Changes to the income free area

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Friday 21 March 2014

On 20 March 2014, the income free area increased from $62 per fortnight to $100 per fortnight for the following payments:

The income free area is the maximum amount of income you can earn before your payment is affected. Income above the income free area will reduce your payment depending on your family situation and the payment you receive.

If your allowance was cancelled because of how much you have earned, you should consider reclaiming in case your income is now below the higher payment cut out point.

Your income test

The table below shows the new income threshold based on your family circumstances.

You are on one of the above allowances andYour income per fortnightAmount your payment will be reduced by
Single, not a principal carerUp to $100nil
Between $100 and $25050 cents in the dollar
Over $25060 cents in the dollar
Single, principal carerUp to $100nil
Over $10040 cents in the dollar
Partnered to a pensioner: your income is deemed to be half the combined income of you and your partner.

Your partner has a separate Pension Income Test.
Up to $100nil
Between $100 and $25050 cents in the dollar
Over $25060 cents in the dollar
Partnered to a non-pensioner: the deduction is based on your own income, your partner’s income and your partner’s cut off point.

If your partner’s income is above the cut off point then your payment will be reduced by 60 cents in the dollar.
Up to $100nil
Between $100 and $25050 cents in the dollar
Over $25060 cents in the dollar

The cut off point is the maximum amount of income you can earn before your payment is reduced to zero.

How this may benefit you

The increase to the income free area means:

  • you are able to earn more before your payment is reduced
  • if you have a working credit balance, these changes reduce how quickly your balance is used. This means you can earn more with no effect on your payment for longer
  • if you have a partner they may also be able to earn more before it affects your payment

Tom’s story

Tom is 28 years old, single and has no children. He gets Newstart Allowance to help while he is looking for work. Tom does not have a working credit balance.

Before 20 March 2014

In January 2014, Tom found work at his local bakery for 1 day every week earning $60 per fortnight while meeting his participation requirements. Tom’s income was below the old $62 income free area and Tom received the maximum rate of Newstart Allowance of $509.50 per fortnight.

This meant that Tom received a total of $569.50 per fortnight from his Newstart Allowance payment and his income from the bakery.

Before March 20 Tom received a total of $569.50 per fortnight from his Newstart Allowance payment and his income from the bakery

In February, Tom’s boss offered him an extra shift every fortnight. Tom agreed to this, earning an extra $30 a fortnight.

This meant that Tom was earning $90 a fortnight from his job at the bakery and his income was over the old $62 income free area. His payment was reduced by 50 cents for every dollar of the $28 he earned above the old income free area. Tom received a total of $585.50 from his Newstart Allowance payment and his income from his job at the bakery.

Tom's earnings before March 20, money earned plus extra shift

After 20 March 2014

On 20 March 2014, the maximum rate of Newstart Allowance increased to $519.20 and the income free area increased to $100 per fortnight. This means that Tom’s payment is no longer affected by taking those extra hours. He receives a total of $609.20 from his Newstart Allowance payment and his income from his job at the bakery every fortnight. Tom can even earn a further $10 at his job before his income is affected.

Tom's earnings after March 20, money earned plus extra shift

Jane’s story

Jane is on Widow Allowance and has a 12 year old son in her care. She does not own any assets and does not have a working credit balance.

Before 20 March 2014

Jane works part time at her local supermarket and earns $240 per fortnight from this work. Under the old income free area, Jane’s maximum Widow Allowance rate of $551.30 was reduced by 50 cents for every dollar above $62 that she earned.

The total amount of money Jane received from her Widow Allowance and her income from the supermarket was $702.30 per fortnight.

Before March 20, total amount of money Jane received from her Widow Allowance and her income from the supermarket was $702.30 per fortnight

After 20 March 2014

On 20 March 2014, the maximum rate of Widow Allowance increased to $561.80 and the income free area increased to $100 per fortnight. This means that Jane can now take home more money.

Jane’s payment is not affected for up to $100 of her fortnightly earnings. For every dollar of the remaining $140, her Widow Allowance is reduced by 50 cents. This means the amount of money she takes home from her supermarket income and her Widow Allowance is now $731.80 per fortnight.

After March 20, the amount of money she takes home from her supermarket income and her Widow Allowance is now $731.80 per fortnight

When this change will happen

The new income threshold applies to your earnings and payments from 20 March 2014.

As any increase you receive is based on the number of eligible days in your payment cycle, you may receive less than the full fortnight’s increase in your first payment after 20 March 2014, depending on the exact date of your payment. The full fortnightly increase will apply to all future payments.

What you need to do

If you currently receive any the following payments, the new income threshold will automatically apply:

You need to continue to advise us of your wages and any other changes to your circumstances.