Can Foster or Kinship Care Payments Count as Home Loan Income?

Can foster care, kinship care and Centrelink carer payments can be used as home loan income?

Learn whether foster care, kinship care and Centrelink carer payments can be used as home loan income, including under the Australian Government 5% Deposit Scheme.

Foster care payments, kinship care allowances and Centrelink carer payments can sound similar, but Australian lenders may treat them very differently.

Before assessing whether a payment can be used as home loan income, the lender needs to identify exactly what the applicant receives.

It may be:

• a state or territory foster care allowance;
• a kinship care allowance;
• a reimbursement for the costs of caring for a child;
• Centrelink Carer Payment;
• Centrelink Carer Allowance;
• Family Tax Benefit;
• a disability-related payment; or
• another government or agency payment.

The name, purpose and expected duration of the payment matter.

Related research: Can You Use Foster Care Payments for a Home Loan?

Is a kinship care allowance considered income?

In Victoria, the Department of Families, Fairness and Housing describes its foster and kinship care allowance as a contribution towards the costs of caring for a child.

The Department states that the allowance is not payment for being a carer and is not considered income for tax, benefit or loan application purposes.

That classification creates an immediate difficulty when an applicant asks a lender to use the allowance as ordinary servicing income.

A lender may instead:

• exclude the allowance and exclude the foster child from the dependant calculation;
• use the payment only to offset costs associated with the foster child;
• assess the circumstances manually; or
• decline to use the payment at all.

The approach will depend on the lender and the nature of the care arrangement.

What is the difference between Carer Payment and Carer Allowance?

Carer Payment and Carer Allowance are Commonwealth social security payments.

Carer Payment is an income support payment for someone who provides constant care and whose capacity to work is materially affected. Carer Allowance is a supplementary payment for someone providing daily care and attention to a person with a disability or medical condition.

A lender policy accepting Centrelink Carer Payment does not automatically mean it accepts a state-based foster or kinship care allowance.

The source and official classification of the payment must match the lender’s acceptable income policy.

Which lenders consider foster or carer income?

The attached policy reference contains 22 lender policies dealing with foster or carer income. The results are mixed.

Commonwealth Bank

Commonwealth Bank has an explicit policy for foster care income.

Its policy allows 90% of eligible foster care income to be used where the applicant is expected to remain entitled to the payment for at least the next three years.

Verification may include:

• three months of account credits; and
• a letter from the relevant government department or agency.

The policy also requires two servicing assessments:

1. one including the foster children as dependants and including the foster income; and
2. one excluding both the foster children and the foster income.

The more conservative acceptable result may then determine the outcome.

This provides a potential pathway for foster carers, but it does not mean every state-based kinship allowance will automatically satisfy the policy. The official purpose and classification of the payment still need to be confirmed.

NAB

NAB’s policy provides for foster care income to be referred for manual assessment by an appropriately authorised credit assessor.

This is not automatic acceptance. It indicates that the circumstances, payment type and expected continuity need individual consideration.

Pepper

Pepper’s policy allows foster care income to offset the living expenses associated with foster children.

Any amount above those expenses cannot generally be used to service unrelated debts.

This recognises the payment as support for the child’s care costs rather than unrestricted household income.

Other lenders

La Trobe may consider foster income case by case.

Several other lender policies in the reference either reject foster or carer income or provide no clear pathway for using it. These include policies from ANZ, Macquarie, MyState, Suncorp, ME Bank, ING, St.George, RedZed, Gateway, Resimac and UBank.

Some lenders accept selected Centrelink carer payments while excluding foster care allowances. People First Bank and Newcastle Permanent, for example, have pathways for certain Carer Payment or Carer Allowance income subject to conditions, but those policies should not be assumed to cover a state kinship allowance.

Can the payments be used with the 5% Deposit Scheme?

The Australian Government 5% Deposit Scheme does not publish a separate universal list of acceptable income types.

The participating lender remains responsible for determining whether the applicant can service the loan under its normal credit policy. The government guarantee reduces the lender’s exposure to a high loan-to-value ratio; it does not replace the lender’s assessment of income or affordability.

Among the participating lender policies in the reference:

• Commonwealth Bank has the clearest documented foster care income pathway;
• NAB provides for manual consideration;
• ANZ expressly excludes foster care income;
• Westpac and St.George do not provide a general carer-income pathway in the reviewed policies;
• MyState and Gateway exclude it;
• People First Bank and Newcastle Permanent may accept certain carer payments, but the exact payment must be matched to their definitions; and
• Teachers Mutual Bank does not provide enough detail in the reference to assume acceptance.

A lender may also require the application to service without the allowance, particularly where the payment is designed only to meet the foster child’s costs.

Should a foster or kinship child be entered as a dependant?

This depends on how the lender treats both the child and the payment.

Possible approaches include:

Include the child and include the income

This may apply where the lender accepts the foster payment as income and treats the child as part of the household.

Exclude both the child and payment

This can be used where the payment broadly covers the child’s costs and neither side is intended to affect general servicing.

Include only the net cost

The lender may compare the allowance with the reasonable costs associated with the child and include any shortfall as an expense.

Include the child but exclude the payment

This is the most conservative outcome and can materially reduce borrowing capacity. It may arise where the lender views the child as a household dependant but does not accept the allowance as servicing income.

The application should clearly explain the care arrangement rather than relying on a generic dependant entry in a calculator.

Related research: How Do Australian Lenders Treat Child Support and Dependants?

Example: Victorian kinship carer

An applicant receives a fortnightly DFFH kinship care allowance for a child placed in their care.

The applicant wants to use the full payment as income for a home loan.

Because DFFH describes the allowance as a contribution to the child’s care costs and states that it is not income for loan applications, many lenders are unlikely to treat the full amount as unrestricted income.

A lender may instead:

• remove the allowance and the child from servicing;
• use the payment to offset the child’s associated expenses;
• request a manual assessment; or
• assess whether another payment, such as Family Tax Benefit or Centrelink Carer Payment, can be used separately.

The applicant should provide the lender with the exact payment letter rather than describing the income generally as “foster income” or “Centrelink”.

What evidence may be required?

Useful documents include:

• the placement or care order;
• a letter from the relevant government department or care agency;
• a payment schedule;
• three to six months of bank statements;
• evidence of the applicant’s expected ongoing entitlement;
• confirmation of whether the placement is temporary, long term or permanent;
• details of the child’s age;
• evidence of any Centrelink Carer Payment or Carer Allowance;
• Family Tax Benefit statements; and
• a breakdown of additional care expenses.

Some lenders may also ask whether the payment would continue if the applicant moved house or changed employment.

The main point

Foster care and kinship care payments are not treated consistently across Australian lenders.

A state kinship allowance may be officially classified as a contribution towards the child’s costs rather than income. Some lenders exclude it, some use it only to offset the foster child’s expenses and a smaller number provide a pathway for using qualifying foster or carer income.

Eligibility for the Australian Government 5% Deposit Scheme does not override the participating lender’s income policy. The exact payment type, expected duration and treatment of the child as a dependant must all be assessed together.