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4.2.9.40 Family Actual Means Test - Application of the Test

Summary

This topic contains information on applying the FAMT. This topic covers the following matters:

  • family actual means test,
  • FAMT reduction amount,
  • family actual means calculation,
  • family actual means free area, and
  • reduction for family actual means.

 

Family actual means test

The following table shows the steps involved in applying the FAMT.

Step

Action

1

Determine the individual's maximum payment rate.

2

Determine whether the young person has a designated parent.

3

Determine the appropriate tax year (1.1.A.170). The base tax year should be used for a FAMT assessment and the current tax year in the calendar year that the person claims should be used for the current FAMT. A base tax year FAMT assessment MUST be completed before a current FAMT is accepted.

4

Determine the family that will be assessed for the base tax year (1.1.A.170). It is important to note that the current family situation at the time of the claim should be taken into consideration for the FAMT.

Example: If a sibling was 22 years of age in the base tax year and in receipt of YA (dependent full-time student), BUT is currently in full-time employment and not in receipt of YA, the sibling would not be included as a family member for the FAMT. Therefore spending and savings for the sibling would not be mentioned in the FAMT for the base tax year.

5

Determine the actual means of the young person's family.

6

Determine whether the family have any deductions or exemptions from the FAMT.

7

Determine the person's family actual means free area.

8

Calculate the person's FAMT reduction amount (from the table below).

9

Calculate the personal income test reduction amount (4.2.8.50) and the parental income test reduction amount (4.2.8.10).

10

Reduce the maximum payment rate (from step 1) by the greatest of:

- the personal income test reduction amount (from step 9),

- the parental income test reduction amount (from step 9), or

- the FAMT reduction amount (from step 8).

 

FAMT reduction amount

The following table shows the steps involved in calculating the FAMT reduction amount from 1 July 2010.

Step

Action

1

Determine whether the person has parental income in common with any other person. Note that a person who is subject to the parental income test and FAMT can have parental income in common with a dependent person who is receiving:

- youth allowance,

- ABSTUDY living allowance,

- ABSTUDY Group 2 school fees allowance (means-tested component),or

- additional boarding allowance under AIC.

2

Add together the maximum payment rates of the children identified in step 1. This is the pooled maximum payment rate.

3

Does the family actual means exceed the family actual means free area?

- If NO, the test does not affect the person's maximum rate of YA.

- If YES, subtract the family actual means free area from the family actual means and go to step 4.

4

Divide the result from step 3 by 130 (20% of the step 3 amount, reduced to a fortnightly amount). This is the pooled family actual means reduction amount.

5

Divide the individual's maximum payment rate by the pooled maximum payment rate from step 2.

6

Multiply the pooled family actual means reduction amount (from step 4) by the amount calculated in step 5. This is the FAMT reduction amount to be used in step 4 of the previous table in FAMT.

 

Act reference: SSAct section 1067G-G1 How to work out effect of actual means of a person's family on maximum payment rate

Policy reference: SS Guide 4.2.9.10 Family Actual Means Test - Designated Parents

 

Family actual means calculation

The formula for determining a family's actual means is as follows. The below equation works by taking the family's actual means (spending + savings - deductions) and halving, and then applying the marginal tax rate and medicare levy to this amount, which is then doubled. Total net investment loss (TNIL) or net passive business loss (NPBL) is added. This gives the family an equivalent family income that will be used for assessment purposes. The formula for determining a family's actual means is as follows:

2[(GAM/2) + TNITML] + TNIL or NPBL

when:

GAM

Gross actual means is the actual means for all family members that year.

TNITML

Total notional income tax/medicare levy is the sum of the amount of medicare levy and income tax that is notionally payable by the parents.

TNIL or NPBL=

Total net investment loss or the net passive business loss (if any) of each parent.

Note: In 2010, TNILs will apply as a component of parental income for all current tax year assessments. NPBLs will continue to be included as a component of parental income for all base tax year assessments until 2011. From 2011, TNILs will form part of the parental income test for both current and base tax year assessments.

 

Act reference: SSAct section 1067G-G13 Actual means of family of claimant/recipient

 

Family actual means free area

The family actual means free area specifies the amount ABOVE WHICH a dependent YA recipient's rate is reduced by family actual means. The family actual means free area is the same as the parental income free area.

 

Act reference: SSAct section 1067G-G14 Family actual means free area

Policy reference: SS Guide 4.2.8.10 Dependent YA - Parental Income Test & Limits

 

Reduction for family actual means

Every $1.00 of family actual means above the family actual means free area reduces the rate of YA by $0.20. Where there is more than one dependent young person receiving YA (or ABSTUDY living allowance or AIC - additional boarding allowance) in the family, the reduction in rate is apportioned between the dependent young people according to their share of the total pool of parentally income tested payments in the family. For AIC, which does not have a FAMT, this apportionment is notional.

 

Act reference: SSAct section 1067G-G15 Reduction for family actual means

_______________________________________________________

Last reviewed: 4 January 2011


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