AUSTUDY REGULATIONS (AMENDMENT) 1996 NO. 245

Commonwealth Numbered Regulations - Explanatory Statements

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AUSTUDY REGULATIONS (AMENDMENT) 1996 NO. 245

EXPLANATORY STATEMENT

Statutory Rules 1996 No. 245

Issued by the authority of the Minister for Employment, Education, Training and Youth Affairs

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. Section 56 of the Act provides that the Governor-General may make regulations for the purposes of the Act.

The AUSTUDY scheme is intended to assist students from genuinely needy families to complete secondary education and undertake tertiary education. AUSTUDY is income and assets tested to direct assistance to those most in need. Income testing is based on taxable income.

The Actual Means Test (AMT) was introduced for 1996 to supplement the AUSTUDY income and assets tests as part of ongoing efforts to more tightly target AUSTUDY to those most in need. Many welloff families arrange their financial affairs so that they have low taxable incomes and low net assets. These families are therefore able to pass the income and assets tests and get AUSTUDY even though they may not need it. This is contrary to the Government's intention that families with the means to fund their children's education should do so.

The AMT is directed to examining the amount of money that a family spends and saves. Actual means is measured by adding together the total expenditure and savings for a year of a family with a designated parent or spouse. Total actual means is compared to the maximum after tax income that a similar, notional family can have and still get AUSTUDY (this is known as the "benchmark"). A student with a designated parent or spouse can get AUSTUDY if the actual means of his or her family is less than or equal to the after tax income of the notional family. The amount of AUSTUDY the student can get is then determined by applying the parental or spouse income test as appropriate.

OUTLINE OF AMENDING REGULATIONS

Following a review of the administration of the AMT, the Government announced in the 1996-97 Budget that the AMT would:

* be extended to independent students who would qualify for the independent living allowance and who are in a designated group (currently, only independent students with a designated spouse are subject to the AMT) (regulation 17); and

* be extended to people earning exempt income (for taxation purposes) or who are involved in tax minimisation arrangements (subregulations 8.1 and 14.1 and regulation 17);

* not be applied to families with a designated parent or spouse while the parent or spouse of the student is getting a Drought Relief Payment (DRP) or a Farm Household Support scheme payment and, in the case of the DRP, until the end of the calendar year in which the parent or spouse stops getting the payment (subregulation 4.1);

* be made fairer and more reflective of individual family circumstances by:

- excluding from a family's actual means expenditure and savings derived from income earned by full time students in the family aged 16 and over from employment outside of the family and its business structures, maintenance paid by a designated parent, spouse or student and boarding costs incurred by isolated families. The amount of student income and boarding costs that can be excluded will be determined under the regulations according to each family's circumstances (subregulations 10.2 and 16.2 and regulation 17); and

- amending elements of the formulae used to calculate the after tax income of a notional parent or spouse to define parental or spouse income as the amount at which the student would become ineligible for AUSTUDY, include the Medicare levy in the tax component, and provide that the family payment amount is the basic or maximum rate, as appropriate (subregulations 9.1 and 15.1). These changes will apply as appropriate to the AMTs for designated independent students with a spouse and designated independent students without a spouse (regulation 17); and

* be extended so that a family's actual means are used to determine the AUSTUDY entitlement of a student who is subject to the AMT (regulations 18 to 24 inclusive).

The Attachment contains a more detailed explanation of the amendments made by these regulations.

COMMENCEMENT AND APPLICATION

The regulations commence on the day of gazettal and provide that the amendments apply only in relation to applications for AUSTUDY for a period starting on or after 1 January 1997 (note to regulation 1 and regulation 2).

ATTACHMENT

DETAILS OF THE AUSTUDY REGULATIONS (AMENDMENT)

Regulation 1 Amendment

Subregulation 1.1 provides that the AUSTUDY Regulations are amended as set out in these regulations.

These regulations commence on gazettal in accordance with section 48 of the Acts Interpretation Act 1901.

Regulation 2 Application of amendments

Subregulation 2.1 provides that the amendments made by these regulations apply only in relation to applications for student assistance for 1997 and later years.

AMENDMENTS MADE BY THESE REGULATIONS

Details of the changes to the AUSTUDY Actual Means Test (AMT) made by the amending regulations are explained under the following five headings.

(A) CHANGES TO AMT COVERAGE

The regulations extend the coverage of the AMT.

Background

The AMT currently applies to a student who has a designated parent or spouse. A designated parent or spouse is one who:

* holds or has held a business skills permanent visa or entry permit;

* has an interest in overseas assets, a proprietary company or unlisted public company, or a trust;

* derives income from an overseas source;

* is self-employed (except a person who is wholly or mainly engaged in the carrying on of a primary production business that is owned by the person); or

* is a partner in a partnership.

The coverage of the AMT is extended by these regulations to all independent students who are in a designated category, people earning exempt income under certain provisions in the Income Tax Assessment Act 1936 and people who are involved in income minimisation arrangements.

Independent students

An independent student with a designated spouse is currently subject to the AMT. However, independent students who do not have a spouse and independent students who have a spouse who is not a designated spouse are not currently subject to the AMT even though these students may derive considerable benefits from their, or their spouse's, financial arrangements. These regulations extend the AMT arrangements to these independent students.

Regulation 17 inserts new Subdivisions D and E into Division lB of Part 1 of Chapter 2 to provide the "AMT: designated student with a spouse" and the "AMT: designated student without a spouse" respectively. These tests apply to students who are designated students within the meaning of new regulation 12Y and who, apart from new subdivision D or E as appropriate, would qualify for the independent living allowance (new regulations 12W and 12ZC respectively).

These tests are the same as the existing AMTs (after modifications made by these regulations) for dependent students with a designated parent and independent students with a designated spouse. The actual means (i.e. family expenditure and savings) of a designated student with a spouse or a designated student without a spouse are calculated (new regulations 12ZA and 12ZF respectively) and compared with the after tax income of a similar notional family (i.e. the "benchmark") (new regulations 12Z and 12ZE respectively), and a decision about the student's eligibility to get AUSTUDY is made (new regulations 12X and 12ZD respectively).

In the case of the AMT for a designated student with a spouse, the benchmark is based on the spouse income test threshold at which the student would get no AUSTUDY (new regulation 12Z). This is because the benchmark would be too low if it was based on the student income threshold at which the student would be ineligible for AUSTUDY. The student income threshold at which a married student who has a dependent child cannot get AUSTUDY will be $19,161 in 1997. The spouse income threshold at which the same student can no longer get AUSTUDY will be $27,851 in 1997. This treatment benefits designated students with a spouse by providing a higher benchmark, thus enabling them to have greater actual means and still qualify to get AUSTUDY.

Exempt income (for taxation purposes) and income minimisation

People who earn income that is exempt from tax under provisions of the Income Tax Assessment Act 1936 ("the Tax Act") and people who use arrangements in that Act to minimise their income may have low (or no) taxable income. They, therefore, can pass the income tests and get AUSTUDY. They may, however, have substantial actual means. People in these groups are not subject to the AMT under the current arrangements unless they are in a designated category.

These regulations extend AMT coverage to people who, in the financial year ending immediately before the year of study:

* derives income that is exempted from tax under section 23AF of the Tax Act (relating to income from approved overseas projects);

* derives income that is exempted from tax under section 23AG of the Tax Act (relating to foreign service income);

* derives income from sources in Norfolk Island that is exempted from tax under section 24G of the Tax Act (relating to certain income from sources in a prescribed Territory); and

* are salary and wage earners who have claimed or will claim income tax deductions for a business loss (whether current or carried forward).

Subregulations 8.1 and 14.1 extend the AMT to people in these groups by inserting new paragraphs 12L(1)(d) and US(1)(d) respectively. Subregulations 8.1 and 14.1 also amend paragraphs 12L(1)(c) and US(1)(c) respectively to exclude from their scope income described in subparagraphs 12L(1)(d)(ii) and 12S(1)(d)(ii) respectively.

Regulation 17 inserts new paragraphs 12Y(1)(d) and 12ZC(a) to provide that people in these groups are subject to the proposed AMTs for designated students with a spouse and designated students without a spouse respectively. Regulation 17 also provides that paragraph 12Y(1)(c) excludes from its scope income described in subparagraph 12Y(1)(d)(ii).

Exemption from AMT for Drought Relief Payment and Farm Household Support Scheme recipients

Families with a designated parent or spouse who is getting a Drought Relief Payment (DRP) are exempted from the AMT from the day the parent or spouse starts getting the DRP until the end of the calendar year in which the designated person stops getting the DRP. Families with a designated parent or spouse who is getting a Farm Household Support scheme payment are exempted from the AMT while the parent or spouse is receiving the payment. These exemptions are provided by subregulation 4.1 which amends regulation 12G accordingly. The changes achieve consistency between the AMTs and the current income and assets tests.

(B) EXCLUSIONS FROM ACTUAL MEANS

The regulations exclude certain expenditure from the actual means of a designated parent, spouse or student.

Background

The actual means of a designated parent or spouse are the total expenditure and savings of the parent or spouse and his or her family for a period of eligibility. "Family" is defined to include the spouse of the parent or student, the student and the dependent children of the parent or spouse.

The need for some adjustments to the calculation of actual means has become apparent during 1996. These adjustments are designed to more accurately reflect individual family circumstances and, in part, to retain parity with the income testing arrangements.

Income from "independent employment"

Family. actual means currently includes expenditure and savings derived from the after tax income of the student applicant and other dependent students in the family. This is at odds with the parental and spouse income tests which do not take account of the income of either the student or other dependent students in the family.

To achieve parity with the income tests, these regulations exclude from the actual means of a designated parent, spouse. or student expenditure and savings derived from after tax income earned from "independent employment" by all full-time dependent students in the family aged 16 or over (including the student applicant). The maximum exclusion is an amount equal to:

* if the person applies for AUSTUDY, the person's income determined from their AUSTUDY application, less tax that would notionally be payable on that income; or

* if the person does not apply for AUSTUDY, the lesser of:

- the amount of income that would be determined from the person's AUSTUDY application if the person applied for AUSTUDY, less tax that would notionally be payable on that income; and

- the amount at which, on a notional application of the student income test, the person would become ineligible to receive living allowance.

Subregulations 10.2 and 16.2 amend the existing designated parent and spouse AMTs by inserting new paragraph 12N(1A)(a) and subregulation 12N(1B), and new paragraph 12U(1A)(a) and subregulation 12U(1B) respectively to achieve this outcome. The student income test will be applied separately to ensure adequate means testing.

Regulation 17 inserts new paragraph 12ZA(2)(a) and subregulation 12ZA(3), and new paragraph 12ZF(2)(a) and subregulation 12ZF(3) to include similar provisions in the AMTs for a designated student with a spouse and a designated student without a spouse respectively. However, in the AMT for a designated student who does not have a spouse, expenditure and savings derived from the income of the student is not excluded from the student's actual means. This is because the student income test will not be separately applied to people in this group and, if the expenditure and savings derived from this income was excluded from the AMT, there would effectively be no means testing of these people.

Subregulations 10.4 and 16.4 amend the existing designated parent and spouse AMTs by inserting new subregulations 12N(5) and 12U(5) respectively to provide that "independent employment" means employment that is not provided by a family member, or by a private or unlisted public company, or a partnership or trust in which a family member has an interest.

Regulation 17 inserts new subregulations 12ZA(8) and 12ZF(8) to make the same provision for a designated student with a spouse and a designated student without a spouse respectively.

Maintenance

Under the existing income tests, maintenance paid by a parent or spouse of a student for the upkeep of a dependent child or former spouse of the parent or spouse, is deducted from parental or spouse income. Maintenance paid by a non-custodial parent who is a designated parent or spouse is currently included in actual means.

These regulations address this inconsistency by excluding from actual means maintenance paid by a designated parent, spouse or student. The exclusion applies to maintenance paid by a designated parent, spouse or student for the upkeep of a child of the parent, spouse or student if the parent, spouse or student does not have responsibility for the day to day care, welfare and development of the child. The exclusion also applies to maintenance paid by a designated parent, spouse or student for the upkeep of a former spouse of the parent, spouse or student.

Subregulations 10.2 and 16.2 insert new paragraphs 12N(1A)(b) and 12U(1A)(b) respectively to provide this exclusion in the parental and spouse AMTs.

Regulation 17 inserts new paragraphs 12ZA(2)(b) and 12ZF(2)(b) to provide the exclusion in the proposed AMTs for a designated student with a spouse and a designated student without a spouse respectively.

Boarding costs incurred by isolated families

Geographically isolated families incur unavoidable costs when their children must board away-from-home to attend school. Subject to eligibility, assistance is available to these families in the form of boarding allowances under the Assistance to Isolated Children (AIC) scheme, or the away-from-home rate of AUSTUDY. However, for some families this assistance does not provide full compensation for these unavoidable costs, which are included in their actual means, and can unfairly disadvantage them in the application of the AMT.

These regulations provide additional compensation to these families by excluding from actual means the lesser of.

* the actual expenditure incurred; or

* $5,274 less either the amount of any AIC boarding allowance paid in respect of the student or the compensation embedded in the benchmark (if the student gets the away-from-home rate of AUSTUDY).

This applies for each primary and secondary student from isolated families for whom a designated parent, spouse or student incurs boarding costs and in respect of whom the parent, spouse or student receives an AIC boarding allowance or the away-from-home- rate of AUSTUDY.

The amount of $5,274 is the average boarding cost incurred by AIC recipient families in 1995, the last year for which complete data are available. This will be changed from time to time to reflect changes in average boarding costs.

The exclusion from actual means takes account of the compensation already embedded in the family's benchmark. A family with children who board away-from-home is partially compensated for the additional boarding costs incurred because:

* the parental income threshold in their benchmark is higher for students who are notionally eligible for the away-from-home rate of AUSTUDY than those notionally eligible for the at-home rate of AUSTUDY; and

* their benchmark includes higher deductions for other dependent children in the family who get an AIC boarding allowance.

The total compensation in the benchmark is at least $4,800 and increases depending on the family structure. For families in which there is only one child, the compensation in the benchmark is usually sufficient recognition of the additional boarding costs incurred by the family for that child. However, where the number of children in the family is two or more, the compensation in the benchmark (which is between $4,800 and $7,000) is spread across each child and therefore decreases as the number of children increases.

The exclusion from the actual means of these families works in one of two ways, depending on the particular circumstances of the family. If the family receives an AIC boarding allowance in respect of a student child, the exclusion in respect of this child is the lesser of the actual expenditure incurred in respect of boarding the child away-from-home and $5,274 less the AIC boarding allowance received.

Example: A family has three dependent children all boarding away-from-home to study. The family is subject to the AMT. An AIC boarding allowance of $2,900 is paid in respect of one of the children. Actual boarding costs incurred in respect of the child are $4,800. The exclusion from actual means for this child is the lesser of $4,800 and ($5,274 - $2,900). The exclusion from actual means in respect of boarding costs for this child is $2,374.

Subregulations 10.2 and 16.2 insert new paragraphs 12N(1A)(c) and 12U(1A)(e) respectively to provide this aspect of the concession in the designated parent and spouse AMTs.

Regulation 17 inserts new paragraphs 12ZA(2)(c) and 12ZF(2)(c) to provide this aspect of the concession in the AMTs for a designated student with a spouse and a designated student without a spouse respectively.

If dependent secondary students in the family qualify for the away-from-home rate of AUSTUDY, the exclusion from actual means in respect of each of these children is the lesser of the actual boarding costs incurred for each child and $5,274 less the compensation in the benchmark.

Example: The other two children in the family in the above example are secondary students who qualify for the away-from-home rate of AUSTUDY. The family incurs boarding costs of $5,000 in respect of each of these children. The compensation in the family's benchmark is $6,776. The exclusion from actual means for the boarding costs in respect of each secondary child is the lesser of $5,000 and' ($5,274 - 6,776/2). The exclusion is $1,886 for each secondary child.

Subregulations 10.2 and 16.2 insert new paragraph 12N(1A)(d) and subregulation 12N(1C), and new paragraph 12U(1A)(d) and subregulation 12(1C) respectively to provide this aspect of the concession in the existing designated parent and spouse AMTs.

Regulation 17 inserts new paragraph 12ZA(2)(d) and subregulation 12ZA(4) to provide this aspect of the concession in the AMT for a designated student with a spouse and new paragraph 12ZF(2)(d) and subregulation 12ZF(4) to provide this aspect of the concession in the AMT for a designated student without a spouse.

The regulations amend elements of the formulae used to calculate the after tax income of a notional parent, spouse or student (the benchmarks). The changes make the actual means tests fairer and more equitable.

Background

The formula for calculating the after tax income of a notional parent (regulation 12M) is [(PI + DC) - T] + FP where:

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

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

* "FP" is 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 (the SSA) in respect of the children of the notional parent.

A similar formula provides the after tax income of a notional spouse (regulation 12T) and these regulations insert similar formulae in new Subdivisions D and E to provide the after tax income of a notional spouse and student respectively (new regulations 12Z and 12ZE respectively). Changes to elements of these formulae are discussed below.

'PI'

Some clients have found it difficult to understand that their benchmark is currently based on the amount of parental or spouse income at which the notional student can get $1,000 of AUSTUDY. To assist clients' understanding of the benchmark concept, the definition of "PI" is amended by these regulations from being the amount of parental or spouse income at which the student can get $1,000 of AUSTUDY to the amount of parental or spouse income at which the student becomes ineligible for AUSTUDY.

'T'

Under the current arrangements 'T' does not include the Medicare levy payable by the notional parent or spouse. This puts the notional parent or spouse and the designated parent or spouse whose tax impost includes the Medicare levy in a dissimilar position, which is at odds with the notional parent or spouse concept. 'T' is amended by these regulations to include the Medicare levy to correct this.

'FP'

The amount of family payment currently added on to a family's benchmark is the maximum amount of the relevant rate. However, at the level of parental or spouse income at which the student would be ineligible to get AUSTUDY, most families would only get the basic amount of family payment. These regulations amend the formulae used to calculate the after tax income of a notional parent or spouse to correct this. The AMT for independent students with a spouse takes account of this change. The AMT for independent students without a spouse provides that the maximum family payment is added to the benchmark. This is because the notional independent student without a spouse who has dependent children would be eligible for maximum family payment at the amount of student income at which he or she would no longer be eligible to get AUSTUDY.

Regulations 9 and 15 amend regulations 12M and 12T respectively to make these changes to the formulae for calculating the after tax income of a notional parent or spouse.

Regulation 17 inserts new regulations 12Z and 12ZE to provide the formulae to calculate the after tax income of a notional spouse and student respectively. These new provisions take account of the changes noted above.

Furthermore, to be consistent with the amendment to regulations 12K and 12R to change 'PI' and 'SI' to the amount of parental or spouse income respectively at which the student is ineligible to get AUSTUDY, subregulations 7.1 and 13.1 amend subregulations 12K(1) and 12R(1) respectively to provide that a student who has a designated parent or spouse is not entitled to receive living allowance unless the Secretary is satisfied that the actual means of the parent or spouse are less than (currently less than or equal to) the after tax income of a notional parent or spouse.

Regulation 17 inserts new subregulations 12X(1) and 12ZD(1) for a designated student with a spouse and a designated student without a spouse respectively to take account of these changes.

(D) USING ACTUAL MEANS TO DETERMINE A STUDENT'S AUSTUDY ENTITLEMENT

The regulations provide that the actual means of a designated student, parent or spouse are used to determine how much AUSTUDY a student is entitled to get.

Background

In 1996, a student whose family's actual means are less than or equal to the family's benchmark is eligible to get AUSTUDY. The amount of AUSTUDY the student can get is determined by applying the parental or spouse income test as appropriate.

For 1997 and subsequent years, a family's actual means are to be used to determine the amount of AUSTUDY a designated student, or a student who has a designated parent or spouse, can get. However, this only applies where:

* family actual means are below the family's benchmark. Where family actual means are at or above the benchmark the student will not be eligible to get AUSTUDY; and

* the amount of parent, spouse or student income derived from actual means is greater than the amount of parent, spouse or student income derived under the income tests. Where the amount derived under the income tests is greater, that amount will be used to determine how much AUSTUDY a student is entitled to get. This ensures that people who may understate their actual means in the first instance, are not paid more AUSTUDY than they would have been entitled to get under the relevant income test.

There are three stages to using actual means to determine how much AUSTUDY a designated student, or a student with a designated parent or spouse, can get:

* deriving parent, spouse or student income from actual means;

* comparing that figure to the parent, spouse or student income figure derived under the income tests and determining which is the greater amount; and

* subjecting the greater amount to taper (withdrawal) arrangements.

Deriving student, parental or spouse income from actual means

The formulae to calculate student, parental or spouse income from actual means are essentially a reversal of the formulae used to calculate the respective benchmarks. The actual means as determined is converted to a before tax income figure by the formula:

([AM - FP] + T) - DC where:

* 'AM' is actual means of the designated parent, spouse or student as the case may be;

* 'FP' is the minimum family payment at the basic rate and is the same amount that was added on in the benchmark. Note that the formula for deriving student income for a designated student who. does not have a spouse uses the maximum amount of any family payments. This is because many students who do not have a spouse but have a dependent child can get more than the basic rate of family payment at the amount of student income at which they become ineligible for AUSTUDY;

* 'T' is the amount of income tax (including Medicare levy, but before rebates, if any) that would be payable by a parent, spouse or student, as appropriate who would have an after tax income of (AM -FP); and

* 'DC' is deductions for other dependent children (regulations 87 and 94A). Note that the formula for calculating student income in the case of a designated student without a spouse does not contain DC.

Subregulation 20.1 inserts new subregulation 87A(1) to provide that, for a student with a designated parent, parental income is the greater of the amount worked out in the parental income test (i.e. under regulation 86) and the amount worked out using the formula in new paragraph 87A(1)(b).

Subregulation 23.1 inserts new subregulations 94A(1) and 94B(1) to provide that, for a student with a designated spouse or a designated student with a spouse as appropriate, spouse income is the greater of the amount worked out in the spouse income test (i.e. under regulation 94) and the amount worked out using the formulae in either new paragraph 94A(1)(b) or 94B(1)(h) as appropriate.

Subregulation 18.2 inserts new subregulation 82(1B) to provide that, for a designated student, the student's relevant income is the greater of the amount worked out in the student income test, (i.e. under subregulation 82(1A)) and the amount worked out using the formula in paragraph 82(1B)(b).

Subregulation 20.1 also inserts new subregulation 87A(2) to provide that the concession to the parental income test provided by regulation 91 (i.e. because a parent is getting a listed Social Security or other income support payment) does not apply to .2 person to whom new regulation 97A applies.

Subregulation 23.1 also inserts new subregulations 94A(2) and 94B(2) to provide that the concession to the spouse income test provided by regulation 97 (i.e. because a spouse is getting a listed Social Security or other income support payment) does not apply to a person to whom new regulation 94A or 94B apply.

Taper (withdrawal) arrangements

The parental, spouse or student income figure (i.e. the greater of the actual means derived figure and the income test derived figure) is subject to the taper (withdrawal) arrangements contained in regulations 82 (for independent students with a spouse), 88 (for dependent students) and 95 (for independent students with a spouse) which are amended by these regulations.

The arrangements are:

* for independent students without a spouse:

- if student income (i.e. the greater of the actual means derived figure and the student income test figure) is not more than $6,000 in an entitlement period, the student is entitled to maximum AUSTUDY at the relevant age related independent rate;

- if student income is greater than $6,000 in art entitlement period, the maximum entitlement is reduced by one dollar for every two dollars by which the student's income exceeds $6,000.

This is consistent with the current taper arrangement in subregulation 82(2) which does not require amendment to accommodate this approach;

* for dependent students:

- if parental income (i.e. the greater of the actual means derived figure and the parental income test figure) is not more than $23,350, the student is entitled to maximum AUSTUDY at the relevant age related rate;

- if parental income is greater than $23;350, the maximum entitlement is reduced by one dollar for every four dollars by which parental income exceeds $23,350.

Subregulation 21.1 amends the taper (withdrawal) arrangements in subregulation 88(1) to provide that a student can get maximum living allowance only if parental income worked out under regulation 86 or new regulation 87A is not more than $23,350. Subregulation 88(2) provides, as it currently does, that the maximum living allowance is reduced by one dollar for every four dollars by which parental income exceeds $23,350;

* for independent students with a designated Spouse and designated students with a spouse:

- if spouse income (i.e. the greater of the actual means derived figure arid the spouse income test figure) is not more than $14,690, the student is entitled to maximum AUSTUDY at the relevant age related independent rate;

- if spouse income is greater than $14,690, the maximum entitlement is reduced by one dollar for every two dollars by which the spouse's income exceeds $14,690.

Subregulation 24.1 amends the taper (withdrawal) arrangements in subregulation 95(1) to provide that a student can get maximum living allowance only if the income of his or her spouse as worked out under regulation 94, or new regulation 94A or 94B is riot more than $14,690. Subregulation 95(2) provides, as it currently does, that maximum living allowance is reduced by one dollar for every two dollars by which spouse income exceeds $14,690.

(E) MISCELLANEOUS CHANGES AS A RESULT OF THE EXTENSIONS TO THE AMT

A number of minor amendments to the regulations are required as a result of the extensions to the AMT discussed above. Unless otherwise indicated, these amendments do not change the operation of the existing AMTs in any way.

Miscellaneous changes:

* subregulation 3.1 amends the heading to Division 1B from "Actual means test - parent and spouse" to "Actual means test";

* subregulation 5.1 amends the heading to subdivision B from "Actual means test - parents" to "Actual means test: designated parent";

* subregulation 6.1 omits regulation 12J (To whom does this Subdivision apply?) and substitutes a new regulation 12J. This clarifies that Subdivision B applies to a student who has a designated parent within the meaning of regulation 12L;

* subregulations 7.1, 7.2 and 7.3 amend references in regulation 12K from "the designated student" to "the relevant student";

* subregulations 8.1 and 14.1 amend new paragraphs 12L(1)(e) and 12S(1)(e) respectively to clarify that a person who is wholly or mainly engaged in the carrying on of a primary production business owned by the person is a designated parent or spouse;

* subregulations 8.2 and 14.2 renumber paragraphs 12L(1)(d) and 12S(1)(d) to 12L(1)(e) and 12S(1)(e) respectively;

* subregulations 9.1 and 15.1 amend regulations 12M and 12T respectively to clarify that the amount of Family Payment (FP) added to the benchmark is in respect of children of the notional parent or spouse who are under the age of 16 years;

* subregulations 10.1 and 16.1 amend subregulations 12N(1) and 12U(1) to omit "the total" and substitute "the amount that equates to total".

* subregulation 10.3 and 16.3 amend paragraphs 12N(5)(c) and 12U(5)(b) respectively to substitute "less than 16 years" for "15 years or less";

* subregulation 11.1 amends the heading to subdivision C from "Actual means test - spouse" to "Actual means test: designated spouse";

* subregulation 12.1 omits paragraph 12Q(a) and substitutes a new paragraph 12Q(a) which clarifies that subdivision C applies to a student who has a spouse who is a designated spouse within the meaning of regulation 12S;

* subregulations 13.1, 13.2 and 13.3 amend references in regulation 12R from "designated student" to "relevant student";

* subregulation 18.1 amends subregulation 82(1A) to omit "A student's" and substitute "Subject to subregulation (1B), a student's". This provides that, if a student is a designated student, student income is calculated under regulation 82(1B);

* subregulation 18.3 omits "income exceeds the amount calculated under the formula." from subregulation 82(2) and substitutes "relevant income exceeds the amount worked out under subregulation (1)." This clarifies the taper (withdrawal) arrangements that apply in the student income test;

* subregulation 19.1 amends subregulation 86(1) to insert "and except as provided by regulation 87A" after "regulation 90,". This provides that parental income for a student who has a designated parent is calculated under regulation 87A;

* subregulation 22.1 amends subregulation 94(1) to insert "and except as provided by regulations 94A and 94B," after "regulation 9C. This provides that spouse income for a student who has a designated spouse is calculated under regulation 94A and spouse income for a designated student with a spouse will be calculated under proposed regulation 94B.

* regulation 25 amends regulation 109 (What changes in circumstances must the Department be told about?) to require:

- a designated student to tell the Department when he or she becomes aware that his or her actual means within meaning of regulation 12ZF or his or her spouse's actual means within the meaning of regulation 12ZA increase substantially (new paragraphs 109(1)(cc) and (cd) respectively); and

- a parent, spouse or student to tell the Department when he or she becomes a designated parent, spouse or student within the meaning of regulations 12L, 12S or 12Y (new paragraphs 109(1)(ce), (cf) and (eg) respectively).