carers who do not qualify for CA, but still provide at least 14 hours of weekly care for a child under 16 years, may receive the HCC. The income test also applies to CA (child) HCC only recipients (3.6.7.10).

The income test is based on a person's, and their current partner's (where applicable), ATI for the reference tax year. A person's ATI is usually evidenced by their TNA and any other income documents required to determine the ATI or deemed income from account-based income streams.

The person's ATI for the reference year includes:

  • taxable income, disregarding the person's assessable First Home Super Saver (FHSS) released amount (within the meaning the of Income Tax Assessment Act 1997) for that year
  • employer provided fringe benefits value in excess of $1,000
  • target foreign income
  • total net investment loss
  • tax free pensions or benefits
  • reportable superannuation contributions
  • less the amount of the person's deductible child maintenance expenditure (the deductible component).

If the account holder is 60 years of age or older, deemed income from account-based income streams is also included in the income test for qualification for CA. The balance of an account-based income stream is assessed under the deeming provisions using the person's latest superannuation statement.

Act reference: SSAct section 23(1)-'tax year', section 10A(2)-'fringe benefit', section 10A(2)-'assessable fringe benefit', section 957C Accepted estimates, section 957D Income from long-term financial assets

FAAct Schedule 3 clause 8(1) Deductible child maintenance expenditure, Schedule 3 clause 7 Tax free pension or benefit

Income Tax Assessment Act 1997 section 301-10 All superannuation benefits are tax free

Policy reference: SS Guide 3.6.7.30 Qualification for CA, 3.6.7.10 Qualification for CA (child) HCC only, 1.1.F.180 Fringe benefits (income test assessment), 3.6.7.33 CA Income test method statement, 3.6.7.34 Treatment of income components of CA

Reference tax year

The reference tax year is usually the tax year immediately before the current tax year (i.e. the base tax year) in which CA is claimed or a recipient is reviewed. If the applicant has not received a TNA for that tax year, the tax year immediately preceding that will be the reference tax year.

The test day is the day a person satisfies the CA income test.

If an applicant's income for the reference tax year is above the CA income limits, and the applicant can show that the source of the increased income is of a 'one-off' nature then, subject to certain conditions, the applicant may give an estimate of their income for the current tax year provided it is within the relevant income limit to qualify for CA.

Members of a couple must use the same reference tax year.

Example: If Andrew had not received his TNA for the 2017-18 tax year, he would be able to provide his TNA from the tax year immediately preceding that year, the 2016-17 tax year. This will be the reference tax year.

Act reference: SSAct section 23(1)-'tax year', section 957A(4) The base tax year is the …, section 957C Accepted estimates, section 957B Adjusted taxable income, section 957D Income from long-term financial assets

Verification of income

The table below outlines the documents that may be required to verify a person's income.

Note: Current CP recipients are not required to establish that their income is below $250,000 per annum. Receipt of CP indicates their income is below the CA threshold.

Income Document required
Taxable income disregarding the person's assessable FHSS released amount (within the meaning of the Income Tax Assessment Act 1997) Tax notice of assessment
Employer provided fringe benefits PAYG payment summary
Target foreign income Tax return
Total net investment loss Tax return
Tax free pensions or benefits Statement or letter from payer
Reportable employer superannuation contributions PAYG payment summary
Personal superannuation contributions Tax return
Balance of an account-based income stream Details of income stream product form (SA330) or similar schedule from the provider

Policy reference: SS Guide 3.6.7.34 Treatment of income components for CA

Accepted estimates

A person may provide an estimate of income, in certain circumstances:

  • if they are unable to provide a TNA for either of the 2 years prior to the current financial year, or
  • they can demonstrate that a change to their financial circumstances has occurred which would reduce their income in the current financial year. Acceptable conditions for using a current financial year estimate of income for the CA income test are limited to situations where the applicant can demonstrate that a change to their personal circumstances has already occurred through retirement, changes or costs associated with the provision of care, or another one-off event such as a natural disaster.

The following table lists circumstances that are acceptable for the purposes of using a current year estimate of income.

Change in person's circumstances Acceptable conditions
A person's retirement or partial retirement from the workforce or closure of a business. The estimated reduction in the person's income is commensurate with their earnings or business income from the previous financial year.
Ongoing reduced working hours because the care receiver requires more care. The estimated reduction in the person's income is commensurate with their earnings or business income from the previous financial year.

A substantial loss of income caused by a catastrophic event or natural disaster.

  • This includes a loss of income due to the Covid‑19 pandemic.

The person or their partner has withdrawn money from a superannuation fund or retirement saving account, to pay for any of the following costs, which has increased their taxable income above the threshold:

  • repair costs to owner occupied home
  • emergency accommodation costs
  • replacement or repair of motor vehicles for personal use
  • costs to replace personal documents, such as driver's licence, birth certificate.

Where the circumstance is related to Covid-19, no one set of circumstances will exist. The loss of income must be as a result of Covid-19 and have already occurred.

It may be that the business employing the person (or their partner) closed due to not being considered essential or due to lack of work as people are advised to stay at home, or a reduction in hours worked.

  • This is not an exhaustive list.
Substantial one-off costs because of the disability/medical condition of the care receiver.

The person or their partner has withdrawn money from a superannuation fund or retirement saving account, to pay for any of the following costs, which has increased their taxable income above the threshold:

  • cost of treatments not covered by existing Medicare or health fund benefits
  • costs to transition to a nursing home or other care facility
  • cost of home renovations to improve independence or mobility
  • vehicle modifications.

The estimate for the current financial year would only be accepted if the Secretary of DSS or their delegate is satisfied the reason for the estimate is acceptable, the event has occurred and the estimate is reasonable. A person may provide an estimate of income for two or more consecutive years ONLY if they can show an additional increase in income that is of a one-off nature for each year, and that the events that led to the change of circumstances in each year are unrelated. Services Australia will review the estimate when ATO income data is available.

Note: An estimate provided to the Secretary must be based on evidence. An example of this may be where the care receiver has experienced an increase in their care requirements and the carer has been required to withdraw money from superannuation to modify their home to meet the care receiver's requirements. The care receiver's health professional can identify and support the additional care required because of increased impairment and a statement from the superannuation provider will show the withdrawal of funds.

Example: George is currently receiving CA for the care he provides his brother. George has had to reduce his working hours (ongoing) because the care receiver requires more care and he is personally providing the care. His TNA for 2017-18 showed a taxable income of $300,000 from employment income. George will have employment income of $200,000 in 2018-19 due to his lower paying job. George can use an estimate of income for the current financial year to remain eligible for CA.

Example: Jane is in receipt of a CA (child) HCC only for her daughter, Sarah. Jane is single, her income for the previous financial year was $280,000 consisting of $240,000 from superannuation and investments, as well as a taxable capital gain on the sale of shares of $40,000. Sarah's mobility has recently deteriorated. Jane has used the proceeds of the sale of her shares to pay for modifications to her car and home to provide continued care for Sarah. Jane can show that the sale of her shares is of a one-off nature as she has not made any similar transactions in previous years. Her income for the current year remains at $240,000. It is acceptable for Jane to use an estimate of income for the current financial year to remain eligible for CA.

Example: Spiro and Gabriella's 2017-18 family income was $300,000 while also providing significant care to their son Nikolas. Their income was reduced as Spiro's employment temporarily ceased due to Covid-19 closures. He claimed jobkeeper payment and provided a current year estimate of $220,000. It is acceptable for Spiro to use an estimate of income for the current financial year to claim CA.

Act reference: SSAct section 23(1)-'tax year', section 957C Accepted estimates

Determining if an estimate is reasonable

Factors to be considered when deciding whether an estimate is reasonable are:

  • the event that has caused a reduction in income must have already occurred (i.e. it cannot be a future event)
  • the applicant's explanation of how they calculated the estimate is consistent with the estimated amount, and
  • the reason for change in income (as listed in the above table).

Example: Whether the reasons given are consistent with the reduction in income.

Act reference: SSAct section 957C Accepted estimates

Policy reference: SS Guide 4.2.1.10 Pensions income test

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