Parental Income Tests

Income tests apply for Living Allowance, Rent Assistance, and the `at home' rate of School Fees Allowance. In general, parental income tests are applied to dependent students claims with a few exempt categories. After applying parental income test, a personal income test is applied.

This chapter describes the income tests which are applied for ABSTUDY assistance.

If students are not independent, a parental income test applies.

Where the adjusted family income of parents exceeds the annual threshold¹, ABSTUDY Living Allowance will be reduced.

The parental income test of parents is usually assessed for the financial year ending before the year of study. For most students, this financial year ends on 30 June of the previous year. However, the most recently completed financial year accounting period may end on another date if:

the student's parents have, under Section 18 of the Income Tax Assessment Act 1936, adopted a 12 month accounting period which ends on a date other than 30 June, or
parental income consists principally of income from a foreign country which uses a different taxation accounting period from that ending on 30 June (for example, New Zealand has a taxation period of 1 April to 31 March). The financial year ending before 1 January of the year of study is considered.

Note 1: Where combined adjusted family income increases by 25% or more, ie from the previous to current financial year, the student's entitlement is reassessed with effect from 1 October in the year of study.

Note 2: Where parental income suffers a substantial and lasting fall, a concession is available to take into account income in a financial year (or accounting period) no later than the financial year or last accounting period which ends during the year in which ABSTUDY is sought.

Income testing is based on historical (previous financial year) income.

When use of historical income is unreasonable special rules apply. These apply where:

there is a substantial and lasting fall in income under the current income concession
a parent starts getting a Commonwealth pension or benefit, or is in receipt of a Health Care Card / Low Income Card under the special assessment provision, or
parental income increases by 25% or more after the normal (previous financial year) income test period .

Dependent students who are under 16 years old and eligible for Living Allowance, or who are 16 years of age and over, are subject to income testing on the combined taxable income of both their parents/guardians, irrespective of whether they live at home or away from home.

Parental income is taken into account whether or not parents/guardians actually provide financial assistance or support.

If a student claims a person other than a natural or adoptive parent (or the parent's partner) for parental income test purposes, the case will be considered on its merits to determine if:

the person does support the student wholly or substantially; and
the arrangement is bona fide i.e., it is not an arrangement to avoid assessment on the basis of the income of the student's natural or adoptive parent or their partner (married or de facto).

A student is not wholly or substantially dependent on another person if the parent (or parent's partner, married or de facto) is:

supporting the student in the other person's home, or
is providing financial assistance, directly or indirectly, to that person in respect of the student.

Students `normally live with' a parent and/or the parent's partner (married or de facto) if they maintain a permanent home there. Students `normally live with' the parent or parent's partner (married or de facto) even though they live away while studying, or are temporarily absent from the home on a holiday.

A student should be regarded as not normally living with a person if the student maintains a separate permanent home (including vacation and holiday periods).

If the natural or adoptive parents are divorced or separated, the parent, for the purposes of the parental income test, is:

the natural or adoptive parent with whom the student normally lives, ie with the custodial parent, or
the parent on whom the student was dependent at the start of the eligibility period in the year of study if normally living with neither parent, or
the parent on whom s/he was last dependent if dependent on neither parent at that time, or
if each equally shares custody of the student, both natural or adoptive parents are taken into account where they are separated or divorced.

If the parents reunite, the student's entitlement is reassessed with effect from the date of the reunion, taking into account the previous financial year incomes of both parents. In some cases current income may be applicable.

The income taken into account in the case of divorced or separated parents includes any payments made by way of maintenance to the parent on whom the student is dependent. However, any maintenance payments made to a former partner or in respect of other children are deducted from total income.

Natural or adoptive parents also include step-parents. If the parent or the person on whom the student was last dependent remarries or enters a de facto relationship, the income of the step-parent is taken into account.

The step-parent's income may be disregarded only where:

the step-parent is not the student's adoptive parent, and
s/he is able to provide a statutory declaration to confirm s/he did not provide the student with any form of support at the start of the eligibility period in the year of study. In this case it would be expected that the other parent had sufficient income to support the student and that the step-parent was not the provider of food and/or shelter.

If a student was wholly or substantially dependent at the start of the eligibility period in the year of study on a person who was not her/his natural or adoptive parent, that person is considered to be the student's parent even if one or both of the natural or adoptive parents are living.

A de facto relationship is recognised between a student's natural or adoptive parent and her/his de facto partner from the date the de facto relationship starts if the student `normally lives with' the parent and the parent's partner .

In most cases, the parental income test will apply to the parents on whom the student is dependent at the start of eligibility. However, ABSTUDY will be reassessed if the student's parents change during the period of eligibility, so that, if a student:

loses a parent by death or separation, ABSTUDY is reassessed based on the remaining parent from the date of change of circumstance (where separated/divorced parents share custody)
gains a parent (for example because a natural or adoptive parent remarries, or gains a de facto partner and the student normally lives with the partner), ABSTUDY is reassessed from the date of change of circumstances taking into account the combined income of the original parent and the new partner
changes parents, ABSTUDY is reassessed from the date of change of circumstances. For example, the student:

stopped living with one parent and moved in with the other; -started or stopped normally living with a parent's partner, or
started or stopped being wholly or substantially dependent on another adult.

Note: Reassessment is based on the income of the parent(s) for the previous financial year unless the current income concession or special assessment applies.

a student has been living with one parent for a considerable time and that custodial parent subsequently dies, and
there has been little or no contact with the non-custodial parent,

it would be unreasonable to require that ABSTUDY be based on the income of the surviving parent given that essentially no parental role (financial support or otherwise) has been played by the surviving parent for a long time, if at all.

The student's claim under the homeless provisions should be reviewed. This is on the basis that it would be unreasonable for students to live in the home of their surviving parent because of extreme family breakdown.

Students need to apply for Student Homeless Rate in the usual way, including the provision of appropriate evidence/statements to support their claim.

the student's parents had been separated for a considerable length of time (discretion may be applied depending on individual circumstances)
the surviving non-custodial parent has not provided support, either directly or indirectly, to the student or her/his former partner in that time (eg, child support payments, payment of school fees, etc)
the student has had no recent contact with the surviving parent
the surviving parent has not resumed a parental role following the death of the previously custodial parent
the student has no other supporting adult, and
the other homeless provisions do not apply.

where custody is shared between the parents, the income test is applied to the income of the parent with whom the student normally lives, and that parent's partner, married or de facto (if applicable), or
where one natural parent has primary custody of the student (i.e. has custody of the student for a greater proportion of the time), the income test is applied to the income of that parent, and their partner, married or de facto (if applicable).

In the very rare cases of shared custody where the student spends an equal amount of time with each parent, the lower family income (taking into account the income of the relevant natural parent and her/his new partner, where applicable) may be used to calculate the student's entitlement subject to statements being provided confirming and setting out the custodial (i.e., turnaround period) and maintenance payment arrangements (e.g., legal documentation from the Family Court or solicitors, or statements from each parent).

If a student's parents live permanently apart, the parental income test applies only to the parent with whom the student normally lives. This applies whether or not the parents are legally divorced.

If a student's parents live permanently apart, but the student does not normally live with either parent, the parental income test applies:

to only that parent with whom the student last lived if the parents stopped living together when the student last lived with them, or
to both parents if they were not living permanently apart when the student last lived with them.

Where parents are `separated but living under the one roof' for Family Law purposes, and the student normally lives in or last lived in the house shared by both parents, the income of both parents is taken into account.

Where parents live apart temporarily, (for example, because of absence due to work commitments as with some mining, fishing, sales representative or other occupations) and the student normally lives with, or last lived with, both parents, the income of both parents is taken into account.

part-time students
pensioner students
students who are or have been living under an officially approved substitute care arrangement
independent students
students in lawful custody, and
dependent students whose parents/guardians are receiving a Commonwealth income tested pension or benefit .

Chapter 118 Parental Income Tests

118.1 How does parental income affect ABSTUDY?

118.2 Parental income test period

118.3 Historical basis for income testing

118.4 Students subject to parental income test

118.4.1 Dependent students

118.4.2 Students living at home

118.5 Categories of parents for income testing

118.5.1 Divorced or separated parents

118.5.2 Step parents

118.5.3 Other than natural or adoptive parent

118.5.4 De-facto relationships

118.6 Change of parent

118.7 Separated parents

118.7.1 Death of custodial parent

118.7.1.1 Student Homeless Rate

118.7.1.2 Granting independent status to student

118.7.2 Shared custody arrangements

118.8 Students not normally living with parents

118.9 Allowances not subject to parental income testing