Commonwealth Numbered Regulations - Explanatory Statements

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AUSTUDY REGULATIONS (AMENDMENT) 1995 NO. 132

EXPLANATORY STATEMENT

Statutory Rules 1995 No. 132

Issued by the Authority of the Minister for Schools, Vocational Education and Training

Student and Youth Assistance Act 1973

AUSTUDY Regulations (Amendment)

The Student and Youth Assistance Act 1973 (the Act) provides the legislative authority for the AUSTUDY scheme and for a debt management regime for the AUSTUDY, ABSTUDY and Assistance for Isolated Children schemes. These schemes pay financial assistance to students or their parents.

Section 56 of the Act provides that the Governor-General may make regulations for the purposes of the Act. Section 7 of the Act enables the Secretary to grant a benefit under the AUSTUDY scheme, subject to that provision and the regulations. Subsection 7(2) of the Act provides that, without limiting the generality of matters that may be dealt with by the regulations, the regulations may specify the benefits that may be granted and specify the circumstances in which benefits are not payable,

The AUSTUDY Regulations (Amendment) (hereafter "the regulations") have introduced measures to improve the targeting of AUSTUDY to those in genuine need. The AUSTUDY means testing arrangements have been modified by the regulations so that, in specified circumstances, the actual means available to a family, as indicated by actual household expenditures and outgoings, will determine whether the student is entitled to assistance.

The changes made to the AUSTUDY Regulations are detailed below in amending regulation order.

Regulation 1        Commencement

Subregulation 1.1 provides that these regulations will commence on 1 October 1995.

Regulation 2        Amendment

Subregulation 2.1 provides that the AUSTUDY Regulations are amended as set out in these Regulations.

Regulation 3         New Division 1B of Part 1 of Chapter 2 (Who can get AUSTUDY?)

Subregulation 3.1 inserts a new Division 1B ("Means test: parent and spouse") after regulation 12E in Part 1 of Chapter 2.

Subdivision A - Preliminary

New Division 1B contains preliminary provisions set out in Regulations 12F and 12G.

Regulation 12F provides that the new Division 1B will apply only to applications for AUSTUDY for a period starting on or after 1 January 1996. This limits the application of the regulations to applications for AUSTUDY relating to periods of study commencing on or after 1 January 1996.

Regulation 12G provides that the new Division 1B will not apply to a student while the parental income test does not affect the student's living allowance because the student is not living with a natural or adoptive parent; and: the student is in an approved substitute (foster) care arrangement; or

the student stopped being in an approved substitute (foster) care arrangement only because of his or her age.

Subdivision B - Actual means test: parents

Subdivision B of the new Division 1B sets out the "Actual means test: parent" in Regulations 12H to 12N. These provisions enable the actual means of a "designated parent" to be compared with the after tax income of a "notional parent" for the purpose of determining whether the applicant is entitled to AUSTUDY.

Regulation 12H provides that "notional parent" in Subdivision B has the meaning given by subregulation 12K(2).

Regulation 12J provides that Subdivision B will apply to a student who, apart from the operation of Division 1B, is entitled to receive the standard or away-from-home living allowance. This means that Subdivision B will apply to students who are dependent on their parents for financial support while they study.

Regulation 12K enables a comparison of the means available to a designated parent with the after tax income of the notional parent of a typical recipient to establish whether the designated student is entitled to receive a living allowance. "Parent" for the purposes of proposed regulation 12K is defined in subregulation 85(2) of the AUSTUDY regulations.

Subregulation 12K(1) provides that a designated student who has a designated parent is not entitled to receive living allowance in respect of a period of eligibility in a year of study unless the Secretary is satisfied that, for that period, the actual means of the designated parent are less than, or equal to, the after tax income of a notional parent. The expressions in italics are discussed in the following paragraphs.

Subregulation 12K(2) defines, for the purposes of subregulation 12K(1), a notional parent as a parent who:

•       receives income solely from a salary and wage source;

•       is the parent of a student who qualifies for living allowance at the same rate that the designated student would qualify, but for the operation of Subdivision B; and

•       has the same number of children of the same age as the designated parent mentioned in subregulation 12K(1).

Regulation 12L defines who is a designated parent. Subregulation 12L(1) provides that, for the purposes of subregulation 12K(1), a designated parent is a parent who:

•        holds, or at one time held, a visa or entry permit, within the meaning of the Migration Act 1958, the grant of which was contingent on the person demonstrating skills in business (paragraph 12L(1)(a)); or

•       has an interest in:

•       an asset located outside Australia and its external territories (subparagraph 12L(1)(b)(i));

•       a proprietary company or an unlisted public company (subparagraph 12L(1)(b)(ii)); or

•       a trust or similar arrangement (subparagraph 12L(1)(b)(iii)); or

•       derives income from a source outside Australia and its external territories (paragraph 12L(1)(c)); or

•        is a self-employed person (except a primary producer to whom the fifty per cent business assets test discount applies) (paragraph 12L(1)(d)); or

•       is a partner in a partnership (paragraph 12L(1)(e)).

Subregulation 12L(2) defines "self-employed person" for the purposes of paragraph 12L(1)(d) as a person who works for gain or reward otherwise than under a contract of employment or apprenticeship, whether or not that person employs one or more other persons.

Regulation 12M provides that the after tax income of a notional parent for the purposes of subregulation 12K(I) is calculated by the formula:

[(PI + DC) - T] + FP

where:

"PI" means the maximum income of the notional parent in respect of which, on a notional application of the parental income test, a student's eligibility to receive living allowance for the period would be an annual rate of 1,000;

"DC" means the total amount of any deductions for children of the notional parent that, under regulation 87, would be applicable;

"T" means the amount of income tax (before rebates, if any) that would notionally be assessable on (PI + DC); and

"FP" means the total amount of any family payments (at the maximum rate) that could be paid under Part 2.17 of the Social Security Act 1991 in respect of the children of the notional parent.

This formula establishes that the maximum income available to the notional parent is the threshold amount against which the actual means of a designated parent are to be compared. The threshold amount will increase with the number of children in the family because deductions for other dependent children and family payments increase with the number of children. The example in appendix A shows how this works.

Proposed Regulation 12N deals with the actual means of a designated parent.

Subregulation 12N(1) establishes that the actual means of a designated parent for the period of eligibility are taken to be the total expenditure and savings of the parent and his or her family in that period. Subregulation 12N(5) defines "family", in relation to a parent, as:

•       the parent's spouse (if any), being a person:

•        to whom the parent is married and from whom the parent is not separated; or

•        with whom the parent lives in a de facto relationship;

•       the student;

•       a person aged 15 years or less who is a natural or adopted child of the parent or who is wholly or substantially dependent on the parent; or

•       a person aged 16 years or more, who is a natural or adopted child of the parent, or who is wholly or substantially dependent on the parent, and is not in a substitute (foster) care arrangement.

This ensures that the actual means of a parent with whom the student does not normally Eve will not be taken into account. The actual means of the designated parent alone will be relevant where:

•       the student's parents have separated (ie the parents are, or were, married and the spouse of the designated parent does not live with the student and designated parent); and

•       the designated parent does not have another spouse.

However, if the student's parent is married to, or living in a de facto relationship with, another person, the actual means of the parent and spouse will be taken into account in determining the student's need for assistance.

Subregulation 12N(2) requires the Secretary to impute a fair market price to a transaction where the Secretary reasonably believes that the amount expended in the transaction does not represent a fair market price for the transaction.

So, hypothetically, if the Secretary has a reasonable belief that expenditure of $5,000 on education fees for a family with three children at Exclusive Persons College for a full year is not a fair market price, the Secretary shall impute a value that he or she considers to be the fair market price for the purposes of regulation 12N.

Subregulation 12N(3) provides that if the Secretary reasonably believes that a transaction engaged in by a person, other than the parent or a member of his or her family, is a transaction engaged in for the benefit of the parent or a member of his or her family, the Secretary must impute a value to the transaction that the Secretary considers to be the fair market value of the transaction as if the parent or member of his or her family had expended the amount.

This will enable the Secretary to include in a designated parent's actual means the value of, for example, rent paid by the parent's grandmother (not a member of the parent's "family" as defined) where that rent would have been paid by the parent if the grandmother had not paid it for the benefit of the parent or another family member.

Subregulation 12N(4) provides that an amount of expenditure or savings is to be taken to be expended or saved in a particular period if..

•       the expenditure or the savings occurred in that period; or

•       the Secretary reasonably believes the expenditure or savings should be taken to have occurred in that period.

This will ensure that arrangements to incur expenditure or realise savings so that they do not fall in the period of eligibility in the year of study can be added to the actual means of the designated parent in the period of eligibility.

Subdivision C - Actual means test: spouse

Subdivision C of Division 11B of Part 1 of Chapter 2 sets out the spouse actual means test in Regulations 12P to 12U. These provisions enable the actual means of a "designated spouse" to be compared with the after tax income of a "notional spouse" for the purpose of determining whether the applicant is entitled to AUSTUDY.

Regulation 12P provides that "notional spouse" in Subdivision C has the meaning given by subregulation 12R(2).

Regulation 12Q provides that proposed Subdivision C will apply to a student who has a spouse and who, apart from the operation of Subdivision C, is entitled to receive the independent living allowance. This will limit the application of Subdivision C to students who are dependent on their spouse for financial support while they study.

Regulation 12R enables a comparison of the means available to a designated spouse with the after tax income of the notional spouse of a typical recipient to establish whether the designated student is entitled to receive a living allowance.

Subregulation 12R(1) provides that a student whose spouse is a designated spouse is not entitled to receive living allowance in respect of a period of eligibility in a year of study unless the Secretary is satisfied that, in that period, the actual means of the designated spouse are less than, or equal to, the after tax income of a notional spouse. The expressions in italics are discussed in the following provisions.

Subregulation 12R(2) defines, for the purposes of subregulation 12R(1), a notional spouse as a spouse who:

•       receives only salary and wage income;

•        is the spouse of a student who gets living allowance at the same rate that the student mentioned in subregulation 12R(1) would get, but for the operation of Subdivision C; and

•       has the same number of children of the same age as the designated spouse.

Regulation 12S defines who is a designated spouse. Subregulation 12S(1) provides that, for the purposes of subregulation 12R(1), a designated spouse is a spouse who:

•       holds, or at one time held, a visa or entry permit, within the meaning of the Migration Act 1958, the grant of which was contingent on the person demonstrating skills in business (paragraph 12S(1)(a)); or, has an interest in:

•       an asset located outside Australia and its external territories (subparagraph 12S(1)(b)(i));

•        a proprietary company or an unlisted public company (subparagraph 12S(1)(b)(ii)); or

•       a trust or similar arrangement (subparagraph 12S(1)(b)(iii)); or

•       derives income from a source outside Australia and its external territories (paragraph 12S(1)(c)); or

•       is self employed (except a primary producer to whom the fifty per cent business assets test discount applies) (paragraph 12S(1)(d)); or

•       is a partner in a partnership (paragraph 12S(1)(e)).

Subregulation 12S(2) defines "self-employed person" for the purposes of paragraph 12S(1)(d) as a person who works for gain or reward otherwise than under a contract of employment or apprenticeship, whether or not that person employs one or more other persons.

Regulation 12T provides that the after tax income of a notional spouse for the purposes of subregulation 12R(1) is calculated by the formula:

[(SI + DC) - T] + FP

where:

"SI" means the maximum income of the notional spouse in respect of which, on a notional application of the spouse income test, a student's eligibility to receive living allowance for the period would be an annual rate of $ 1,000;

"DC" means the total amount of any deductions for children of the notional spouse that, under subregulation 94(2A), would be applicable;

"T" means amount of income tax (before rebates, if any) that would notionally be assessable on (SI + DC); and

"FP" means the total amount of any family payments (at the maximum rate) that could be paid under Part 2.17 of the Social Security Act 1991 in respect of the children of the notional spouse.

This formula establishes that the maximum income available to the notional spouse is the threshold amount against. which the actual means of a designated spouse are to be compared. The threshold amount will increase with the number of children in the family because deductions for other dependent children and family payments increase with the number of children. The example in appendix B shows how this works. Regulation 12U deals with the actual means of a designated spouse.

Subregulation 12U(1) provides that the actual means of a designated spouse for the period of eligibility are taken to be the total expenditure and savings of the spouse and his or her family in that period. Subregulation 12U(5) defines "family", in relation to a spouse, as:

•       the student;

•       a person aged 15 years or less who is a natural or adopted child of the spouse or who is wholly or substantially dependent on the spouse; or

•       a person aged 16 years or more who is a natural or adopted child of the spouse, or who is wholly or substantially dependent on the spouse, and is not in a substitute (foster) care arrangement.

Subregulation 12U(2) requires the Secretary to impute a fair market price to a transaction where the Secretary reasonably believes that the amount expended in the transaction does not represent a fair market price for the transaction.

So, for example, where the Secretary has a reasonable belief that expenditure of $500 a year on housing in Canberra for a family with four children is not a fair market price, the Secretary must impute a value that he or she considers to be the fair market price for the purposes of regulation 12U.

Subregulation 12U(3) provides that if the Secretary reasonably believes that a transaction engaged in by a person other than the spouse, or a member of his or her family, is a transaction engaged in for the benefit of the spouse or a member of his or her family, the Secretary must impute a value to the transaction that the Secretary considers to be the fair market value of the transaction as if the spouse or member of his or her family had expended the amount.

This will enable the Secretary to include in a designated spouse's actual means the value of, for example, rent paid by the spouse's grandmother (not a member of the spouse's "family" as defined) where that rent would have been paid by the spouse if the grandmother had not paid it for the benefit of the spouse or another family member.

Subregulation 12U(4) provides that an amount of expenditure or savings is to be taken to be expended or saved in a particular period if..

•       the expenditure or the savings occurred in that period; or

•       the Secretary reasonably believes the expenditure or savings should be taken to have occurred in that period.

This will ensure that arrangements to incur expenditure or realise savings so that they do not fall in the period of eligibility in the year of study can be added to the actual means of the designated spouse in the period of eligibility.

Regulation 4       Regulation 109 (What changes in circumstances must the Department be told about?)

Subregulation 4.1 amends regulation 109 of the AUSTUDY regulations which sets out the prescribed events about which a student must tell the Department within 7 days of the event happening. The amendment requires a student to tell the Department within 7 days of:

•       a designated parent or spouse becoming aware that his or her actual means, within the meaning of proposed regulations 12N or 12U, are substantially more than his or her actual means were when the student's AUSTUDY application was lodged or when the Department was last notified of his or her actual means; and

•       a parent or spouse of a student becoming a designated parent or spouse for the purposes of regulations 12L or 12S.

Appendix A

Example of how the parental actual means test works

Does the actual means test apply?

A self employed plumber has a dependent 16 year old full time student child who lives at home and is applying for AUSTUDY, and one other dependent child aged 11. As the parent is self employed, she is a designated parent (Regulation 12L) and the parental actual means test (Subregulation 12K(1)) will apply.

The actual means test

The after tax income of a notional parent (Regulation 12M) in this family is calculated by the formula [CPI + DC) - T] + FP where:

"PI" is $31,687 (above this parental income, no AUSTUDY at the under 18 at home rate is payable);

"DC" is $4,900 (maximum deductions under AUSTUDY subregulation 87(2));

"T" is, for the purposes of the example, assumed to be $8,500; and

"FP" is $3,759 (maximum family payment available to a family with this profile, calculated as $21.70 per fortnight basic family payment per child, plus additional family payment of $67.20 per fortnight for the 11 year old and $34 per fortnight the 16 year old, all payable over 26 fortnights).

The after tax income of a notional parent in this example is $31,846.

The designated parent indicates actual means (Regulation 12N) in the period of eligibility in the year of study as:

Accommodation/mortgage

$ 6,500

Other debts (excl car)

$ 1,000

Car finance

$ 2,000

Credit cards

$ 1,000

Living expenses

$11,000

Utilities/recurrent bills

$ 2,000

Entertainment

$ 1,000

Clothing

$ 2,000

Other consumer goods

$ 1,000

TOTAL

$27,500

The designated parent's actual means (as indicated by expenditure of $27,500) are less than the after tax income of the notional parent ($31,846). In this example, the student will be eligible to receive assistance.

Appendix B

Example of how the spouse actual means test works

Does the actual means test apply?

A married student's spouse is a public servant. They have three dependent children aged 17 (a full time student), 14 and 12. The student's spouse derives income from a family trust and, for this reason, is a designated spouse (Regulation 12M). The spouse actual means test (Subregulation 12L(1)) will apply.

The actual means test

The after tax income of a notional spouse (Regulation 12N) in this family is calculated by the formula [(SI + DC) - T] + FP where:

"SI" is $24,437 (above this spouse income, no AUSTUDY at the independent over 18 rate is payable);

"DC" is $7,400 (maximum deductions under AUSTUDY subregulation 94(2A));

"T" is, for the purposes of the example, assumed to be $7,500; and

"FP" is $6,770 (maximum family payment available to a family with this profile, calculated as $21.70 per fortnight basic family payment for each child; plus additional family payment of $67.20 per fortnight for the child aged 12, $94.10 per fortnight for the child aged 14 and $34.00 Per fortnight for the 17 year old student, all payable over 26 fortnights).

The after tax income of a notional spouse in this example is $31,107.

The designated spouse indicates actual means (Regulation 12P) in the period of eligibility in the year of study as:

Accommodation/mortgage

$ 7,800

Other debts (excl car)

$ 1,500

Car finance

$ 1,700

Living expenses

$11,000

Utilities/recurrent bills

$ 1,900

Entertainment

$ 1,100

Clothing

$ 2,000

Savings

$ 400

Other consumer goods

$ 1,000

TOTAL

$28,400

The designated spouse's actual means (as indicated by expenditure of $28,400) are less than the after tax income of the notional spouse ($31,107). In this example, the student will be eligible to receive assistance.


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