ABSTUDY, Means Tests: Chapter 58 - Parental Income Test and Limits

The Parental Income Test does NOT apply where one or both parents are:

• in receipt of an income support payment; or
• in receipt of Farm Help Income Support or Exceptional Circumstance Relief payments under Part 5 or 6 of the Farm Household Support Act 1992; or
• holders of a current Health Care Card (HCC) or Low Income Health Care Card, including a HCC issued on the basis of receipt of maximum rate Family Tax Benefit Part A; or
• in receipt of ABSTUDY Living Allowance; or
• in receipt of a Community Development Employment Projects (CDEP) wage as a participant; or
• taken to be receiving their income support payment during an employment income nil rate period.

However, the special assessment concession does not apply:

• for a period after the expiry date on the card; or
• where a Parent holds a HCC because they receive a social security Mobility Allowance or Carer Allowance (in respect of a disabled child); or
• if the applicant or the applicant’s Partner holds only a Pensioner Concession Card or a Commonwealth Seniors Health Card (CSHC).

58.1.1 Exceptional Circumstances Relief Payment ceases

A parent receiving payment under the Exceptional Circumstances Relief Payment (ECRP) provisions of the Farm Household Support Act 1992 is not subject to the Parental Income Test from the commencement of the period of receipt of ECRP until 31 December of that year.

The Parental Income Test is based on the income of the student’s or Australian Apprentice's parent/s.

Where there is a change in parent, the ABSTUDY is income tested in respect of the new parent from the date of change.

For the purposes of the Parental Income Test, the components of parental income are:

• taxable income;
• adjusted employer provided benefits (commonly known as fringe benefits) for the relevant tax year;
• target foreign income based on the relevant Australian tax year;
• net passive business losses; and
• maintenance.

58.3.1 Taxable income

Taxable income has the same meaning as in the Income Tax Assessment Act.

58.3.2 Adjusted employer provided benefits

For the purposes of the ABSTUDY Parental Income Test, an employer provided benefit is a benefit an employer provides to, or on behalf of, an employee for the employee's, or in some cases their family's, private use. An employer provided benefit is commonly known as a fringe benefit.

Employer provided benefits include, but are not limited to:

• cars;
• school fees;
• private health insurance;
• low interest loans;
• housing assistance;
• financial investments; and
• expense benefits.

Expense benefits include, but are not limited to:

• telephone expenses;
• holiday expenses;
• medical or hospital expenses;
• union dues/professional association membership fees;
• fuel and/or power expenses, including electricity, gas, oil or firewood;
• entertainment;
• grocery bills;
• credit card accounts;
• sporting or social club fees; and
• childcare expenses.

Amounts paid to meet or reimburse expenses incurred in connection with the employee's employment are NOT employer provided benefits.

58.3.3 Foreign income

For the purposes of the ABSTUDY Parental Income Test, foreign income includes:

• any taxable or non-taxable income amount earned, derived or received from sources outside Australia; OR
• periodical payments or benefits by the way of gifts or allowances from a source outside Australia.

58.3.4 Net passive business losses

For the purposes of ABSTUDY, a net passive business loss is the difference (where the difference results in a loss) between:

• the total deductions that can be claimed in respect of a passive business in the appropriate tax year; AND
• the gross income from that business during the same tax year.

The value of such net passive business losses is added to the combined parental income for the purposes of the ABSTUDY Parental Income Test, and is also added to total household expenditure for the purposes of the Family Actual Means Test.

58.3.4.1 Passive business

A passive business is one in which the parent is engaged for less than 17.5 hours per week on average, and includes the following business types:

• primary production;
• provision of professional services;
• earning income from rent; and
• share market speculation.

A person is NOT considered to be engaged in a passive business if they are merely an employee of the business regardless of whether or not they are paid.

58.3.5 Maintenance

Maintenance payments are taken into account when assessing combined parental income for the Parental Income Test. This includes:

• all maintenance received by either parent for the upkeep of a child in their care; and
• spousal maintenance.

Maintenance includes payments made or received directly, and payments made or received indirectly, such as payments via the Child Support Agency, or payments via a third party e.g. school fees, payment of utility charges.

Maintenance amounts received are included and amounts paid out are deducted.

Income assessed under the Parental Income Test is combined parental income in either:

• the financial year ending on 30 June of the year before the calendar year for which payment is claimed, referred to as the base tax year; or
• the financial year ending on 30 June of the calendar year for which payment is claimed, referred to as the current tax year.

Under the Parental Income Test, it is not possible to consider a financial year other than the base tax year or the current tax year.

Normally, the parental income test would be applied against the base tax year income unless:

• the applicant and/or parent/s request the Parental Income Test be applied against the current tax year parental income due to a reduction in this income; or
• the parental income for the tax year following the base tax year exceeds 125% of base tax year parental income and of the claimant's parental income free area. In this case, from 1 October the Parental Income Test would be applied against the current tax year parental income.

58.4.1 Current tax year assessment

Current year assessments can be used when:

• the parental income is substantially less in the current tax year than in the base tax year; and
• the decrease in parental income is likely to apply for AT LEAST 2 years from the date on which the event that led to the decrease occurred or first became apparent.

A broad interpretation of what constitutes “substantially less income” should be applied. If the parental income has, or will, decrease enough for the student to get ABSTUDY, the decrease may be accepted as substantial.

The following table shows the steps involved in applying the Parental Income Test. 

The manner in which the ABSTUDY Living Allowance (plus Rent Assistance, Remote Area Allowance and Pharmaceutical Allowance) is affected is set out in Chapter 57 Calculating ABSTUDY Rates.

The adjusted Parental Income Free Area (PIFA) is the amount of income the parent/s can have without affecting the ABSTUDY customer’s rate. If the parental income is above the adjusted PIFA, the ABSTUDY customer’s rate is reduced.

Every $4 of parental income above the adjusted Parental Income Free Area reduces the rate of ABSTUDY by $1, which is the minimum amount payable.

The base Parental Income Free Area is set annually. The current base Parental Income Free Area amount is found in “A Guide to Australian Government Payments    ”. Additional amounts for other dependent children in the parent's care are added to the base PIFA to arrive at the adjusted PIFA. These amounts are shown in dollars in the following table.