1. No category

Community Housing
Rent Setting Manual
How to determine rents for community housing
tenants
November 2013
Last updated: June 2014
Questions?
(08) 9221 7933
[email protected]
Contents
1.0
Introduction ............................................................................................... 3
2.0
What is rent setting? .................................................................................. 4
3.0
Community housing tenants ....................................................................... 4
4.0
Community Housing Providers? .................................................................. 4
4.1 Unregistered Providers ................................................................................5
4.2 Registered Providers ...................................................................................5
5.0
Commonwealth Rent Assistance (CRA)........................................................ 6
5.1 What is CRA?............................................................................................... 6
5.2 Why are CHP tenants eligible for CRA? ....................................................... 6
5.3 CRA rates (as at November 2013) ............................................................... 7
6.0
Market rent ................................................................................................ 8
6.1 Current fortnightly ATO Guideline market rents (June 2014) .....................8
6.2 GST Considerations ......................................................................................9
7.0
Social Housing (Band A) ............................................................................ 10
7.1 Band A/Public Housing Income and Asset Limits ......................................11
8.0
Affordable Housing (Band B) ..................................................................... 12
8.1 Band B/Affordable Housing Income and Asset Limits ............................... 12
9.0
Calculating rent ........................................................................................ 15
9.1 Assessing the income of the tenant .......................................................... 15
9.2 When should rent be calculated?.............................................................. 20
9.3 How to calculate rent ................................................................................20
9.3.1 Using the Rent Setting Calculator .......................................................... 21
9.3.2 Adjusting the Calculator for Band B tenants .........................................21
9.3.3 Step-by-step guide to CHCWA’s Rent Setting Calculator ...................... 22
9.3.4 Calculating rent manually: formulas & checks ......................................30
10.0 Frequently Asked Questions ..................................................................... 33
11.0 Glossary ................................................................................................... 36
12.0
Links ........................................................................................................ 37
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1.0
Introduction
Welcome to the Community Housing Coalition of WA’s Community Housing Rent
Setting Manual. This document is intended for community housing providers in WA.
This document is designed to provide detailed guidance to community housing
providers in determining rents for their tenants. It is a comprehensive and,
hopefully, accessible summary of all relevant policy documents that detail the many
aspects of rent setting in the community housing sector, including the Department
of Housing’s Community Housing Rent to Income Policy and the Community Housing
Income and Asset Limits Policy. We have aimed to answer the questions we are
asked most frequently, as well as explain the basic building blocks of setting rent in
this sector.
This manual can be used merely as a reference, but is intended as a companion to
CHCWA’s Rent Setting Calculator. The Calculator is available under the Resources >
Factsheets tab on our website and is updated quarterly. Those seeking a briefer
guide may find the Rent Setting Factsheet useful, also available on this page.
We have arranged this manual from the basic to the detailed. Following this
introduction you will find definitions and explanations of the vocabulary used in the
community housing sector, and in regards to the structure of the sector itself. Then,
with the introduction of the ‘Calculating Rent’ section, we set out how to use
available resources to determine rents. This is followed by a Frequently Asked
Question section, where we have endeavoured to answer the most common
queries.
3
2.0
What is rent setting?
‘Rent setting’ is the term used for the process by which a tenant’s rent is calculated
by their landlord. In the majority of cases, social housing tenants pay a rent
determined by their income. This is to ensure the rent being paid is affordable.
3.0
Community housing tenants
To be eligible for any community housing an applicant must satisfy the requirements
of the community housing income and asset limits tests. The tests take into account:




Weekly and annual income;
Assets including cash, money in the bank, loans and motor vehicles;
Additional costs faced by people with disabilities;
Additional costs of living in the North West and remote parts of WA.
Once the tenant has been accepted as eligible and taken on by a community housing
provider (CHP), what they will pay in rent is calculated. The calculation takes into
account the Commonwealth Rent Assistance (CRA) payment, which all community
housing tenants are eligible for. This is a crucial difference between public housing
and community housing in terms of determining rents. It means that CHPs are in a
position to charge higher rents to their tenants than are public housing authorities.
As a result, the rent garnered by a CHP from a tenancy exceeds the costs associated
with maintaining the dwelling in which the tenant lives. However, the ‘higher rent’
does not put the tenant at a financial disadvantage; the tenant will still pay an
affordable rent and the housing subsidy they receive from the Federal Government,
rather than being subsumed into general income, is counted as part of the
fortnightly right.
As a part of the broader social housing system, community housing services both the
social housing and affordable rental market. As such tenants are separated into two
streams: social, or Band A housing (7.0), and affordable, or Band B, housing (8.0).
Not all community housing providers, however, have the capacity to house both
tenant streams.
4.0
Community Housing Providers?
4
Community Housing Providers (CHPs) are organisations that provide secure and
affordable rental accommodation to low and moderate income earners and high
needs households. There are two ‘types’ of housing offered by CHPs:
1. Social housing, or Band A, which is for low income earners. Income and assets
tests are in line with those applicable to public housing.
2. Affordable community housing, or Band B, which is for those public housing
tenants who are on moderate incomes that do not fall within public housing
income and asset limits.
Which CHPs can provide Band A or Band B housing is determined by whether or not
the organisation is registered under the Department of Housing’s Community
Housing Policy.
4.1
Unregistered Providers
An unregistered provider ought to
housing only to Band A, or social
housing, tenants.
An ‘unregistered community housing
provider’ is a provider not registered
under the Department of Housing’s 2007
community housing registration policy. If
an organisation has not registered it is
likely to be a small organisation with a
limited amount of resources. Small CHPs
are also likely to specialise in a group of
tenants with particular needs, such as
aged care.
Tenants in unregistered community
housing should pay no more than 25
per cent of their gross assessable
income in rent. ‘Gross assessable
income’ refers to the pre-tax income
of the household. Gross assessable
income can be made up of several
different types of income and, for the
purposes of calculating rent, each type of income may be assessed at a different
rate:



4.2
25 per cent (e.g. Newstart allowance, income from investments).
10 or 5 per cent (e.g. Family Tax Benefits, the income of dependants).
Not assessable at all (e.g. Austudy, War Disability Pension).
Registered Providers
Registered CHPs are providers that have signed onto the Department of Housing’s
community housing registration policy. They fall into three categories: Growth
Providers, Preferred Providers and Registered Providers.
5
Registered providers may provide Band A, or social housing, and also Band B, or
affordable housing.
Registered providers set rents according to the Community Housing Rent Setting
Policy. The policy includes the following guidelines:



Tenants pay no less than an affordable rent of 25 per cent (Band A) and no
higher than 30 per cent (Band B) of a household’s income.
No rent can exceed the current Market Rent for any property.
Commonwealth Rent Assistance (CRA) must be factored into any determination
of rent.
5.0
Commonwealth Rent Assistance (CRA)
Community housing providers are in a unique position in the social housing system
in being able to benefit from taxation settings, rebates on state and local
government charges as well as having the ability to capture Commonwealth Rent
Assistance (CRA).
In capturing CRA, a community housing provider can include, in their tenant’s rent, a
sum equivalent to the tenant’s entitlement to CRA. This enables the organisation to
charge a higher rent, without financially disadvantaging the tenant.
5.1
What is CRA?
Commonwealth Rent Assistance is a non-taxable income supplement payment only
paid to people who are in receipt of a Centrelink benefit. It is not payable to people
who:


are a single disability support pensioner under 21, without dependents, living
with parents
are under 25, single and live with their parents.
Although the CRA is paid by Centrelink to a renter, it is a payment intended
ultimately for the landlord (in this case the CHP).
5.2
Why are CHP tenants eligible for CRA?
Under the Social Security Act 1991, Module D, Section 1068AD1, a person qualifies
for rent assistance if ‘the person is not an ineligible homeowner; and the person is
6
not an aged care resident; and the person pays, or liable to pay, rent (other than
Government rent).’
Government rent is defined under Section 13, 13, (1) which states ‘Government rent
means rent payable to any of the following authorities… (f) the State Housing
Commission established by a law of Western Australia.’
As community housing providers are not the State Housing Commission, they are
entitled to capture CRA.
5.3
CRA rates (as at November 2013)
These rates are accessible from Centrelink and reproduced below for your
convenience.
No dependent children:
Situation
Maximum
fortnightly
payment
No payment if
fortnightly
rent less than
Single
Single, sharer
Couple
One of a couple who are
separated due to illness*
One of a couple who are
temporarily separated
$124.00
$82.67
$116.60
$124.00
$110.00
$110.00
$179.00
$10.00
Maximum
payment
if
fortnightly
rent is more
than
$275.33
$220.22
$334.47
$275.33
$116.60
$110.00
$265.47
Maximum
payment
if
fortnightly
rent is more
than
$338.33
$363.72
$407.91
*Includes respite care and partner in jail.
With dependent children:
Situation
Maximum
fortnightly
payment
No payment if
fortnightly
rent less than
Single, 1-2 children
Single, 3+ children
Couple, 1 – 2 children
$145.18
$164.22
$145.18
$144.76
$144.76
$214.34
7
Couple, 3 + children
6.0
$164.22
$214.34
$433.30
Market rent
Market rent is the rental income that a property would command in the private
rental market.
Benchmark market values are published by the ATO and updated annually, taking
effect from January 1 each year. This information enables organisations such as CHPs
to make a comparison of the benchmark market values and the consideration
received for a supply (dwelling) provided to determine whether the supplies are
taxable, GST-free or input taxed (6.2). The figures allow a provider to easily
determine if a supply is for consideration less than 75% of the GST-inclusive market
value.
Using the figures supplied by the ATO is not compulsory, although they are widely
utilised in the sector and in CHCWA’s Rent Setting Calculator. A CHP may use 75% of
another (substantiated) market rent, such as the figures published by REIWA.
The market values have been reproduced by CHCWA in this document (6.1).
The Department of Housing’s Community Housing Income and Asset Eligibility Paper
defines affordable housing as housing that is leased to ‘eligible persons at a rent less
than 75% of market rent or in accordance with the relevant policies.’ However, as at
time of writing, organisations that are not charitable not-for-profits for tax purposes
are entitled to charge a rent in excess of 75% market rent.
If the organisation wishes the housing supply to be GST-free it must charge less
than 75% of the ATO Market Rent or other substantiated market rent.
6.1
Current fortnightly ATO Guideline market rents (June 2014)
Perth & WA
4+ bedrooms
Market rent
$1,175.50
75% market $881.25
rent
3 bedrooms
$787.50
$590.63
2 bedrooms
$725.00
$543.75
1 bedroom
$437.44
$328.08
Note: The figures in this table are the ATO Guideline ‘market rent’ ceilings (link below). They were taken from the tables based
on the ‘market rents’ guidelines for capital cities. The Australian Tax Office has made a ruling that these simplified rates apply
across the whole State. The table on the ATO website is for weekly rents. These have been converted to fortnightly rent for this
8
table.
https://www.ato.gov.au/Business/Bus/GST-and-non-commercial-rules---benchmark-market-values/?anchor=Table5#Table5
Table 5 is updated annually on January 1.
For more information on market value guidelines see:
https://www.ato.gov.au/Business/Consultation--Business/In-detail/GST-issues-registers/Charities-consultative-committeeresolved-issues-document/?page=12#Section_B__Market_value_guidelines
6.2
GST Considerations
In settling on a market rent figure to use for a property, the CHP needs to consider
whether they wish the consideration for supply to be GST free or input taxed.
If the organisation is registered for GST and claims input tax credits, then it is
important to ensure the rents charged do not compromise the organisation’s GST
Free Status. Under the GST Legislation (A New Tax System (Goods and Services Tax)
Act 1999, Chapter 3 Part 3-1, Division 38 Section – 250 (2):
(2) A supply is GST free if:
(a) the supplier is a charitable institution, a trustee of a
charitable fund, a *gift-deductible entity or a *government
school; and
(b) the supply is for *consideration that:
(i) if he supply is a supply of accommodation – is less than 75% of
the cost of the supplier of providing the accommodation; or
(ii) If the supply is not a supply of accommodation – is less than
75% of the consideration the supplier provided, or was liable to
provide, for acquiring the thing supplied.
GST free status applies to organisations that have been endorsed, by the Australian
Taxation Office, as either an Income Tax Exempt Charity (ITEC) or a Deductible Gift
Recipient (DGR).
Having GST free status means, unlike other rental properties which are input taxed,
the organisation is entitled to claim input tax credits on all creditable acquisitions
associated with the cost of the property and are not liable for any GST.
The ATO has produced a series of tables to simplify the process of calculating the
GST Free Threshold. These tables are updated in January each year. The tables are
available on the ATO website via the following pathway:
9
Home > Non-Profit Organisations > Resources & services > Committees & forums >
Charities Consultative Committee > Charities Consultative Committee Resolved
Issues Document
Example 1:
The WA Community Housing Group provides a two bedroom flat in Cannington to a
single parent and two children. The client makes a contribution of $140.00 per week.
Using these guidelines the market value for this dwelling is $262.50/week.
In this example, WA Community Housing Group’s dwelling would be GST-free
because the consideration for the supply is less than 75% of the market value.
Example 2:
The Queensland Community Housing Group provide a one bedroom apartment to a
single pensioner on Centrelink payments plus a small other income. The client makes
a contribution of $175.00 per week. Using these guidelines for the market value the
market value for this dwelling is $225.00/week.
This dwelling would be input taxed because the consideration is 77.7% of the market
value.
These examples were taken from: http://www.ato.gov.au/corporate/content.asp?doc=/content/00118033.htm
7.0
Social Housing (Band A)
The vast majority of community housing tenants
are in social housing, or Band A. Band A tenants
pay no more than 25% of their gross assessable
income as rent.
To be eligible for this stream the combined
weekly gross income of the applicant, partner
and co-applicant must be within Public Housing
Income and Asset Limits, as decided by the
Department of Housing.
‘Gross’ income refers to the
pre-income tax income of a
household or individual. When
rent is calculated based on
gross assessable income it is
because the income of the
individual
or
household
concerned is minimal, and
therefore there is little
difference, if any, before and
after tax has been taken out.
Rent is, as such, calculated on
the larger figure.
10
For convenience, we have also included the income and asset limits in this manual
(6.1.). These figures are updated as the above document is.
7.1
Band A/Public Housing Income and Asset Limits
Income limits:
Number
of Metro & country
North west & remote areas
people
in Single Income Dual Income
Single Income Dual Income
household
1
$430
610
2
$580
$670
820
$940
3
$695
790
980
$1120
4
$815
930
1150
$1320
For households with more than 4 people add $115 per additional person
Income limits for people with disability:
Number
of Metro & country
North west & remote areas
people
in Single Income Dual Income
Single Income Dual Income
household
1
$540
$760
2
$725
$830
$1025
$1180
3
$870
$1000
$1225
$1400
4
$1020
$1160
$1440
$1650
For households with more than 4 people and at least one person with a disability
add $145 per additional person.
Asset limits:
Household type
Cash Asset Limit
Single
Couples
Seniors 60 years plus (singles or couples)
People with disabilities
$38,400
$63,800
$80,000
$100,000
Assessable Assets
Cash assets
 Deposit in bank
 Credit union
 Building society
Non-assessable Assets
Managed assets
 Loans
×
 Debentures
×
 Friendly
Society ×
Car
Antique furniture
Stamp collection
11
 Savings/cheque
account
 Cash
 Term deposit
 Shares
and
insurance ×
bonds
 Unlisted equity
 Property trusts
Life insurance policies
Superannuation:
Superannuation and annuities are not assessed, but any annual
income/return/dividend received is assessed as part of the income assessment
process.
Superannuation funds for applicants under the age of 55 years:
Superannuation funds that cannot be released (e.g. superannuation roll-over fund)
are not assessed as an asset.
Superannuation funds for applicants 55 years of age and over:
Where a lump sum superannuation payment is taken, it will be treated as a cash
asset and any income derived will be assessed for eligibility and rent assessment
purposes.
8.0
Affordable Housing (Band B)
Affordable housing tenants (Band B) are
usually former social housing tenants
(Band A) transitioned from Band A to Band
B by their community housing landlord
following an increase in their income. In
other words, a CHP can increase rent to
match the tenant’s new income, allowing
them to stay in their home.
A Band B tenant should pay no more than
30% of their net (post-tax) income.
8.1 Band B/Affordable
Income and Asset Limits
Housing
‘Net’ income refers to the postincome tax income of a household
or individual. Calculating rent after
income tax ensures the rent
remains affordable, as it is
calculated on what the tenant
actually receives. This approach is
used for Band B, or affordable
housing tenants, who have higher
incomes and therefore a wider gap
between their gross and net
income.
An affordable housing tenant must comply with the Department of Housing’s
income and asset limits, as decided by the Department of Housing.
12
For convenience, we have also included these income and asset limits below.
Income Limits:
Household type
Metro & country
NW & remote areas
Single Person
Two adults/couple
Sole parent with 1 child
Sole parent with 2 children
Couple with 1 child
Couple with 2 children
Each additional adult
Each additional child
Weekly
$881
$1,218
$1,219
$1,511
$1,510
$1,802
$337
$292
Weekly
$1,101
$1,522
$1,523
$1,889
$1,888
$2,253
$421
$365
Disability Income Limits:
Household type
Metro & country
NW & remote areas
Single Person
Two adults/couple
Sole parent with 1 child
Sole parent with 2 children
Couple with 1 child
Couple with 2 children
Each additional adult
Each additional child
Weekly
$1,101
$1,522
$1,523
$1,889
$1,888
$2,253
$421
$365
Weekly
$1,376
$1,903
$1,904
$2,361
$2,360
$2,816
$527
$457
Annual
$45,956
$63,535
$63,579
$78,882
$78,778
$94,021
$17,579
$15,243
Annual
$54,445
$79,419
$79,474
$98,528
$98,473
$117,526
$21,974
$19,054
Annual
$57,445
$79,419
$79,474
$98,528
$98,473
$117,526
$21,974
$19,054
Annual
$71,806
$99,273
$99,342
$123,159
$123,091
$146,908
$27,467
$23,817
Asset limits:
Household type
Cash Asset Limit
Single
Partnered (combined)
Couple but separated due to illness (combined)
$332,000
$412,500
$412, 500
Assessable Assets:
Includes cash, insurance, household possessions.
 Any cash or money the tenant has in the bank, building society or credit union
13
accounts (including interest free accounts), interest bearing deposits, fixed
deposits, bonds, debentures, shares, property trusts, friendly society bonds and
managed investments.
 Any assets held in superannuation and rollover funds if the tenant is eligible for
the Aged Pension.
 The value of any real estate, including holiday homes, the tenant owns (this does
not include the principal home).
 The value of any businesses and farms, including goodwill (where goodwill is
shown on the balance sheet).
 The surrender value of life insurance policies.
 The value of gifts worth more than $10,000 in a single year or more than $30,000
in a five year period.
 The value of any loans (including interest-free loans) the tenant has made to
family trusts, members of the family, organisations.
 The value of any motor vehicles the tenant owns.
 The value of any boats and caravans the tenant owns that they do not use as a
home.
 The value of the tenant’s household contents and personal effects.
 The value of any collections for trading, investment or hobby purposes.
 The value of the tenant’s entry contribution to a retirement village if it is less
than the difference between the homeowners' and non-homeowners' assets
limits.
 Some income stream products.
 The attributed value of a private trust or private company where the tenant is a
controller of that trust or company.
 The value of a life interest created by you or your partner, or upon the death of
their partner.
14
CHPs often specialise in providing for particular groups, such as the aged or those
with mental health issues. As such, criteria other than income and assets may
determine an applicant’s eligibility for a particular provider. These include the
applicant’s age, level of care required, or physical or mental disability.
9.0
Calculating rent
In this section we will detail the procedure for calculating the rent of a tenant in
community housing, from what documents a provider should obtain from a tenant
to using the Rent Setting Calculator, adjusting for Band B tenants, and how to
manually calculate and check the results.
9.1
Assessing the income of the tenant
Knowing the income of the tenant, and the amount to use as the basis for calculating
their rent (or their ‘assessable income’), is the first step in rent setting for CHPs.
Current practice for determining assessable income is based on the Public Housing
Rent Setting Manual, which sets out what income is assessable in community
housing and at what rate.
The CHP is responsible for calculating the total assessable income for each tenancy.
In order to do this the provider must have evidence of the income of the tenant.
This section explains what is taken into account for assessable income. For how to
actually calculate rent, see 9.3 How to calculate rent.
Documentation
As per the Department of Housing’s Rental Policy Manual, the provider should
require the following from their tenant:

A recipient of a Centrelink benefits or pension should supply a Statement of
Benefit from Centrelink that is not more than four weeks old.

Wage and salary earners should either provide salary advice slips for the last
three months or have their employer complete an Employer Income Verification
Statement.
15

Overseas pension recipients should provide proof of the pension source and
amount.

Tenants not in receipt of an income or in receipt of an income lower than the
base statutory benefit are deemed to be receiving the base statutory benefit for
which they would be eligible if they are eligible to make application for a
statutory benefit but choose not to. Example: Persons who become unemployed
but choose not to apply for Centrelink benefits; persons who lose part payment
because they have breached the Social Security Activity Test.

Self-employed tenants must provide their last financial year income tax
assessment from the ATO. If they have difficulties supplying this documentation
they should be assessed at the equivalent award rate for the occupation in that
industry.

A recipient of income from cash assets: the deeming rate for cash assets is in
line with Centrelink Deeming Rate for financial assets.

Single and receiving either a pension or allowance: the first $46,600 of financial
investments is deemed to earn income at 2.5% per annum and any amount over
that is deemed to earn income at 4% per annum

A couple with at least one receiving a pension: the first $77,400 (combined) of
the tenant’s and their partner’s financial investments is deemed to earn income
at 2.5 per cent per annum and any amount over that is deemed to earn income
at 4 per cent per annum

A couple with neither receiving a pension: the first $38,700 for each of the
tenant’s and their partner’s financial investments is deemed to earn income at
2.5% per annum and any amount over that is deemed to earn income at 4% per
annum.

Landowner (with or without a house): the net value of property assets acquired
by existing tenants is deemed at an annual rate of 4%. For current rates go to
Deeming Factors on the Centrelink website.
Working out assessable income
16
Determining the total assessable income of a household requires working out which
part of the income of the tenant or tenants is assessable and at what rate. The
income of other household members (including partners) must also be considered.
How income is assessed is dependent upon a number of factors, including:



The type of income.
The age of the recipient.
Whether the recipient is the ‘tenant or is a signatory on the tenancy agreement’,
or is an ‘other household member’
There are some differences in how the income of ‘tenants’ and ‘other household
members’ is assessed, so it is important to be clear who has actually signed the
tenancy agreement. Amounts that are not assessable are excluded from the
assessable income of a household.
The total assessable income of a tenant can be made up of several different types of
income and, for the purpose of calculating rent, each type of income may be
assessed at a different rate. Some income is assessed at 25% (or up to 30%, if the
tenant is Band B), some at a reduced rate of either 10% or 5%, and there are
elements of income that are not assessable at all.
Unless otherwise indicated, the followings considerations apply regardless of
whether or not the tenant is in Band A or Band B.
Income that is fully assessable (assessed at 25 – 30%)
The total assessable income of the tenant(s), partner, co-applicants and all other
members of the household over the age of 21, including boarders and visitors
staying for more than 2 months, form the bulk of the assessable income of a
household. This income includes, but is not limited to:
 Wages and salaries above the working allowance.
 Centrelink benefits such as the Newstart Allowance, Age Pension and Disability
Support Pension.
 Youth Allowance.
 Austudy or Abstudy Allowances.
 Income from investments.
 Overseas pensions.
 Income from self-employment or own business.
17
 Any other payments not listed as non-assessable income, such as Large Family
Supplement.
Income that is partly assessable
The most common kinds of partly assessable income include, but are not limited to:
 Family Tax Benefit A (less the Base Rate) is assessed at 10%. The Base Rate is
reviewed annually by Centrelink. To 1 January 2014, the base rate is $55.16 per
child of all age groups. The current Guide to Australian Government Payments
can be found online.
 Family Tax Benefit B is assessed at 5%
 Income of dependent household members aged between 16 and 21 is assessed
at 10%. Also assessed at 10% is the income of students under the age of 25
years.
 Child maintenance payments are assessed at 20%.
Non-assessable income
Supplements, allowances and benefits that are paid for a specific purpose, such as
rent assistance, are not assessable for rent. According to the Department of
Housing’s Rental Policy Manual, are:


















$50 of weekly income for working disabled
Abstudy Incidentals Allowance
Austudy/Abstudy Fares Allowance
Austudy/Abstudy Pensioner Educational Allowance
Baby Bonus
Basic Family Payment (minimum standard payment)
Basic Family Tax Benefit Part A
Bereavement Payment
Carer Allowance (previously Child Disability Allowance)
Carer Allowance (previously Domiciliary Nursing Care Benefit)
Child Care Rebate
Double Orphans Pension
Education Entry Payments
Employment Entry Payments
Family Tax Payment
Incentive Allowance
Isolated Children’s Allowance
Maternity Allowance and Maternity Immunisation Allowance
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






Mobility Allowance
Multiple Birth Allowance
Orphans, Ward of the State and Foster Child Allowance
Pharmaceutical Allowance
Remote Area Allowance
Telephone Allowance
Training Allowance
Department of Veteran’s Affairs:
 Attendant Allowance
 Clothing Allowance
 Decoration Allowance
 English War Disability Pension
 Pensioner Supplement (GST Com)
 Recreational Transport Allowance
 Vehicle Assistance Scheme
War Disability Pension
 Intermediate War Pension
 Extreme Disability Adjustment
 Totally Permanent Invalid (TPI)
 Prisoner of War (POW) Recognition Supplement
Exceptions and Notes
Discretion
The most important exception to the guidelines outlined above is that providers can and
should exercise discretion to take into account tenants’ specific circumstances.
Self-employed tenants

Where a self-employed tenant continues to be eligible for part or full Social
Security entitlements, including the New Enterprise Incentive Scheme (NEIS), the
assessable income will be the Social Security entitlement or equivalent and the
estimated profit from self-employment.

Where a couple are in a business partnership and the level of assessable income
is less than the award wage for a similar occupation or trade, then only one wage
is deemed for the purpose of assessing rent.
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Department of Veteran Affairs
Where the DVA War Disability Pension, Intermediate, Extreme, and TPI pensions are
the sole source of income or only a part Centrelink pension or allowance is paid,
then the appropriate pension rate is deemed for that household.
9.2
When should rent be calculated?
The provider should calculate the tenant’s total assessable income on the basis of
income at the time of signing the Tenancy Agreement, or at the time of the
application for a rent to income subsidy. Tenants should advise the provider
immediately of any:


changes to household composition
changes to income by $10 per week or more.
Providers can backdate rental payments where the tenant did not advise the
provider of an increase in income. However, strictly implementing this guideline
may cause problems if a tenant’s income changes frequently. While in theory the
rent should be adjusted with each change in income, in practice this may be too
administratively cumbersome.
When a tenant’s income grows to exceed the income and asset limits of the
accommodation provided by the CHP, they are no longer eligible for community
housing.
9.3
How to calculate rent
Because determining a tenant’s assessable income can become quite complex,
Keeping in mind the principle that those tenants with similar capacity to pay
should pay similar rent, a provider could:





Conduct an annual review and calculate the rent at that time.
Use the tenant’s average income for the last three months.
Use the tenant’s last financial year income tax assessment from the ATO.
Assess the tenant at the equivalent award rate for their occupation.
Negotiate a mutually satisfactory solution with the tenant.
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CHCWA maintains a Rent Setting Calculator, downloadable from our website, that
does most of the work. Before we cover how to use it, some important points:

‘Basic Rent’ is how much household income the tenant will contribute to their
rent. It is called ‘basic’ because the actual rent the tenant will pay is made up of a
second part, their entitlement to Commonwealth Rent Assistance.

The Calculator determines CRA at the same time as it calculates basic rent. It will
not be obvious, from looking at the Calculator, how the CRA figure has been
utilised.

How CRA is actually calculated is described in another section of this manual. If
there is uncertainty about what it is and how it is applied, it is recommended the
CRA section is read before this one.

The Calculator is ideally suited to tenancies where there is a single tenant, a
single person, a couple with dependent children, or a single or couple living with
one other household member (perhaps an adult son or daughter). Where there
are multiple tenancies (sharers) in the house, use a separate Rent Calculation
Form for each tenant.
9.3.1 Using the Rent Setting Calculator
The Rent Setting Calculator is an Excel spreadsheet. If you have read the preceeding
sections of this manual you will understand there are many pre-set numbers
involved in rent setting calculations, such as market rent figures. These have been
entered in for you. All you have to do is enter in what parts of your tenant’s income
is assessable and their entitlement to Commonwealth Rental Assistance. The
Calculator, using the formula above, will work out:



Basic rent
Commonwealth Rent Assistance
Total rent (a combination of the above two)
9.3.2 Adjusting the Calculator for Band B tenants
1. You will notice on the Calculator or in the screenshots in the following section
that the default rate of assessment is 25%. This is for Band A, or social housing
tenants. To adjust the Calculator for Band B, or affordable housing tenants,
change every ‘25%’ to ‘30%’.
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2. When you calculate for Band A clients, you will use their gross (pre-tax)
assessable income. When you calculate for Band B clients, use their net (posttax) income.
9.3.3 Step-by-step guide to CHCWA’s Rent Setting Calculator
The following scenario will be used to demonstrate how to use the Rent Setting
Calculator:
1. Identify the tenant’s income.
Shirley is 72 years old and receives the Age Pension.
She lives with her husband Eric who also receives the Aged Pension in a rental
unit managed by a CHP.
Gather all relevant documentation/evidence of the tenant’s income. e.g. Centrelink
income statement.
In Shirley and Eric’s case, their documentation shows:
Centrelink Payment (per fortnight)
 Aged pension (each) $533.10 (each)
 Pension basic supplement $92.20 (combined)
Property details
 1 Main Street, Joondalup 6027.
 Two bedroom villa unit (multi-brick).
ATO market rent
 $496.88 per fortnight (75%)
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2. Open the CHCWA’s Rent Setting Calculator.
The calculator can be found on our website under ‘Resource Centre’ then
‘Factsheets’ (here).
To begin with make sure you are on ‘The Basic Rent Form A’ tab.
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3. Enter the tenant’s details.
At the very top of the calculator under sections 1 and 2 enter the name and
address of the tenant(s).
4. Determine 75% property market rent.
click on the ‘notes’ tab at the bottom of the page.
Depending on the number of bedrooms make up the house, the last row of
the table will read 75% of the property market rent.
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This figure needs to be entered under section 3 of the ‘Basic Rent Form A’
5. Assess Income.
Enter all assessable income as stated on the tenant’s income statement under
section 3 of the ‘Basic Rent Form A’.
25
Please note the only other income Shirley and Eric receive (as per example) is
a ‘pension basic supplement payment’. In this case their other income has not
been entered because ‘supplement payments’ are non-assessable. For a list
of non-assessable income see 9.1 Non-assessable income.
Any other assessable income should be entered in section 3.4
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Shirley and Eric (as per example) are also deemed as a couple. This means all
members of this particular household have signed the tenancy agreement resulting
in both members becoming Tenants.
If a tenant declares they have another household member (with no relation or
receiving income) 16 -21 years or a student under 25 years, that household members
income must be entered in section 4.
6. Determine Basic Rent.
Once all previous steps have been completed. You should have your basic rent
figure. This figure can be found at the bottom of the ‘Basic Rent Form A’.
27
7. Determine CRA entitlements.
In order to determine Tenants CRA entitlements you need to click on the
‘CRA’ tab.
And select which family situation applies to the Tenant(s) under section 5.
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8. You have now calculated the final figure you are entitled to charge the
tenant(s) for rent.
Total Rent to be charged
Which is made up of?
CRA entitlements paid to the Tenant(s)
from Centrelink.
The amount to be paid by the Tenant(s)
out of their own pocket.
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9.3.4 Calculating rent manually: formulas & checks
This is the formula behind the Rent Setting Calculator and the checks you will need
to do before finalising the rent.
C = 4B – 3T
C
=
The rent to be charged that captures CRA but does not exceed
25% of the household’s gross assessable income, if the CRA
component is removed (or market rent, whichever is lower)
B
=
The basic rent (25% of assessable income)
T
=
The Threshold (from CRA Table) which if fortnightly rent is under
this amount no CRA payment is made
M
=
The maximum CRA payment
A
=
The amount of CRA your tenant will receive
Example 1
If we take the example of a single person on Disability Support Pension with no
dependents, they would receive 670.90 per fortnight.
25% of their gross assessable income is $670.90 x 25% = $167.25
Their CRA threshold from the Centrelink CRA table (for a single person with no
dependents) is $103.60
We can now apply the formula:
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C
=
4B – 3T
=
4 (167.25) – 3 (103.60)
=
669.00 – 310.80
=
358.20
This formula tells us to charge the tenant $358.20 a fortnight; however, at the start
of this section we mentioned two important checks that must be made before
finalising your tenant’s rent.
There are two important checks that must be made before finalising rent:
1. Does the CRA payment calculated using the formula exceed the Maximum
CRA Payment available to the tenant?
2. Does the rent exceed Market Rent?
Check Number 1 - Does the CRA payment calculated using the formula exceed the
Maximum CRA Payment available to the tenant?
Having established the potential rent using the formula (C = 4B – 3T), it is important
to check that this amount does not exceed the maximum CRA payment to which the
tenant is entitled. The maximum CRA payment for a single person with no children is
$116.40 (from Centrelink CRA table). In Example 1, the CRA payment is above this
amount.
If the CRA (calculated using formula) exceeds Maximum Payment
If the CRA exceeds the maximum payment then the maximum payment would be
used. Rent would be calculated by adding the maximum payment to 25 - 30% of
total assessable income.
C=B+M
So, in Example 1:
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= 167.25 + 116.40
= 283.65
Check Number 2 – Does the rent exceed Market Rent?
Whatever method of rent calculation you use, the rent you charge must never
exceed:


B (basic rent) plus M (the maximum CRA payment to which your tenant is
entitled);
Either the GST Free Rent in the ATO tables or 75% of a rent that can be
substantiated as a fair market rent.
If your organisation has decided to use a limiting Market Rent, the rent you arrive at
may be less than the tenant’s assessed income plus maximum Commonwealth Rent
Assistance. By reducing the rent, the amount of CRA your tenant receives will also be
reduced.
As you need to know the level of CRA each tenant receives, you must work out the
CRA component of the rent. The formula to do this is:
A = (C – T) x 75
Using the figures from the Example 1 and ATO market rent and supposing that the
property the tenant is moving into is $271.88 per fortnight, the calculation would
look like this:
A
=
(271.88 – 116.40) x 75%
A
=
155.48 X 75%
A
=
116.61
If A (CRA) is $116.61 and market rent is $271.88, then the tenant’s contribution to
the rent has fallen to $155.27. It is acceptable for the tenant’s contribution to be
less than B (basic rent) when the rent is adjusted back to market rent.
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10.0 Frequently Asked Questions
My tenant’s income has increased. Can my organisation charge more rent?
It depends. First, it would be a good idea to check whether the increased income of
the tenant means that they are still in compliance with the applicable income
eligibility criteria. In the case of registered organisations, this may result in the
tenant being transitioned to a higher rent, ‘Band B’ tenancy. If the provider is
unregistered, the amount by which the tenant is above the income threshold needs
to be considered as the tenant may no longer be eligible for social housing.
What is required of us when we increase our tenant’s rent?
CHCWA has produced a factsheet, ‘Rent Increases and the RTA’, which may be useful
for information on how to increase your tenant’s rent as appropriate to their
income, your method of calculating the rent, and the RTA.
Briefly, if rent is calculated by the tenant’s income (which community housing rent
generally is), then if the income increases, the tenant’s rent should also increase.
When rent increases because the tenant’s income does but the method of
calculating the rent remains the same, the lessor does not have to give notice to the
tenant of the rent increase.
For example, a Band A tenant’s income increases but it is still within Band A limits.
Their rent is based on 25% of their gross assessable income. Their rent will therefore
rise but, as the method of calculating rent has not changed, you do not have to
advise the tenant of the increase in rent.
On the other hand, another Band A tenant receives an increase in income resulting
in their shift from Band A to Band B, where they pay no less than 25% and no more
than 30% of the household’s net income. The method of rent calculation has
changed and the tenant must be given written notice of the increase.
If rent is not calculated by the tenant’s income the tenant must still be given written
notice of any rent increases.
We recently found we’ve been miscalculating the rent and haven’t been charging
our tenant enough – what do we do?
Your course of action should be determined by the policies of your organisation in
this case. However, our suggestion is that:
33

A letter is sent to the tenant explaining the error and that the rent will be
increased from the next due date (or later, if your organisation wishes to give the
tenant time to adjust for the increase).

The letter should also state if the organisation requires the rent to be back paid.
Our recommendation is that back pay is not requested due to legal complications
and possible financial difficulties for the tenant. However, this may be
determined depending on the amount of money owed.

CHCWA strongly advises that this scenario addressed in your organisation’s
policies and procedures.
Why are we taking the Commonwealth Rent Assistance from the tenant, and can
the tenant keep it?
The ability of Community Housing Providers to ‘take’ the Commonwealth Rent
Assistance is the crucial point of different between community housing and public
housing.
Capturing the CRA, as it is known, means when a CHP calculates their tenant’s rent a
sum equivalent to the tenant’s entitlement to CRA is taken into account. Rather
than being subsumed into general income it is counted as part of the fortnightly
rent.
In effect, this enables CHPs to charge their tenants a higher rent than public housing
authorities. However, the tenant is not at any financial disadvantage: they are paying
the same rent they would as a tenant in public housing (25%) and their income is
also the same, as public housing tenants are not eligible for CRA to begin with. For
the CHP, this arrangement means the rent collected exceeds the costs associated
with maintaining the dwelling. It is this surplus that CHPs use to conduct extensive
renovations or to construct more affordable housing.
Using the CRA this way is a vital part of how a CHP functions and the tenant may not
‘opt out’.
How much should/can we charge other household members?
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Community housing providers must determine the subsidised rent of all existing
tenancies based on a percentage of the assessable household income plus 100% of
the household’s entitlement to CRA.
Household members are all people living in the accommodation, regardless of age or
relationship.
The following table shows the percentage of income payable by different members
of a household:
Assessment Rate*
Tenant/Other Household Member(s)
25%
The tenant, their spouse or live-in partner, irrespective of their
age.
All other persons living in the household who are aged 21 years
or over.
15%
People living in the household aged 18 to 20 years inclusive
who are not the tenant, their spouse or live-in partner.
15%
Family Tax Benefit Part A & B
Nil
Persons living in the household aged under 18 years who are
not the tenant, their spouse or live in partner are not assessed
for rent-setting purposes.
*these rates do not apply to those affordable housing (Band B) tenants.
Why does the assessment rate for some payments vary, and why are some not
assessable at all?
It is not always clear why some payments are considered assessable and why others
are not, or why some payments are assessed at a particular rate and others at
another. In the past CHCWA has sometimes found it difficult to receive a clear
rationale from the ATO or Centrelink as to why some rates are assessable and others
are exempt.
However, we do know that certain payments, such as any supplements, are exempt,
because they are designed for a specific purpose, such as the War Disability Pension.
35
11.0 Glossary
Assessable income
‘Assessable income’ is the term used for the portion of income to be accounted for
when determining the amount of government benefits or amount of rent someone
may pay. Certain payments, such as any supplements, are exempt, often because
they are designed for a specific purpose. Such payments are termed ‘non-assessable
income’ and are not to be taken into account when determining rent.
See: 9.1 Assessing the income of the tenant
Band A
One of two tenancy ‘streams’ in the community and public housing systems. Band A
tenants are often on very low incomes and make up the majority of social housing
tenants.
See: 7.0 Social Housing (Band A)
Band B
One of two tenancy ‘streams’ in the community and public housing system. B
tenants earn low to middle incomes and rent ‘affordable housing’ dwellings, which
are let at a slightly higher rate than social housing.
See: 8.0 Affordable Housing (Band B)
Commonwealth Rent Assistance (CRA)
Commonwealth Rent Assistance is a non-taxable income supplement payment only
paid to people who are in receipt of a Centrelink benefit.
See: 5.0 Commonwealth Rent Assistance (CRA)
Market Rent
The rental income that a property would command in the private rental market.
Market rent for dwellings is indicated by the rents landlords are willing to accept and
tenants to pay in recent lease transactions for comparable accommodation.
36
See: 6.0 Market Rent
Registered Provider
Registered CHPs are providers that have signed onto the Department of Housing’s
community housing policy. They fall into three categories: Growth Providers,
Preferred Providers and Third Tier Registered Providers.
See: 4.2 Registered Providers
Unregistered Provider
An ‘unregistered community housing provider’ is a provider not registered under the
Department of Housing’s community housing policy. If an organisation has not
registered it is likely to be a small organisation with a limited amount of resources.
Small CHPs are also likely to specialise in a group of tenants with particular needs,
such as aged care.
See: 4.1 Unregistered Providers
12.0
Links
Community Housing Rent Setting Policy:
http://www.dhw.wa.gov.au/HousingDocuments/CH_Income_and_Asset_Limits_Poli
cy.pdf
Department of Housing’s Rental Policy Manual:
http://www.dhw.wa.gov.au/HousingDocuments/Rental_Policy_Manual.pdf
Guide to Australian Government Payments:
http://www.humanservices.gov.au/corporate/publications-and-resources/a-guideto-australian-government-payments
37