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10.6.2 Child and Spousal Maintenance Income
Last amended: 18 June 2010
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Child maintenance
Child maintenance received by a pensioner from the parent of a child or a partner/former partner is not assessed as ordinary income under the income test for income support purposes. It is, however, taken into account under the maintenance income test for "more than the base rate" of Family Tax Benefit Part A and for child related payments in respect of DVA saved children.
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There is an important distinction between child support payments received and child support payments paid. Child support payments received by a person are not assessed under the ordinary income test that applies to service pensions. However, child support payments paid by a person are included within that person's assessable income.
Effect on additional free area for dependent children for income test
Maintenance income payments do not reduce the additional free area provided for dependent children.
Spousal maintenance
Spousal maintenance payments are usually made periodically but can be received as lump sums. Spousal maintenance is distinct from a property settlement, which is the return of a person's own property.
Assessment of spousal maintenance in the hands of the receiver
For the person who receives spousal maintenance, the maintenance is not assessed as ordinary income under the income test for income support purposes. It is, however, taken into account under the maintenance income test for family payment purposes.
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Assessment of spousal maintenance in the hands of the payer
Where a person is claiming or receiving income support and part of their income is used to pay spousal maintenance, it is necessary to look at the facts in each case to determine whether the income used to pay spousal maintenance should be assessed as income.
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Maintenance income paid - discretion to exclude from the income test
The VEA does not exclude maintenance income payments, in the hands of the payer, from the income test. The basis for allowing a favourable discretion to exclude (in some circumstances) spousal maintenance amounts, in the hands of the payer, from the income test is that those amounts may be regarded as not being available for the person's own use or benefit. This may allow a reasonable finding that they do not fall within the definition of income within the VEA.
Individual circumstances must be considered
The individual circumstances of each case must be carefully considered to determine whether this expectation, of the amounts not being available for use by the payer, is correct. Where a delegate is reasonably satisfied that a valid and binding spousal agreement exists, then the maintenance income may be excluded from the pension assessment of the payer.
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Where a divorced or separated couple subsequently reconcile, maintenance income payments may still be required under a continuing court order. In this circumstance the continued exemption of the payments from the income test would not be appropriate, owing to the expectation under the VEA that members of a couple will pool and share their combined financial resources.
Section 5H(1) VEA – ordinary income
Family Assistance Guide 3.1.7 Maintenance Income Test
http://www.fahcsia.gov.au/guides_acts/fag/faguide-3/faguide-3.1/faguide-3.1.7.html
Family Assistance Guide 3.1.7 Maintenance Income Test
http://www.fahcsia.gov.au/guides_acts/fag/faguide-3/faguide-3.1/faguide-3.1.7.html
The ordinary income of a person for a period means, as described in section 46 of VEA, the gross ordinary income from all sources for that period without any reduction, other than a reduction of business income.
One element of the means test for income support pensions whereby the rate of pension payable to a pensioner reduces progressively as their income increases above a certain threshold known as the income free area (IFA).
The maintenance income test applies when assessing a person's entitlement to Family Tax Benefit. A threshold amount of income (the maintenance income free area) is allowed, with each dollar of maintenance income above the threshold reducing FTB Part A payments by 50 cents. The maintenance income test also applies to child-related payments in respect of DVA saved children.
Family Tax Benefit A is a payment made by the Family Assistance Office to assist families with the cost of raising children. It replaces Minimum Family Allowance, Family Allowance, Family Tax payment Part A and Family Tax Assistance Part A.
From 1 January 1998 responsibility for administration of most income support child related payments was transferred to Centrelink. However, saving provisions allow any person in receipt of service pension or income support supplement on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.
According to subsection 5K(1) of the VEA, maintenance income in relation to a person, means:
- child maintenance — that is, the amount of a payment or the value of a benefit that is received by the person for the maintenance of a maintained child of the person and is received from:
- a parent of the child, or
- the partner or former partner of a parent of the child, or
- partner maintenance — that is, the amount of a payment or the value of a benefit that is received by the person for the person's own maintenance and is received from the person's partner or former partner, or
- direct child maintenance — that is, the amount of a payment or the value of a benefit that is received by a maintained child of the person for the child's own maintenance and is received from:
- a parent of the child, or
- the partner or former partner of a parent of the child,
but does not include disability expenses maintenance.
Section 5F(1) of the VEA defines dependent child as having the same meaning as in the Social Security Act 1991. For income support purposes, dependent child is defined as:
Child under 16 years
- the pensioner has legal responsibility either alone or jointly with another person for the day to day care, welfare and development of the young person AND the young person is in the pensioner's care, or
- the young person is not a dependent child of someone else AND the young person is wholly or substantially in the pensioner's care.
A child under 16 years cannot be considered a dependent child if:
- they are not a full-time student, and
- their weekly income from any source is more than the amount specified in section 5(3)(c) of the Social Security Act.
Child 16 years or older
A young person who has turned 16 years but is under 22 years can still be a dependent child of the pensioner if:
- they are wholly or substantially dependent on the pensioner, and
- their income in the financial year will not exceed the personal income limit, and
- they are receiving full-time education at a school, college or university.
A child over 16 years cannot be considered a dependent child if:
- they receive a social security pension or benefit such as youth allowance, or
- their personal income is more than the amount specified in section 5(4)(b) of the Social Security Act.
Income includes earning from casual, part-time or full-time earnings.
Note: the meaning of a dependent child for DVA income support pension purposes is not the same as the meaning for Family Tax Benefit purposes.