12 – Means test

12 – Means test

Background to the means test

To receive a grant of legal assistance (a grant), an applicant will generally need to meet these three tests:

  1. the means test
  2. the applicable guideline/s
  3. the applicable merits test/reasonableness test.

This chapter is about the means test.

What is the means test?

Under the Legal Aid Act 1978, we can only provide a grant if we believe a person cannot afford to pay for a lawyer on their own. We use the means test to help us determine this.

We know that there will be some people who can’t afford to pay for a lawyer but still won’t meet our means test. The means test focuses legal aid on people who need it the most.

There is a gap between the income and asset thresholds used in our means test and the costs of paying for a lawyer privately. This may lead to a situation where an applicant:

  • does not qualify for a grant of legal aid because they do not meet the means test, and
  • they cannot afford to pay for a lawyer to obtain the legal service they need.

We continue to look for ways to improve access to legal aid services.

How does the means test work?

The means test sets thresholds for an applicant’s (and if relevant, their partner's) income and assets, as well as their expenses and legal costs.

When a person applies for a grant, we look at their (and if relevant, their partner's) income, assets, expenses, and the type of their legal matter. If these all meet the thresholds, then the applicant will be eligible under the means test.

The rest of this chapter sets out:

  • the income, assets and expenses we consider and how, and
  • the types of supporting information we ask for including the documents that need to be provided.

Means test guideline

Who does the means test apply to?

The means test applies to all applicants for legal assistance (and if relevant, their partner) except if the applicant is:

Our online means test calculator can be used to find out if someone is likely to meet the means test.

Does an applicant have to pay for any of the costs in a grant?

If an applicant receives a grant, they may need to pay for some or all of our costs of providing them with assistance. This is known as a contribution.

This depends on the applicant’s income and assets and will be decided based on our contributions guideline.

We can also request a contribution from an applicant’s partner, if no exemption applies.

How do we decide if an applicant meets the means test?

To decide if an applicant meets the means test, we will:

  • calculate their assessable income – that is, their income minus their assessable expenses
  • calculate their assessable assets – that is, the value of their assets minus any excluded assets, and
  • assess whether their matter will be low cost, medium cost or high cost.

What are our thresholds?

Generally, we will decide an applicant meets the means test and will need to pay a contribution based on the following thresholds:

Assessable income Assessable assets Does the applicant meet the means test? Will the applicant have to pay a contribution?
Less than $360 a week Less than $1,095 Yes No
If the matter is low cost – between $361 and $469 per week Between $1,095 and the cost of the legal matter Yes Yes. The amount will be decided based on our contributions guideline.
If the matter is medium cost – between $361 and $540 per week Between $1,095 and the cost of the legal matter Yes Yes. The amount will be decided based on our contributions guideline.
If the matter is high cost – between $361 per week and the cost of the legal matter Between $1,095 and the cost of the legal matter Yes Yes. The amount will be decided based on our contributions guideline.

Generally, we will decide the applicant does not meet the means test based on the following thresholds:

Assessable income Assessable assets Does the applicant meet the means test? Will the applicant have to pay a contribution?
If the matter is low cost – more than $470 per week More than the cost of the legal matter No n/a
If the matter is medium cost – more than $540 per week More than the cost of the legal matter No n/a
If the matter is high cost – more than the cost of the legal matter More than the cost of the legal matter No n/a

Income

In calculating an applicant’s income, we will consider all of the income an applicant (and, if relevant, their partner) receives from any source. This includes, but is not limited to:

  • pensions, benefits and allowances, excluding Family Tax Benefit
  • earnings from employment, including overtime
  • income from self-employment or business
  • rent received
  • maintenance or child support received

The applicant will need to tell us how much money they (and, if relevant, their partner) receive from each source on the legal aid application form and provide supporting documentation unless an exemption applies.

Expenses

We know that people have many expenses. We will subtract some of these expenses, called 'allowable expenses', from an applicant’s income, so that we can more accurately tell how much money they have left over to pay for their legal costs. We know that all people have other expenses that we do not consider under our means test.

The weekly expenses that we generally will subtract from an applicant’s income are:

  • income tax
  • housing costs
    • a maximum of $400 for metropolitan areas, $300 for outer metro areas and $240 for regional areas
    • this includes rent, board or mortgage payments.
  • childcare costs:
    • a maximum of $310 per household.
  • the Medicare levy
  • business expenses, and
  • spousal maintenance or child support payments:
    • to a maximum of $130 per child.

Partner or dependant allowances

Where an applicant has a partner and/or a dependant, we will also subtract:

  • $130 for your partner or first dependant
  • $125 for any subsequent dependant.

The income of an applicant’s partner (if relevant) is still assessed. These deductions do not apply if the applicant are paying spousal maintenance or child support for that partner or dependant.

This allowance is made because we recognise there can be extra household costs for larger families.

Assets

In calculating the value of your assets, we will consider all of an applicant’s assets and, if relevant, their partner’s assets unless an exemption applies. Assets are any type of property an applicant has that has value. This includes, but is not limited to, any:

We will then subtract the value of certain types of assets. We call these 'excluded assets' and list them in Table 1.

An applicant will need to tell us what their assets are on the application form and provide supporting documentation unless an exemption applies.

Table 1 – excluded assets

Asset Value
Cash savings $1,095 or less if single, $2,190 or less if they have a partner and/or dependants
Household furniture, clothing and personal belongings which are reasonably necessary The total is excluded and does not need to be declared on the application
Tools of trade The total is excluded unless we assess the tools as being exceptionally valuable
Vehicle(s) The total of one or more cars is excluded up to a maximum of $20,000 in equity
Principle place of residence The total is excluded up to a maximum of $500,000 in equity
Farm or business The amount excluded depends on an applicant’s living arrangements – see Table 2
Lump sum payment of compensation or upon termination of employment

We include this as assessable income if an applicant can’t receive a Centrelink benefit because of the lump sum.

We deduct $1,135 from the lump sum amount for each week an applicant can’t receive a Centrelink benefit.

The remaining amount is assessed as an asset.
Lump sum payment, spousal maintenance, child maintenance or child support We treat these like we treat lump sum payments of compensation or upon termination of employment.

Table 2 – Amount of equity in a farm and business excluded in calculating an applicant’s net assets

Applicant's property Single Partner
If an applicant has equity in a property that is not their farm or business $161,500 $229,000
If an applicant does not have equity in a property that is not their farm or business $278,500 $336,500

The values listed in Table 2 are in addition to the other excluded assets we have listed in Table 1.

Supporting documentation

When an application is made for a grant, an applicant (and, if relevant, their partner) will need to provide us with this supporting documentation.

Table 3 – supporting documentation for income and assets

Income or asset type Documents required from the applicant
Centrelink pension, benefit or allowance
  • Current pension, health care card or permission to confirm
Employed
  • A copy of their latest pay slip, or
  • A letter from employer setting out their weekly pay
Recently left employment
  • A Centrelink separation certificate, or
  • A letter from previous employer setting out the date the employment ceased and payout amounts (if any)
Self-employed
  • Latest tax return and profit and loss statement, or
  • Business activity statements (if bsuiness is less than 12 months old)
Savings
  • Bank statements for the past three months if the amount of savings is greater than the amount in Table 1.

We may ask an applicant (and, if relevant, their partner) to provide additional documents if we need to understand their financial circumstances better.