This chapter contains information about payments received for maintenance of the person or the child of the person.
VEA ? [2]
Maintenance Income
Chapter 9.1 Income and Assets Test Principles [3]
Last amended: 18 June 2010
VEA ? [10]
Maintenance income [11] is a payment received that provides for the support and maintenance of a person. Maintenance income may be paid to support a former partner, or a dependent child [11].
The amount of child maintenance or child support received by a pensioner does not affect the assessable value of the pensioner's ordinary income.
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.
More ? [12]
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.
Spousal maintenance received by a person is not assessed as ordinary income under the income test for income support purposes.
Spousal maintenance income paid by a person may be disregarded from the payer's pension assessment if a delegate is reasonably satisfied that these amounts are no longer available for the payer's own use or benefit.
More ? [13]
Where a valid and binding spousal maintenance agreement exists, the amount paid should not be treated as income of the person paying the maintenance. In cases where the arrangement to pay spousal maintenance is not documented, or evidence of an agreement cannot be provided, the gross amount of income should be used in assessing the payer's rate of income support.
A delegate must be reasonably satisfied that a spousal maintenance agreement is fair and reasonable for the full amount of the maintenance payment to be exempt from the payer's assessment. In cases where payments are not fair and reasonable, the deprivation provisions [11] may be triggered.
More ? [14]
The current rate of maintenance income depends on the following:
Variation or cessation of maintenance is reviewable.
More ? [15]
Capitalised maintenance income is income provided by a:
Section 5H(1) [7] VEA – definition of ordinary income
Section 5K(1) [7] VEA – definition of maintenance income
According to subsection 5K(1) of the VEA [27], maintenance income in relation to a person, means:
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
A child under 16 years cannot be considered a dependent child if:
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:
A child over 16 years cannot be considered a dependent child if:
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.
Last amended: 18 June 2010
VEA ? [33]
Child maintenance received by a pensioner from the parent of a child or a partner/former partner is not assessed as ordinary income [11] under the income test [11] for income support purposes. It is, however, taken into account under the maintenance income test [11] for "more than the base rate" of Family Tax Benefit Part A [11] and for child related payments in respect of DVA saved children [11].
More ? [34]
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.
Maintenance income [11] payments do not reduce the additional free area provided for dependent children [11].
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.
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.
More ? [35]
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.
More ? [36]
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.
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.
More ? [37]
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.
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 [41]
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 [41]
The ordinary income of a person for a period means, as described in section 46 of VEA [27], 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 [11] 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) [11].
The maintenance income test applies when assessing a person's entitlement to Family Tax Benefit [11]. A threshold amount of income (the maintenance income free area) is allowed, with each dollar of maintenance income [11] 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 [11].
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 [11]. However, saving provisions allow any person in receipt of service pension [11] or income support supplement [11] on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA [11]. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.
According to subsection 5K(1) of the VEA [27], maintenance income in relation to a person, means:
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
A child under 16 years cannot be considered a dependent child if:
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:
A child over 16 years cannot be considered a dependent child if:
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.
Last amended: 18 June 2010
VEA ? [47]
Separated partners may enter into agreements providing for payments of spousal maintenance from one party to the other. These agreements may take several different forms, including Family Court Consent Orders, formal deeds or agreements drawn up with the assistance of solicitors, or documents drawn up by the former couple.
Where an agreement provides a binding obligation on one former partner to make spousal maintenance payments to the other former partner, these payments may be excluded from the income assessment of both the payer and the payee. For the payer, this is because spousal maintenance payments are not available for their own use or benefit, and therefore do not fit the definition of income. Maintenance income [11] received by a person is specifically excluded from the definition of ordinary income [11] under the VEA and is therefore not assessable for pension purposes.
More ? [48]
Ideally, a spousal maintenance agreement should be in the form of a deed, that is, a legal document effecting a transfer of payments from one person to another. However, other forms of documentation are acceptable.
Each case must be examined on its own merits. In each case, a delegate must be reasonably satisfied that a valid spousal maintenance agreement has been made, before the maintenance payment may be excluded from the income assessment of the payer.
In order to be regarded as a valid spousal maintenance agreement, the agreement must:
An agreement which is signed by each party provides evidence of an acknowledged, binding obligation for the maintenance of one party, by the other. Such an agreement would enable the payee to seek legal recourse if the payer failed to meet his or her obligations.
In order for the full amount of spousal maintenance payments to be excluded from the income assessment of the payer, the maintenance agreement must also:
A delegate should request a certified copy of the agreement for placement on file. A statutory declaration stating that an agreement exists is not sufficient.
Peter receives $200 a week income from a private pension scheme. Peter and his former partner Lesley draft and sign a written agreement which commits Peter to paying $100 per week of this amount to Lesley. For income support purposes, the amount of $100 ($200 less $100) is held as ordinary income of Peter. The maintenance payment is excluded from Peter's assessment.
In cases where the arrangement to pay spousal maintenance is not regarded as a valid agreement, the gross amount of income should be used in assessing the payer's rate of income support. This may occur where, for example, the only evidence of any arrangement is a verbal agreement or a statutory declaration.
In cases where the spousal maintenance agreement has been reached out of court, care should be taken to ensure that the property settlement is fair and reasonable. Any valid agreement must be such that one party has an agreed and acknowledged right to the income and the other party is prevented from disposing, withdrawing, encumbering or in any way diminishing the monies owed to the first party. To be fair and reasonable, adequate financial consideration [11] must have been agreed. The main purpose of the agreement must not have been to minimise income for the payer, in order to maximise pension entitlement. Where a spousal maintenance agreement is not fair and reasonable, part of the maintenance payment may be considered a deprivation of income and/or assets.
More ? [49]
A couple have been married for many years and the former partner has never been in the paid workforce. When the couple separate the person agrees, by a valid spousal maintenance agreement, to direct 50% of a private pension to their former partner. This would be considered to be a 'fair and reasonable' agreement.
A couple both worked full time and had done so for many years before retirement. When the couple separate, the person agrees, by a valid spousal maintenance agreement, to direct 80% of a private pension to their former partner. This may be regarded as unreasonable as the former partner is receiving payments in excess of adequate financial consideration. In this case, a delegate may decide that deprivation of income has occurred.
Section 5K(1) [7] VEA – definition of maintenance income
Section 5H(1) [7] VEA – definition of ordinary income
According to subsection 5K(1) of the VEA [27], maintenance income in relation to a person, means:
but does not include disability expenses maintenance.
The ordinary income of a person for a period means, as described in section 46 of VEA [27], the gross ordinary income from all sources for that period without any reduction, other than a reduction of business income.
For adequate financial consideration to be received when disposing of an asset [11], a person must receive value in the form of money or assets. Adequate financial consideration can be accepted when the amounts received reasonably equate to the market value of the asset. It may be necessary to obtain a valuation from a property valuation service provider.
When disposing of income [11], in order for adequate financial consideration to be received, the person must receive money, goods or services which approximate in value to the rate of disposed income. If a person disposes of an income producing asset and receives adequate financial consideration in money or money's worth for the asset, then it can be accepted that they have received adequate financial consideration for the disposal of both the income and the asset.
Last amended: 18 June 2010
When a pensioner is receiving maintenance, the delegate of the Commission [11] must determine:
The following table shows the review action required when a person advises of a maintenance variation or cessation.
If a person advises... |
Then a delegate must... |
a variation in maintenance, and it is necessary to verify the payment |
consult either the:
|
that their maintenance payments:
|
|
According to Section 179 [31]of the VEA [31], the Commission is a body corporate under the name of Repatriation Commission.
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
A child under 16 years cannot be considered a dependent child if:
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:
A child over 16 years cannot be considered a dependent child if:
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.
VEA ? [56]
Capitalised maintenance income is income provided by a:
Only the part specified as being provided as maintenance for a resident parent or a child is assessed under the maintenance income test for Family Tax Benefit or DVA child related payments for saved children [11]. If none of the amount is specified as maintenance, no amount is assessed. A person with an informal child support agreement, rather than a court order or written agreement must nominate the percentage of a capitalised amount that is for maintenance.
A court order involves the non-resident parent transferring part of their share in the former family home to the resident parent. The total value transferred was $40,000, half of which was specified as maintenance. The amount assessed as capitalised maintenance income is $20,000.
Assessment stops at the end of the capitalisation period. The assessment does not change if the capitalised maintenance is spent or disposed of in any other way before the period ends.
Capitalised maintenance income is converted to an annualised rate of maintenance income by working out:
The child support order or agreement may state the amount apportioned to each person. If not, the amount is divided equally between the people the agreement covers.
The following table shows an example of apportioning $30,000.
If the $30,000 is for... |
The amount is apportioned as... |
the resident parent and 2 children, |
$10,000 for each person. |
2 children only, |
$15,000 for each child & nil for the resident parent. |
The capitalisation period is the period for which the maintenance is paid. This will generally be given in the terms of the child support order or agreement. The capitalisation period given in a court order or agreement may be varied if it is clear that the period is not appropriate for the circumstances of the case.
If the capitalisation period is not given in a court order or agreement, the period is taken to be the period stated by the resident parent. The following table shows when the capitalisation period is reduced in some situations.
When the capitalisation period is not specified in an order or agreement... |
Then the capitalisation period is... |
and the FTB child [11] or saved child is less than 18 years old when the payment was received, |
the period beginning on the day the payment was received, and ending the day before the child turns 18. |
and the resident parent is less than 65 years old when the payment was received, |
the period beginning on the day the payment was received, and ending the day before the parent turns 65. |
VEA ? [57]
The following table shows how the amount of capitalised maintenance is assessed for the relevant period during the income year.
Step |
Action |
1 |
Work out the amount attributable for the income year using the following formula: Capitalised maintenance income X Relevant period / Capitalisation period |
2 |
Work out the annualised amount for the income year using the following formula: Result from Step 1 X number of days in the income year / Number of days in the capitalisation period in the income year. |
If the payer dies during the period that the capitalised maintenance covers, there is no change to the assessment of the capitalised maintenance under the maintenance income test.
The capitalised maintenance income definition is met at the time the payment is received by the person, and the payer is alive at the time.
Carol receives $100,000 capitalised maintenance under the terms of a court order. The order specifies that the $100,000 applies for a period of 10 years. Under the maintenance income test, $10,000 is assessed per year. Carol's ex-husband dies after 5 years. The assessment of the capitalised maintenance does not change and it continues to be assessed for the whole 10 year period.
5/03/02 — Page 1
From 1 January 1998 responsibility for administration of most income support child related payments was transferred to Centrelink [11]. However, saving provisions allow any person in receipt of service pension [11] or income support supplement [11] on 31 December 1997 who would be or is financially disadvantaged by the transfer to continue having their child related payments paid by DVA [11]. Saved children are assessed under the rules contained in the VEA as at 31 December 1997.
FTB child has the same definition as given in section 22 and 22A of the Family Assistance Act (i.e. A New Tax System (Family Assistance) Act 1999).
For more information, see also 9.4.3/Effect of Children on Remote Area Allowance (RAA) CS Policy Library [60].
Links
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[3] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/91-income-and-assets-test-principles
[4] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/94-children
[5] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets
[6] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/101-ordinary-income
[7] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
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[13] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn695
[14] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn696
[15] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn697
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[17] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn693
[18] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/106-maintenance-income/1062-child-and-spousal-maintenance-income
[19] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn694
[20] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/106-maintenance-income/1063-documentary-requirements-spousal-maintenance-agreements
[21] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn695
[22] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn696
[23] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/106-maintenance-income/1064-assessment-and-review-maintenance
[24] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn697
[25] https://clik.dva.gov.au/compensation-and-support-policy-library/part-10-types-income-and-assets/106-maintenance-income/1065-capitalised-maintenance
[26] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn698
[27] http://www.comlaw.gov.au/Series/C2004A03268
[28] https://clik.dva.gov.au/book/export/html/16360#tgt-SSA_ftn1
[29] http://www.comlaw.gov.au/Series/C2004A04121
[30] https://clik.dva.gov.au/book/export/html/16360#ref-SSA_ftn1
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[37] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn703
[38] https://clik.dva.gov.au/legislation-library
[39] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn699
[40] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/94-children/944-payments-respect-saved-children
[41] http://www.fahcsia.gov.au/guides_acts/fag/faguide-3/faguide-3.1/faguide-3.1.7.html
[42] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn700
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[47] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn704
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[49] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn706
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[51] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn705
[52] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets/962-general-provisions-deprivation
[53] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn706
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[57] https://clik.dva.gov.au/book/export/html/16360#tgt-cspol_part10_ftn708
[58] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn707
[59] https://clik.dva.gov.au/book/export/html/16360#ref-cspol_part10_ftn708
[60] http://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/94-children/943-effect-children-assessment-income-support-payments/effect-children-remote-area-allowance-raa