ABSTUDY, Means Tests: Chapter 59 - Assessing Income for the Partner and Personal Income Tests

Where a student has been awarded a Commonwealth Education Costs Scholarship or a Commonwealth Accommodation Scholarship to assist with challenges in meeting their education costs, the scholarships are NOT income for the purpose of ABSTUDY Personal and Partner Income Tests.

The current ABSTUDY Policy is as follows:

Employment Income, or income from employment, is ordinary income derived from remunerative work undertaken by an employee from an employer/employee relationship.

It includes:

• commissions;
• salaries;
• wages;
• employment-related fringe benefits; and
• profit sharing arrangements in certain industries.

It includes employment income received or earned in Australia or overseas.

It does not include:

• profits from having ownership or an interest in a business or other business income;
• superannuation pensions;
• personal injury compensation; or
• employment related insurance payouts.

To calculate income, the gross rate of earnings is used, before taxation or any personal deductions.

59.2.1 Assignment of earnings

If a customer assigns either all or part of their earnings to another person, the amount assigned is the customer's income and IS treated as income for the purposes of the ABSTUDY Personal and Partner Income Tests.

59.2.2 Deductions for agency fees

In some situations customers may have employment agency fees deducted from their after tax earnings or be required to pay an agency a percentage of their gross income. Agency fees should be treated like any other employment expense and included in the customer's gross income used for social security purposes.

59.2.3 Back pay paid to a person for a period of employment

Arrears of pay can be treated as income IF the person had a 'present legal entitlement' to the payment of arrears at the time they were earned (for example, the person was underpaid due to administrative error on the part of the employer).

Back pay paid to a person for a period of employment, where there was no 'present legal entitlement' is NOT treated as income. 'Present legal entitlement' at the time earned does NOT exist in situations such as where a workplace agreement backdates a pay increase. In those situations, 'present legal entitlement' exists from the date of decision to increase pay, not the earlier date for the commencement of the back pay. Where a person receives arrears for which there was no 'present legal entitlement', the payment, represents a period in the past. The arrears cannot be considered twice: once for the past period, and once for the fortnight of receipt, i.e., the arrears are NOT assessed at all.

59.2.4 Disputed wages

Where a customer has performed work but there is a dispute about who is to pay the wages, the customer may not be paid for the work performed. This means the customer has no present legal entitlement to be paid for the work and it cannot be said that the customer has 'earned' the amount. The amount not paid is therefore NOT counted as Ordinary Income for that period.

If an employee had no choice over whether or not their income was deferred, income is NOT assessed until he or she has received it.

59.2.5 Allowances paid by employers

Payment of an allowance from an employer for expenses is NOT included in any income assessment.

59.2.6 Fringe Benefits

A fringe benefit is any benefit received as part of employment conditions that is not a wage or salary. This includes benefits provided by an employer such as private use of a car or financial investments. Fringe benefits and any valuable consideration received by a customer are treated as employment income.

The value of the non-grossed-up fringe benefits is assessed as employment income.
The 'grossed up' amount of a fringe benefit is the amount that would have been paid in cash salary if it were paid instead of the fringe benefit. The 'grossed up' value is determined by the employer by using a formula supplied by the Australian Taxation Office (ATO) and is calculated using the highest marginal rate of income tax plus the Medicare levy.

The 'non-grossed up' amount of a fringe benefit reflects the actual cost to the employer of the goods or services provided.

59.2.7 Gifts in lieu of money

If a customer receives a gift IN LIEU of money for work performed, the value of the gift IS treated as income for the purposes of the ABSTUDY Partner and Personal Income tests. Such gifts must be capable of being given a monetary value under the principle of valuable consideration.

59.2.8 Ministers of religion

A minister of religion under a contract for service is neither an employee nor self-employed, but is a “holder of a religious office”. The gross income of the minister is counted as income for the purposes of the ABSTUDY Partner and Personal Income Tests; business deductions (such as the depreciation of assets) cannot be claimed. Fringe benefits that are for the minister’s own private benefit are valuable consideration and must be included.

59.2.9 Prisoner’s employment income paid to dependants

Employment income paid to a prisoner’s dependants, such as employment income while on work release that is handed over to the prisoner’s family, is regarded as employment income for the purpose of assessment under the ABSTUDY partner income test.

59.2.10 Earnings of professional sportspeople

Remuneration for professional sports games is attributed to the period in which it is earned and assessed as income in each relevant fortnight in which it is earned, even if payment to the player is deferred, paid at the end of the season, or at another set time.

59.2.11 Industry based lump sum payments

An industry based lump sum payment MAY be conditional upon the customer discontinuing any involvement in that industry. These lump sum amounts ARE treated as income for 52 weeks from the date at which they are entitled to be received.

59.2.12 Profit sharing arrangements

If a customer receives a lump sum amount from a profit sharing arrangement, then the lump sum is treated as income for 52 weeks from the date the person is entitled to receive that amount.

59.2.13 Salary sacrifice to superannuation – customer over age pension age

If a customer has reached age pension age, and their employer makes contributions to a superannuation fund for their benefit, only the amount that is paid as part of the employer’s Superannuation Guarantee Contribution (SGC) obligations will be disregarded as income.

59.2.14 Salary sacrifice into superannuation - employees under age pension age

For employees under age pension age, amounts of salary voluntarily sacrificed into superannuation are NOT income for the purposes of the ABSTUDY Personal or Partner Income tests. As a consequence all employer contributions to superannuation on behalf of an employee under age pension age are NOT assessed as income.

59.2.15 Salary sacrifice into fringe benefits

Fringe benefits are valuable consideration. An amount of salary sacrifice into a fringe benefit or set of fringe benefits IS income.

59.2.16 Valuable consideration

Valuable consideration is something received that is not in money form but is capable of being valued in money terms. Valuable consideration received by a customer IS treated as income for the purposes of the ABSTUDY Partner and Personal Income Tests.

• giving an item: If an item is given to a customer, as valuable consideration, the normal cost of purchasing that item IS assessed as income for the 12 month period from the date the item is received; or
• hiring or leasing an item: If an item is provided for a customer's use, the lease or hire fee IS assessed as income for the duration of the lease or hire agreement.

Income from a sole trader or partnership business is the net amount:

• AFTER deducting the following allowable expenses for the cost of running a business:

• losses and deductions that relate to the business and are allowable under section 51 of the Income Tax Assessment Act 1936 or section 8-1 of the Income Tax Assessment Act 1997; and
• depreciation that relates to the business and is allowable under subsection 54(1) of the Income Tax Assessment Act 1936 or division 42 of the Income Tax Assessment Act 1997; and
• amounts that relate to the business and are allowable deductions under subsection 82AAC(1) of the Income Tax Assessment Act 1936; AND

• BEFORE income tax and other personal deductions.

Other ordinary income is all ordinary income that is not employment income.

59.4.1 Gifts

Gifts are assessed for the purposes of the ABSTUDY Personal and Partner Income Tests in the following ways:

• if the gift is a one-off payment, then it is not treated as income;
• if the gift is received regularly from an immediate family member, then the gift is reduced to a fortnightly equivalent and treated as income;
• if the gift is received regularly from another source, then it is treated as income.

59.4.2 Legacies

Money received by way of a legacy or inheritance is NOT treated as income whether received as a lump sum or by instalments.

59.4.3 Private companies & trusts

Dividends and distributions received from private companies and trusts ARE included in the customer's income. The gross amount of the dividend payment, including any imputation credit, is the amount to be assessed as income.

The assessed income includes the actual amount of any individual payments, AND any franking credits attached to them.

59.4.4 Compensation

Certain forms of compensation are treated as income for ABSTUDY purposes. Refer to Chapter 62 Compensation.

59.4.5 Disability pensions paid by Department of Veterans’ Affairs

Certain payments made by the Department of Veterans’ Affairs, as a group referred to as adjusted disability pensions, are treated as income for the purposes of the ABSTUDY partner and personal income tests. These payments include:

• disability pensions paid under Parts II or IV of the Veterans’ Entitlements Act 1986;
• dependent pension (a small frozen amount paid to dependants of disability pensioners, not granted since 1986);
• temporary incapacity allowance; and
• permanent impairment payments and special rate disability pension paid under the Military Rehabilitation and Compensation Act 2004.

Refer to Chapter 12 for information about customers whose ABSTUDY Living Allowance has been reduced to nil as a result of assessing the above income under the partner and personal income tests.

59.5.1 What is a Scholarship?

A scholarship is an award made to a student or Australian Apprentice to assist with the costs associated with education.  This may include general living expenses. Scholarships may also be called bursaries, stipends, awards or grants. They are generally provided to:

• assist recipients to complete an academic qualification,
• obtain specialised training; or
• complete a special project.

Scholarships may be:

• paid to the scholarship recipient directly (in the form of money, or valuable consideration such as computers or airline flights); or
• indirectly, in the form of a financial obligation paid on behalf of the scholar (such as prepaid fees), that the student is liable to pay in order to enrol.

59.5.2 Employees of a Government agency who are awarded a scholarship

Where a student is an employee of a Government agency, and they are awarded a scholarship by that agency, their eligibility for ABSTUDY may be affected. Refer to Government Financial Assistance - Scholarships.

59.5.3 Non-discretionary fee-waiver and fee-pay scholarships

Non-discretionary scholarships do not provide any choice to students or Australian Apprentices over how the scholarship can be used:

• a fee-waiver scholarship is one where an education provider reduces or waives part or all of the course charges or fees;
• a fee-pay scholarship is one provided by an external provider (e.g. a business, charity or government department) to pay for tuition fees.

Non-discretionary fee-waiver and fee-pay scholarships are not assessed as income under the ABSTUDY Partner and Personal Income Tests.

59.5.4 Scholarships paid directly to the student or Australian Apprentice

Scholarships or similar payments that are paid directly to the student or Australian Apprentice are assessed as income under the ABSTUDY Personal and Partner Income Tests unless otherwise excluded.

59.5.4.1 Commonwealth Learning scholarships

Commonwealth Learning scholarships are NOT income for the purposes of the ABSTUDY Personal and Partner Income Tests. These scholarships introduced from 2004 assist rural, regional, low income and Indigenous students. These scholarships include;

• Commonwealth Education Costs Scholarship; and
• Commonwealth Accommodation Scholarship; and
• The Indigenous Access Scholarship. 

These scholarships are indexed in each year in accordance with the Higher Education Support Act 2003 (Division 198 of Part 5-6).

59.5.4.2 Value of board & lodging

If a scholarship provides for either free (or a reduced charge for) board and lodging the value of the free (or a reduced charge for) board and lodging IS NOT counted as income.

Money paid to a student to pay for accommodation, other than through a Commonwealth Accommodation Scholarship, IS counted as income.

59.5.4.3 Additional allowance

In addition to the scholarship amount, recipients may be entitled to reimbursement of specified 'out of pocket' expenses such as photocopying, postage, printing and similar expenses. To obtain this allowance, the participant is usually required to present an itemised claim for reimbursement, together with receipts. The reimbursement amount is NOT income.

59.5.4.4 Certain scholarships awarded outside Australia

Scholarships that have been awarded outside Australia and that are not intended to be used wholly or partly to assist recipients to meet living expenses are NOT income.

Examples:

• Rotary Foundation Ambassadorial Scholarship, provided that it does not contain any component for living expenses;
• Cambridge Commonwealth Trust Fees Scholarship; and
• Scholarship awarded by Association of Mouth and Foot Painting Artists, Liechtenstein.

59.5.5 Scholarships in the nature of a reward or prize

Scholarships that are paid as one-off sums in the nature of a reward or prize are not treated as income for the purposes of the ABSTUDY Partner and Personal Income Tests. These scholarships are defined by the following characteristics:

• the payment of the lump sum is unlikely to be repeated; and
• the scholarship/reward/prize could not reasonably have been expected to be received or necessarily anticipated; and
• the payment of the lump sum does not represent receipt of money for services rendered directly or indirectly.

59.5.6 Commonwealth Trade Learning Scholarships

Commonwealth Trade Learning scholarships are NOT income for the purposes of the ABSTUDY Personal and Partner Income Tests.  These scholarships are available to Australian Apprentices who are undertaking an identified Australian Apprenticeship trade qualification and paid at the successful completion of the first and second years of an Australian Apprenticeship in a skill shortage trade.  It is paid by the Department of Education, Science and Training.

59.6.1 Income received to cover expenses

Income received to cover out of pocket expenses and payment/reimbursement of work-related expenses are not assessed as income for the purposes of the ABSTUDY Partner and Personal Income Tests.

59.6.2 Income received as special financial assistance

Income received as special financial assistance, emergency relief, or like-assistance is not assessed for the purposes of the ABSTUDY Personal and Partner Income Tests.

Examples include, but are not limited to:

• State Government financial assistance for victims of bushfires;
• Bali Emergency Relief;
• payment of Transition to Independent Living Allowance (TILA) up to $1 000;
• drought financial assistance;
• flood financial assistance;
• Tools for your Trade; and
• payments from medically acquired HIV trusts.

59.6.3 Other exempt income

Other income that is exempt from assessment under the ABSTUDY personal and partner income tests:

• free or discounted accommodation or board and lodging;
• private health insurance rebate;
• payments made to, or for, dependent children such as Foster Care Allowance, superannuation or compensation;
• money passing between partners in a couple, i.e. housekeeping;
• legacies or inheritance;
• pay and allowances (other than in respect of continuous full-time service) to a member of the Naval Reserve, Army Reserve or Air Force Reserve;
• compensation and insurance payouts for damages to property and personal effects;
• Child Care Rebate scheme payments;
• personal care support scheme payments;
• credits from approved exchange trading systems
• bona fide customer borrowings (loans); and

• Apprenticeship Wage Top-Up payments made under the Australian Apprenticeships Incentives Programme.

59.6.4 DFISA-like payments

Defence Force Income Support Allowance-like (DFISA-like) payments made under the Veterans’ Entitlements Act 1986 are not assessed as income for ABSTUDY purposes.

Some lump sums are not treated as income for the purposes of the ABSTUDY partner and personal income tests. An amount received by a person is an exempt lump sum if it is:

• unlikely to be repeated; and
• cannot be reasonably expected to be received or necessarily anticipated; and
• do not represent receipt of money for services rendered directly or indirectly.

They include items like:

• one-off gifts, irrespective of the source of the gifts, if they are not of a periodical nature or representing a form of continuous support;
• windfall gains such as lottery winnings, the distribution of capital from a legacy or inheritance, or prizes/awards;
• ex-gratia superannuation payments, for example, bona fide redundancy payments or the lump sum payment of a superannuation invalidity benefit;
• irregular superannuation amounts such as:

• lump sum amount from the conversion; or
• commutation of a superannuation pension; or
• the payment of arrears at the time of commencing a superannuation pension.  

Note: The initial exemption of a lump sum amount from the income test does NOT mean that any ongoing income generated by the lump sum is exempt, nor does it mean that the asset the lump sum turns into is exempt.

59.8.1 Child maintenance

Maintenance received from a former partner to support a child of the former relationship and paid to a custodial parent or grandparents or other person to whom the court has appointed custody of the child is NOT assessed as ordinary income under the ABSTUDY Personal and Partner Income Tests.

59.8.2 Spousal maintenance

Spousal maintenance is money (or in kind payment) made to a former partner following a divorce or separation. It does not include payments for dependent children. For the person who receives spousal maintenance, the maintenance is NOT assessed as ordinary income under the ABSTUDY Partner and Personal Income Tests.

59.8.3 Legally enforceable agreements

Where the person's former partner has a legally enforceable right to the maintenance, the amount paid should not be treated as income of the person paying the maintenance.

59.8.4 Property settlement - capital component

Property settlements are NOT assessed as income, if they are received as:

• a one-time only payment, OR
• regular repayments of the capital component of the property settlement.

The rate of ordinary income is a required input to the rate calculation process under the Partner and Personal Income Tests for ABSTUDY Living Allowance. The rate of ordinary income is the sum of the rates of all components of ordinary income.

59.9.1 Income taken into account when it is earned, derived or received

Ordinary income, including employment income, is assessed in the fortnight that it is first earned, derived or received. Employment income that has been earned in an entitlement period is spread evenly across all days in that entitlement period, regardless of which days or the number of days worked.

59.9.2 Income received at intervals greater than a fortnight

Income is apportioned over a specific period relating to the source of the income, if:

• it is a payment relating to a period that is greater than a fortnight;
• there are a number of ordinary income payments;
• the amounts of the payments are predictable; and
• there is reasonable regularity in the timing of the payments.

59.9.3 Apportioning lump sums over 12 months

One-off, irregular or non-periodical lump sum amounts are apportioned as income over a 12 month period in 52 weekly amounts, if they are:

• NOT remuneration, periodic payments, or an exempt lump sum;

  • Examples:

• family trust distributions;
• certain 'loan' arrangements i.e. NOT a bona fide loan to customers;
• scholarships (where not an exempt lump sum – see 59.5.5); and
• dividend distributions from a private company; or

• remuneration and received AFTER the date of claim;

  • Examples:

• commissions;
• signing on fees or endorsements for professional sports people;
• an industry related payment such as a dairy cash bonus, or payments to leave the industry; and
• profit sharing.

The date earned, derived or received is the date the customer becomes entitled to receive the amount.

59.9.4 Casual earnings assessed in fortnight earned

Income from casual earnings is assessed in the actual fortnight it is earned or derived, not in the fortnight it is received.

59.9.5 Assessment of deferred income - voluntary

An employee may earn money but choose to defer receipt of the money. As the person has an entitlement to claim the income before it is received, the income is assessed at the time it is earned rather than the time it is received.

59.9.6 Assessment of deferred income - involuntary

If an employee had no choice over whether or not their income was deferred, income is NOT assessed until he or she received it.