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This topic provides information about the following:
A person's IMP can only be waived if they are in severe financial hardship because of unavoidable or reasonable expenditure.
To assess severe financial hardship delegates should use the severe financial hardship test (1.1.S.125) set out in section 19C of the SSAct. Under section 19C a person is in severe financial hardship if their total liquid assets are less than their fortnightly maximum payment rate, or if a member of a couple less than twice the recipient's fortnightly maximum payment rate. It is expected that most claims for waiver will occur once the IMP has already commenced.
Explanation: Due to the strictness of this test it is unlikely that a recipient will be considered to be in hardship when the IMP is first imposed.
To decide whether a recipient is in severe financial hardship due to unavoidable or reasonable expenditure the following assessment is made.
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Step |
Procedure |
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1 |
Establish whether the recipient is in severe financial hardship. |
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2 |
Assess the value of the recipient's total liquid assets at the date of commencement of their IMP. |
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3 |
Assess the unavoidable or reasonable expenditure of the recipient by adding together: - the level of reasonable cost of living (mindful of the upper limit) applicable to the recipient's circumstances, incurred since the commencement of the IMP, and - any unavoidable or reasonable expenditure in addition to the reasonable costs of living that has occurred since the commencement of the IMP. |
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4 |
Deduct the total amount at step 3 (unavoidable and reasonable expenditure) from the amount at step 2 (total liquid assets). |
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5 |
If the amount at step 4 still meets the severe financial hardship test, then the person is in severe financial hardship due to reasonable or unavoidable expenditure and they are entitled to have the remainder of their IMP waived. |
However, if the amount at step 4 does not meet the severe financial hardship test, NO part of the IMP can be waived. This means that NO allowances or deductions can be made for any unavoidable or reasonable expenditure, including the reasonable costs of living, that the recipient has incurred, and the recipient must serve their full IMP.
The value of the recipient's liquid assets as at the commencement of their IMP must be determined in the first instance. Where the recipient's employment has been terminated and they receive a termination payment, their liquid assets will usually include the total gross amount of that termination payment, as generally the IMP takes effect from the date their former employer pays the termination payment. If the recipient has directed some or all of their termination payment to be made to another person, or the recipient's former employer has paid the termination payment into a line of credit account held by the recipient, the recipient's liquid assets should include their total gross termination payment (step 2), as the whole termination payment is still taken to have been received by the recipient in these circumstances. However, the delegate should then consider whether the recipient's expenditure of these amounts was unavoidable or reasonable (step 3).
Act reference: SSAct section 14A Social security benefit liquid assets test definitions
Policy reference: SS Guide 1.1.L.50 Liquid assets
Unavoidable or reasonable expenditure includes:
The IMP can only be waived if the expenditure that has caused the recipient to be in severe financial hardship was unavoidable or reasonable, and this expenditure occurred while the IMP applies to the recipient. If the recipient is in severe financial hardship because of expenditure that is not considered unavoidable or reasonable, NO part of their IMP can be waived. This means that NO allowances or deductions can be made for any unavoidable or reasonable expenditure, including the reasonable costs of living, that the recipient has also incurred, and the recipient must serve their full IMP.
For examples of expenses in addition to the reasonable costs of living that may be considered unavoidable and reasonable see 1.1.U.20.
Act reference: SSAct section 19C(5) Meaning of reasonable costs of living
For examples of expenses considered part of the reasonable costs of living see 1.1.U.20.
If the recipient is entitled to have their IMP waived, generally it is waived from the date that the recipient incurred the unavoidable or reasonable expenditure which caused the severe financial hardship.
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Last reviewed: 7 December 2009
