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4.2.9.50 Current Family Actual Means Test - Current Family Actual Means Test Assessment

Summary

When a family has a reduction in family actual means from the base tax year (1.1.B.10), they can request that their actual means be assessed on the current year, i.e. the tax year immediately following the base tax year. This topic explains the conditions involved in current FAMT assessments. This topic covers the following matters:

  • conditions for using a current FAMT assessment,
  • the period of the assessment's effect,
  • expectations of decreased profits,
  • reasons for a decrease in actual means,
  • family members who are no longer designated parents, and
  • actual means decreased due to study.

 

The appropriate tax year for a current FAMT assessment is the tax year ending in the calendar year in which the young person receives or claims YA (base tax year + 1). Therefore all spending, savings and appropriate deductions for the current FAMT will be for the current tax year instead of the base tax year. Where a person applies for a current FAMT assessment, the base tax year details are required in order to assess the drop in the family's actual means.

 

Conditions for using a current FAMT assessment

The conditions for using a current FAMT assessment are that a reduction of actual means has occurred lasting for 2 years, with the additional requirement that the decrease in actual means must be attributed to one or more of the following:

  • a circumstance or circumstances beyond the control of an family member (section 23(15)), OR
  • there is no longer a designated parent for the FAMT, OR
  • a family member has taken up full-time study (1.1.F.230).

 

These conditions provide an objective basis for granting a concession to families whose actual means was too high in the base tax year.

 

Act reference: SSAct section 23(15) For the purposes of Part 2.11 and the YA Rate Calculator

Policy reference: SS Guide 4.2.8.10 Dependent YA - Parental Income Test & Limits, 4.2.9.10 Family Actual Means Test - Designated Parents

 

Period of effect of assessment

If a person meets the conditions for using a current FAMT assessment and the person makes a request in accordance with an approved form, the current FAMT assessment applies from the start of the YA payment period that ends on or after the later of:

  • the day on which the request is made, or
  • 1 January in a year.

 

Expectations of decreased profits

Applicants MUST supply financial evidence of decreased actual means before current FAMT assessment is used. It should be noted that a current FAMT should not be approved on the basis of an expectation of reduced actual means. A young person needs to have assessed whether their actual means will indeed be lower and provide documentary evidence. Expectation of a decrease in profits in relation to a family company or business should NOT usually be granted for a current FAMT assessment.

Example: Mr and Mrs Jones' actual means for 2008-09 were too high for their daughter to qualify for YA in 2010. They request a current FAMT, stating that their small greengrocery is likely to suffer a down turn in profits in 2009-10 because of competition from a large supermarket due to open in April 2010. At the time of lodging the claim, however, there is no evidence of a downturn in profits. YA CANNOT be granted under current FAMT assessment.

 

Reasons for a decrease in actual means

For a current FAMT assessment to be used, the reasons for the decrease in actual means MUST be out of the control of a:

  • parent,
  • student, or
  • family member.

Examples:

  • departure or loss of a person, crucial to maintaining actual means,
  • death, illness or disability,
  • resignation, retirement, or retrenchment,
  • divorce, separation or imprisonment,
  • stress, personal problems, addictions, pregnancy, child care,
  • bankruptcy, insolvency, bad debts,
  • fire, flood, drought or other disaster,
  • unforeseen downturn in economic conditions such as closure of local industries, or start up of business in competition, and
  • a parent or partner (1.1.P.70) starts receiving a social security payment (section 23(1)-'social security payment').

 

Example 1: Joe runs a take-away food shop with his wife Gretel, who has a degenerative illness. By the time their daughter turns 16 in September 2009 and applies for YA, Gretel is only able to work in the business for a few hours each week. Actual means decrease significantly because the couple has been forced to reduce trading hours. Their daughter may qualify for a current FAMT assessment using the 2009-10 financial year.

 

Example 2: The Thomas family owns a service station in a country town. The main industry in the town, railway workshops, closed early in 2010. Several families have left town and more are expected to follow, resulting in reduced turnover for many local businesses. The Thomas' accountant has advised that earnings are down considerably with little prospect of improvement. YA can be granted because the family provided the accountant's report with their YA claim a current FAMT assessment.

 

Act reference: SSAct section 23(1)-'social security payment'

 

Family members no longer designated parents

A current FAMT assessment can be used if, at the time of applying for the assessment, a parent is no longer a designated parent.

Example 1: James was a sole trader builder who ceased trading and took up PAYG employment in August 2008. As he was a designated parent in an FAMT category in 2008-09, his son's YA claim is subject to the FAMT in 2010. The family can, however, be assessed on current FAMT for 2009-10.

 

Example 2: Mr and Mrs Jackson sold their cleaning business and wound up their private company in April 2009. Their daughter applied for YA on 1 January 2009 and was receiving part rate of payment based on the family's 2007-08 actual means. The family advised of the change in circumstances and applied for a current actual means assessment. The daughter's YA was reassessed from the relevant date in April using current year (2008-09) actual means.

Explanation: If the parents had ceased employment in the cleaning business but had not wound up the company, they would not be eligible for the current year assessment.

 

Actual means decreased due to study

Current FAMT assessment is used if total family actual means decrease because a family gives up substantial employment to take up full-time study (1.1.F.230). Generally, a full-time course of study, and the reduction in actual means, will need to last for at least 2 years. If the person withdraws from the course, the current FAMT assessment is not usually withdrawn.

 

Current FAMT assessment is NOT used if a parent claims the decrease in actual means resulted from education costs.

 

Act reference: SSAct section 1067G-G5 Person who may request Secretary to determine appropriate tax year, section 1067G-G6 Making a request

Policy reference: SS Guide 4.2.9.20 Family Actual Means Test - Actual Means

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Last reviewed: 11 August 2011


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Last Edited: 10/07/2012 12:41:16 PM


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