Transitional income support 16 June 2008 - 30 June 2012 policy guidelines

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Revised July 2011

These guidelines cover the Transitional Income Support program. They are a high level view of the policy intent which includes all specific provisions. The guidelines are linked to other Commonwealth legislation, for example the Social Security Act 1991 and the Farm Household Support Act 1992.

Transitional Income Support Policy Guidelines

The Australian Government has allocated $8.53 million to Transitional Income Support in 2011-12. Applications close on 11 May 2012. The program may be closed to new applicants before this date if funds are expended earlier.

Introduction

Climate change presents significant challenges for Australia’s farming community and farmers will need assistance to adapt and respond to these challenges and to start planning for a different future. This includes changes to farm practices and strategies to manage climatic risks and pressures, and potential demographic changes in the sector.
Under Australia’s Farming Future initiative, primary producers can access assistance to adapt and adjust to the impacts of climate change.

The initiative comprises three components which support research and development projects, communication and awareness activities, training, advice:

Climate Change Adaptation Partnerships Program

Increase understanding of climate change impacts and improve on-farm preparedness

Climate Change and Productivity Research Program

Undertake research on managing emissions and adaptation

Climate Change Adjustment Program

Provide primary producers with professional advice, training and adjustment assistance, including assistance to develop and implement a climate change action plan focussing on the risks and adjustment options to manage climate change.

Transitional Income Support has been linked with the Climate Change Adjustment Program (CCAP) to assist farmers in meeting daily living expenses while they implement their climate change action plan. Farmers in receipt of Transitional Income Support will be assisted in developing and implementing the action plan, through the Rural Financial Counselling Service program.

1.Purpose of Transitional Income Support

1.1 Transitional Income Support will assist farmers1 , regardless of location or industry, who are in need of short term income support to assist recovery from drought, and to help them manage the impacts of climate change.

1.2 Principal features of the Transitional Income Support assistance measure are:

  1. a maximum of 12 months’ income support at the Newstart Allowance2 rate
  2. income support assistance to qualifying farmers who have complied with the requirements of the Advice and Training Grant Scheme under the CCAP, including the requirement for the development and case management of an action plan under that Scheme
  3. income and assets test, including qualification tests of short and longer term liquidity, debt and total net assets position, for example:
    • the mandatory inclusion of farm management deposits3 in the asset tests
    • no off-farm salary and wages exemption;
  4. access to advice and training under the CCAP4.

1.3 Farmers receiving Transitional Income Support will be obliged to take action to achieve financial self-reliance and to increase their preparedness for changing economic and climatic conditions. CCAP will provide funds to qualifying farmers to ensure they have access to professional advice and training, and to assist with the development of action plans.

2. Period for which Transitional Income Support is payable

2.1 Transitional Income Support is payable to qualifying farmers from the time of lodging an application or as specified in section 6.2 for the period or periods up to a maximum of 12 months and not beyond 30 June 2012 (Payment Period).

3. Applying for Transitional Income Support

3.1 A qualifying farmer may apply for Transitional Income Support by lodging with Centrelink, as per Centrelink requirements

3.2 Applications for Transitional Income Support will be accepted until (and including) 11 May 2012.

4.Qualification for Transitional Income Support

4.1 A person is a qualifying farmer for the purposes of Transitional Income Support if:

  1. throughout the Payment Period, the person
    • is a farmer
    • is an Australian resident5 is in Australia
  3. for a continuous period (Qualifying Period) of at least 2 years immediately before the Payment Period, and continuing throughout the Payment Period, the person:
    • is a farmer
    • has derived a significant part6 of his or her gross income from the farm enterprise7
    • has contributed a significant part of his or her capital to the farm enterprise
    • has contributed a significant part of his or her labour in work on the farm enterprise.

4.2 At the time of lodging an application for Transitional Income Support and continuing throughout the Payment Period:

  • the value of the applicant's assets, worked out using the method set out in subsection 10(3) of the Farm Household Support Act 1992, must not exceed the assets value limit mentioned in subsection 10(4) of the Farm Household Support Act 1992
  • assessable income must be below or within the “allowable income limits” used to calculate Newstart Allowance
  • assessable income does not include any adjusted disability pension paid by the Department of Veterans’ Affairs
  • total value of liquid assets including those of the applicant’s partner8 (if any) must be less than or equal to $20,0009.

4.3 If an application for Transitional Income Support is assessed by Centrelink to be preliminarily eligible, the applicant must, within 12 weeks (or by 15 June 2012, whichever comes first), from the date of issue of the financial assessment form:

  1. undergo the Financial Assessment Test10 as part of the financial assessment form completed by a prescribed adviser,11 as detailed in Schedule
  2. return to Centrelink, a financial assessment form completed by a prescribed adviser, to be paid for from funds available under the CCAP Advice and Training Grant12
  3. be assessed as a Group 1 applicant as detailed in Schedule 1.

4.4 Within 12 weeks (or by 15 June 2012, whichever comes first), from the date of lodgement of the financial assessment form, the applicant is required to develop an Action Plan with a Rural Financial Counsellor (RFC) that will identify a course of action the person will undertake while receiving Transitional Income Support to improve their financial situation.

4.5 If an applicant fails to comply with their obligations under clauses 4.3 and 4.4, Transitional Income Support payments will not be granted until these requirements have been met (unless the applicant is assessed as being in severe financial hardship as per clause 6.4). The applicant has until 15 June 2012 to comply with clauses 4.3 and 4.4.

4.6 Only one member of a couple13 is eligible for Transitional Income Support.

5. Applying the Assets Test

5.1 Transitional Income Support is not payable to a person in respect of a Payment Period unless Centrelink has determined that the value of the person's assets does not exceed the applicant’s assets value limit14 during that Payment Period.

6. When payments of Transitional Income Support can commence

6.1 Subject to clause 6.4, payments of Transitional Income Support to a qualifying farmer can commence if the farmer:

  1. has obtained a financial assessment as required by clause 4.3
  2. has developed an activity or action plan as required by clause 4.4
  3. has been assessed as a Group 1 applicant on completion of the financial assessment test and has otherwise complied with the CCAP Advice and Training Grant 2008 Policy Guidelines.

6.2 Payments of Transitional Income Support are payable from either:

  1. the date of application lodgement, providing the farmer meets their obligations under clauses 4.3 and 4.4 within the period specified in those clauses
  2. the date the farmer meets their obligations under clauses 4.3 and 4.4 being outside of the period specified in those clauses.

6.3 If an applicant for Transitional Income Support was previously in receipt of Exceptional Circumstances Relief Payment, payments of Transitional Income Support can be backdated to the day after the day Exceptional Circumstances Relief Payment was cancelled, provided the application for Transitional Income Support is:

  1. lodged within 28 days of the Exceptional Circumstances Relief Payment cancellation date
  2. their obligations as specified in clauses 4.3 and 4.4 are met within the periods specified in those clauses.

Farmers in severe financial hardship

6.4 Clauses 4.3 to 4.6 apply to applicants in severe financial hardship. However, if an applicant is assessed to be in severe financial hardship, Transitional Income Support payments can be paid following Centrelink’s preliminary assessment and backdated to date of application.

In this section, a farmer is in severe financial hardship if the total value of the liquid assets of the farmer and the farmer’s partner (if any) at the date of application for Transitional Income Support is less than or equal to the amount of Newstart Allowance that would have been payable to the farmer during the period of 6 weeks immediately preceding the date of application.

6.5 A farmer in severe financial hardship who is paid Transitional Income Support in accordance with clause 6.4 has the periods as specified in clauses 4.3 and 4.4 to qualify for the CCAP by obtaining a financial assessment, including the Financial Assessment Test, and developing an action plan with a RFC.

6.6 If a farmer in severe financial hardship does not complete their obligations under clauses 4.3 and 4.4, Transitional Income Support payments will be suspended until these requirements have been met, but no longer than a period of four weeks.15

6.7 If a farmer in severe financial hardship does not complete their obligations under clauses 4.3 and 4.4, during the period their Transitional Income Support payments are suspended (as referred in clause 6.6), this will result in the cancellation of payments and the farmer will need to reapply to Centrelink for Transitional Income Support. Payment of Transitional Income Support will then be paid in accordance with clause 6.2.

7. Rate of TIS Payable

7.1 The rate payable will be calculated in the same way Farm Help Income Support was calculated under section 24B of the Farm Household Support Act 1992.

8. Person qualified for Transitional Income Support after accessing the Exceptional Circumstances Professional Advice and Planning Grant

8.1 An applicant who is eligible for Transitional Income Support but who has received assistance under the Exceptional Circumstances Professional Advice and Planning Grant during the Qualifying Period, will be entitled to $2,500 to update their financial outlook and assessment and access professional advice and training activities in accordance with the CCAP Advice and Training Grant Scheme Guidelines.

8.2 An applicant who has received a reduced CCAP Advice and Training Grant of up to $2,500, as per 8.1:

  • will be treated as an applicant who has received a grant under the CCAP Advice and Training Grant Scheme
  • cannot receive any further CCAP Advice and Training Grant money.

9. Situations In Which Transitional Income Support Is Not Payable

9.1 Transitional Income Support is not payable to an applicant for a period during which the person is qualified for Transitional Income Support if, during that period:

  1. Exceptional Circumstances Relief Payment is payable to the person
  2. Centrelink has determined that the value of the person’s assets exceeds the person’s asset value limit
  3. the person is a full-time student
  4. another support payment is being paid to the person
  5. the person is receiving income that is paid by a community or group of funds provided under a Commonwealth funded employment program.

10. Taxability

10.1 Transitional Income Support is assessable for income tax purposes and Centrelink will issue Payment Summaries16 to all recipients.

11 Method of payment

11.1 Arrangements for payment of Transitional Income Support will be the normal arrangements that Centrelink adopts for income support payments.

12. Overpayments

12.1 If an amount of Transitional Income Support in respect of a period has been paid to a person and:

  • the recipient was not qualified for Transitional Income Support in respect of that period
  • Transitional Income Support was not payable in respect of that period to the person
  • an amount of Transitional Income Support was calculated at a rate that was higher than the applicable rate for that person

the amount overpaid may be recovered by the Department as a debt due to the Commonwealth. The normal Centrelink debt recovery procedures and policies are to be followed.

13. Impacts on Other Payments

13.1 Recipients of Transitional Income Support will not be automatically entitled under legislation, because of the receipt of Transitional Income Support, to various ancillary benefits such as Health Care Cards or concessional Youth Allowance treatment.

14. Termination of Transitional Income Support

14.1 If during the Payment Period an occurrence of an event or change in circumstances results in the person ceasing to be qualified for Transitional Income Support, payments cease to be payable to the person immediately after the day on which the event or change in circumstances occurs.

14.2 If a person fails to comply with their obligations under the CCAP Advice and Training Grant Scheme, Transitional Income Support payments may be suspended.

15. Issues not Covered by these Guidelines

15.1 Treatment of Social Security related elements of the program not specifically addressed in these Guidelines is covered by the provisions of the Social Security Act 1991 and/or the Farm Household Support Act 1992.

16. Review and Appeals

16.1 If an applicant, or the applicant’s partner, for Transitional Income Support disagrees with an eligibility or assessment carried out by Centrelink then the following mechanisms are available:

  1. Discuss the issue with the Centrelink officer who made the original decision, to provide a chance to correct misunderstandings, present new information or evidence, and to get an incorrect decision changed quickly (this step is not mandatory).
  2. Ask for a review by an Authorised Review Officer. Authorised Review Officer’s are senior and experienced people in Centrelink who will have had no involvement in the case.
  3. The Authorised Review Officer will:
    • look at the information used by the original decision maker
    • where possible, talk to the applicant to discuss the matter
    • check whether any new, relevant information is available
    • clear up any misunderstandings
    • correct any mistakes that were made
    • change the decision where appropriate
    • inform the applicant of the result, explaining the reasons for the Authorised Review Officer’s decision.
  4. If the applicant believes the Authorised Review Officer’s decision is incorrect, he or she can request a further file review through a member of the Centrelink Rural Programs Team in National Support Office. During this review, consultation with the Department of Agriculture, Fisheries and Forestry will occur in all cases where a policy matter is in question.
  5. If the applicant believes the National Support Office decision is incorrect, he or she can seek assistance from the Commonwealth Ombudsman. The Commonwealth Ombudsman investigates complaints about the administrative actions of Australian Government departments and agencies. It cannot override the decisions of Centrelink, nor issue directions to its staff but resolves disputes through consultation and negotiation, and if necessary, by making formal recommendations to the most senior levels of government.

Prescribed Adviser – Farm Business Analysis and Financial Assessment17

16.2 If an applicant disagrees with the outcome of the farm financial assessment, conducted by a prescribed adviser, and the applicant is consequently made ineligible for Transitional Income Support then the following procedures are established:

  1. If requested by the applicant, the local RFC may assist the applicant to gather additional data, if any. This may include a request to Centrelink to arrange a valuation by the Australian Valuation Office.
  2. The applicant may provide any additional data to the prescribed adviser for a supplementary assessment, in accordance with the guidelines.
  3. Any supplementary assessment by a prescribed adviser is final and no further mechanisms are available to review the outcomes of the farm financial assessment, other than in accordance with the guidelines.

16.3 If the RFC who is case-managing the applicant considers that the applicant is not adequately complying with his or her obligations under the CCAP Action Plan then the RFC may report to Centrelink and Centrelink may, after following the process outlined below, suspend Transitional Income Support. The RFC may consult with Centrelink prior to making a report.

16.4 The applicant must be informed by the RFC that the applicant’s apparent non-compliance may result in a report to Centrelink by the RFC and that action may be taken by Centrelink to suspend Transitional Income Support.

Transitional Income Support

16.5 Before Transitional Income Support is suspended the following process will be undertaken:

  1. If at any of the quarterly reviews of the applicant’s Action Plan by the RFC the applicant has not undertaken agreed advice or training sessions or met any other agreed milestones, the RFC must seek to resolve the issue as quickly as possible. The applicant must be given the opportunity to explain his or her lack of actions and/or agree to comply within 30 days of the review with the RFC. A follow up meeting to check on compliance is to be scheduled for 30 days’ time from the quarterly review in which the applicant was found to be non-compliant.
  2. If the applicant does not attend the further review with the RFC, the RFC should attempt to contact the applicant as to why they did not attend. If a reasonable explanation is provided a new review meeting should be scheduled. Otherwise the RFC must advise the applicant that the RFC will report the non-compliance to Centrelink and that their income support payments may be suspended by Centrelink due to non–compliance.
  3. If at the follow up review meeting the issue has not been resolved, the RFC must inform a Centrelink representative via the telephone of the situation. Centrelink may decide to suspend the applicant’s Transitional Income Support payments unless unusual circumstances exist.
  4. If Centrelink decides to suspend income support payments, Centrelink must notify the applicant in writing.
  5. Payments will cease to be payable to the applicant on the day on which the written notification is sent.
  6. If after the 30 day period under (a) above, the applicant provides the RFC with evidence of compliance with his or her obligations under the Action Plan, the RFC must report this to Centrelink who may then decide that Transitional Income Support be re-instated and backdated.

16.6 If the applicant believes the decision to suspend income support payments is incorrect, he or she can seek a review through the review and appeals provisions of these guidelines.

Schedule 1

Financial assessment Test

Farmers wishing to access the Advice and Training Grant scheme under CCAP and Transitional Income Support must initially meet the income and asset tests administered by Centrelink. These tests are applied so that:

  • the value of the applicant's assets, worked out using the method set out in subsection 10(3) of the Farm Household Support Act 1992, does not exceed the assets value limit mentioned in subsection 10(4) of the Farm Household Support Act 1992; and
  • assessable income must be below or within the allowable income limits used to calculate Newstart Allowance.

Further eligibility criteria are contained within the Financial Assessment Test.

Financial Assessment Test

The Financial Assessment Test is based on four tests that are designed to assess the financial status of the applicant and the farm business. A financially sound business would usually have the following elements:

  • an ability to earn profits or surpluses;
  • an ability to generate sufficient cash flow (as profitability without liquidity is of limited benefit to a business);
  • sufficient liquidity to meet short term cash flow obligations; and
  • a finance structure whereby the entity is not over leveraged.

The four tests used in the criteria have been chosen to cover each of the elements shown above. Applicants will need to show through passing Test 1 and Test 2, as well as either Test 3 or Test 4, (as outlined below) that they are in severe financial difficulty and eligible for the program. These applicants fall into Group 1 and will be entitled to case management from a Rural Financial Counsellor. Applicants that fail the Financial Assessment Test but meet the Farm Business Net Assets Test will fall into Group 2 and be entitled to the CCAP Advice and Training Grant, but will not receive case management for this program from the Rural Financial Counsellors.

Tests 1 and 2 align with the initial Centrelink income and assets test that will be used to determine initial access to the program. While the applicant must have already passed these tests, their inclusion in the eligibility criteria will enable a complete assessment of the applicant’s current financial situation to be provided to the applicant by the Prescribed Adviser. This assessment is an important foundation for the applicant’s Climate Change Action Plan they will work through during their time on the program.

  • Test 1 – Farm business income and non-farm income

The farming family’s total income (including their farm and off-farm income) is of primary importance to the applicant’s financial position. An applicant who is earning insufficient income to cover their family’s living costs is unlikely to be in a position where they can fully consider their future adjustment needs. By focussing on the farming family’s estimated total income for the next 12 months, past activities and income streams that may not be relevant to the applicant’s future financial position will be disregarded. Centrelink applies the personal income test used for Newstart Allowance and the estimates of income will align with Centrelink adjustments.

  • Test 2 – Non-farm net assets

Asset tests are designed so that people with substantial assets, apart from their home, use these assets to meet their day-to-day living expenses before calling on the Government for support. This test ensures the applicant does not have significant net non-farm assets that should be used before seeking assistance from the Government. To be eligible, the value of the applicant’s non-farm net assets must be less than the Applicable Newstart Allowance asset test limit, taking into account their homeowner and marital status.

  • Test 3 – Liquidity

Test 3 is a two limb test. If the applicant can provide sufficient information to prove severe financial hardship, that is, the total value of the liquid assetsof the applicant and the applicant’s partner (if any) at the date of application for Transitional Income Support is less than or equal to the amount of Newstart Allowance that would have been payable to the farmer during the period of 6 weeks immediately preceding that time, then the applicant passes test three. If the applicant is unable to provide this information, they must satisfy the second component of test three, which is the liquidity ratio.

The ratio of cash/debtors is the most appropriate measure of liquidity for a farm business. This test will be calculated over the most recent 3 months by dividing the applicant’s balance of cash by current liabilities (quick ratio). A ratio of greater than 1.0 indicates that an entity has adequate liquidity i.e. a sufficient level of current assets to meet short-term financial obligations (liabilities). Applicants may be eligible for CCAP and Transitional Income Support if they have a quick ratio of less than 1.0.

The liquidity ratio will also consider the timing/seasonal aspect of farm businesses by ascertaining whether current assets held by the applicant are a representation of the applicant’s true financial position or whether they expect current assets to rise or drop within a certain timeframe. The liquidity ratio will include (where relevant) an applicant’s overdraft if it has not been fully drawn upon.

All Farm Management Deposits must be included in the liquidity test, as these funds may be drawn upon to add to the estimate of the applicant’s cash reserves.

  • Test 4 – Debt to equity position

An applicant with a low level of debt compared to assets should be able to extend their borrowings before seeking financial assistance from the Government. This test will be calculated by dividing the applicant’s total debts by total net assets over the previous 3 months. A debt to equity ratio greater than 1 will be a pass as it indicates the farm may not be able to increase its borrowings. The debt to equity test will include (where relevant) an applicant’s overdraft and the potential liability if it has not been fully drawn upon.

Farm Business Net Assets

In addition to the four tests above, applicants will also need to pass the $1.5 million cap total net assets test. To maintain consistency with social security policy where persons are seeking financial assistance from the taxpayer, the applicant must first draw on their own resources. The total net assets held by the applicant and their partner (if any) (including their farm assets and their principal residence) must not exceed $1.5 million.
In calculating the total net assets:

  • gifted assets must be included in the total net asset value calculation consistent with the Social Security Act 1991
  • any rights of the applicant under an insurance policy in relation to the applicant’s life or under a superannuation scheme are to be excluded in the total net asset value calculation
  • the principal residence and all farm assets must be included in the total net asset calculation
  • where the principal residence and any farm assests are held in a superannuation scheme their value must be included in the total net asset calculation.

The cap acknowledges the unique circumstances of a farm business where a level of net assets may be needed to maintain viability.

When the four tests are applied, applicants fall into one of the following three groups:

  • Group 1 includes applicants who pass the farm business and non-farm income and assets tests as well as either the liquidity or debt to equity tests. These applicants will be deemed to be in financial difficulty or severe financial difficulty and are eligible for Transitional Income Support. These applicants will be required to develop a Climate Change Action Plan with the support of a RFC. They will also need to seek specific professional advice and training to assist them in achieving their objectives, and must attend mandatory quarterly review sessions with a RFC. Alternatively, eligible applicants may consider leaving farming and applying for the Exceptional Circumstances Exit Grant.
  • Group 2 includes applicants who pass the farm business and non-farm income and assets tests but fail both the liquidity and debt to equity tests. These applicants are deemed to be financially viable and are not eligible for Transitional Income Support, but have been impacted by the effects of climate change. They may seek specific professional advice and training to assist them in achieving their objectives, under the CCAP Advice and Training Grant. They will not generally require support from a RFC. These applicants will be required to develop a self-managed Climate Change Action Plan with the support of Centrelink officers.
  • Group 3 includes applicants whose net assets are deemed to be in excess of the allowable cap of $1.5 million and are ineligible for assistance under the CCAP and Transitional Income Support.

1 “Farmer” has the same meaning as in the Farm Household Support Act 1992.

2 “Newstart Allowance” has the same meaning as in the Social Security Act 1991.

3 “Farm Management Deposits” has the same meaning as in Division 393 of the Income Tax Assessment Act 1997. Farm Management Deposits are offered under the Farm Management Deposits Scheme and are deposits offered by Authorised Deposit-taking Institutions to assist primary producers to deal more effectively with fluctuations in their cash flow resulting from climate variations and changes in market prices.

4 Contact Centrelink for details on the Climate Change Adjustment Program Advice and Training Grant Scheme

5 “Australian resident” has the same meaning as in the Social Security Act 1991.

6 "significant part" is as determined by Centrelink

7 “Farm enterprise” has the same meaning as in the Farm Household Support Act 1992.

8 “Partner” has the same meaning as in section 4 of the Social Security Act 1991.

9 “Liquid assets” has the same meaning as in section 19B of the Social Security Act 1991 and includes Farm Management Deposits.

10 “Financial Assessment Test” is set out in Schedule 1 to the TIS guidelines.

11“Prescribed adviser” has the same meaning as in the Farm Household Support Regulations 1993.

12 Climate Change Adjustment Program Advice and Training Grant Scheme Guidelines

13 “Member of a couple” has the same meaning as in section 4 of the Social Security Act 1991.

14 “Assets value limit” has the meaning given by section 10(4) of the Farm Household Support Act 1992.

15 If a recipient, who has been approved to receive payments for up to 12 months, has his or her payments suspended for 4 weeks, then the recipient forfeits this payment amount.

16 “Payment Summaries” are issued by Centrelink to all social security recipients.

17 The “Farm Business Analysis and Financial Assessment” has the same meaning as the “Farm Financial Assessment” and is prescribed in the Department of Agriculture, Fisheries and Forestry template known as the Climate Change Financial Assessment.

Last reviewed:
12 Jul 2011
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