A major determinant of economic wellbeing for most people is the level of income they and other family members in the same household receive. While income is usually received by individuals, it is normally shared between partners in a couple relationship and their dependent children. To a lesser extent, it may be shared with other children, other relatives and possibly other people living in the same household, for example through the provision of accommodation either free or at less than market price. This situation is more likely in the case of non-dependent children and other relatives with low levels of income of their own.

Even when there is no transfer of income between members of a household, nor provision of free or discounted accommodation, household members benefit from the economies of scale that arise from sharing a dwelling. Therefore the household is often used for the analysis of the levels and distribution of income.

For some analysis it is appropriate to use a statistical unit in which it can be assumed that a high degree of sharing of income, and other economic resources, takes place. A unit based on the degree of income sharing between couples and their dependent children may be more useful, in such cases, than one based on the income sharing with other of the household. The income unit serves this purpose.

The name of the variable is 'Income unit composition'.

The primary factor determining 'Income unit composition' is the assumption that particular groups of people within a household will pool their income and share the benefits. Any person not belonging to a multi-person income unit represents an income unit in their own right. The basis for identifying the income unit is 'Relationship in household'. For more information, see the 'Relationship in household' standard.

The variable 'income unit' is nominally defined as: 

• A group of two or more related people in the same household assumed to pool their income and savings and to share the benefits deriving from them equitably; or
• One person assumed to have sole command over their income, consumption and savings.

This definition is the basis of the operational definition of 'Income unit composition'.

The variable 'Income unit composition' is defined as:

• The differentiation of income units on the basis of the number of people in the income unit and the presence of dependent children.
• 'Income unit composition' is an attribute of the statistical unit 'income unit'.

Operationally, 'income unit' is defined as:

• A group of two or more people who are usually resident in the same household and are related to each other through a couple relationship and/or parent/dependent child relationship; or
• A lone person who is not party to either such relationship.

The operationalisation of 'Income unit composition' is:

• The allocation of people in households to categories of the 'Income unit composition' classification on the basis of their relationship to other members of the household.

The variable 'Income unit composition' applies to all income units.

'Income unit composition' requires the supporting variable 'Relationship in household'.

Multi-person income units comprise people within a family, each of whom is related to another by either a couple relationship or a parent/dependent child relationship. Any person not party to such a relationship, including non-dependent children, is treated as a separate income unit.

It is important to recognise these related points:

• Many Australian dwellings accommodate a single household, comprising a single family and a single income unit.
• While a family must comprise two or more people, an income unit (or a household) may comprise only one person.
• Certain variables, e.g. 'Tenure type', apply primarily to the counting unit 'income unit'. These can also apply by extension to the 'larger' units of 'family' and 'household'.

The concept of the income unit rests on two assumptions:

• There are certain family relationships where all income is pooled and shared between all those so related, who benefit equitably from access to their common financial resources.
• People not party to such a relationship have access to their own financial resources over which they exercise exclusive control.

An additional assumption underlies the operationalisation of the concept:

• The relationships about which the ABS makes those assumptions are those between partners in a couple relationship and between parents and their dependent children. In many cases this operational assumption may not be appropriate. For example, if young adults up to the age of 21 who are not full-time students and are unemployed are present (who are unlikely to have significant financial resources of their own), it may be more appropriate to use the household as the unit of analysis.

In ABS statistics, a dependent child is classified as either a child under 15 or a dependent student (i.e. a full-time student aged 15-24 living with his or her parents and with no child(ren) or partner of his or her own) irrespective of his or her financial dependency.

An operational constraint of household surveys is that the income unit, like the family, must comprise usual residents of the same household. There are, however, a number of circumstances that may result in parents and their financially dependent children living apart. Specifically, this occurs where:

• Full-time students live away from home, and
• Non-custodial parents provide for dependent children living in another household.

Income units are classified according to the following criteria: 

• whether they comprise one person or more than one person
• among those comprising more than one person, whether a couple relationship exists and
• among those where a couple relationship exists, whether any dependent children are present.

Note that one-parent income units always include dependent children. In a one parent family with non-dependent children only, each individual comprises a separate one-person income unit.

The standard classification of 'Income unit composition' is:

1 Couple only
2 Couple with dependent children
3 One parent with dependent children
4 One person

All income units can be coded to one of the substantive categories of the 'Relationship in household' data so residual categories and codes are not required.

A supplementary code of '0 Inadequately described' is provided for those cases where 'Relationship in household' data are insufficient to identify and classify the component income units.

The categories of the classification are defined as follows:

• Couple only income unit: an income unit comprising two partners in a couple relationship.
• Couple with dependent children income unit: an income unit comprising two partners in a couple relationship and all of their dependent children.
• One parent income unit: an income unit comprising a lone parent and all of their dependent children.
• One person income unit: an income unit comprising a person who is not party to either a couple or parent/dependent child relationship. Specifically this includes all persons identified by the 'Relationship in household' variable as a non-dependent child, an other related individual or a non-family member.

The classification applies to all income units.

'Income unit composition' is coded from data obtained from 'Relationship in household'. The rules and procedures for allocating individuals to income units are the same as those for identifying families which were explained in detail in the 'Family composition' standard, except that persons who are not in couple or one parent income units are not allocated to any form of 'Other family' income unit. Such persons form instead one person income units. The procedures are as follows:

Where a couple relationship is identified, the couple will form the nucleus of an income unit. If 'Relationship in household' data reveal the presence of one or more natural, adopted, step, or foster dependent children of that couple, the couple and the dependent children will be coded as a Couple with dependent children income unit. A couple without dependent children will be coded as a 'Couple only' income unit.

Once any couple relationships have been identified in the household, if there is a lone parent with one or more natural, adopted, step, or foster dependent children, that parent and the children will be coded as a 'One parent' income unit.

Any person in a household aged 15 or over who is not allocated to an income unit using these procedures will be coded as a 'One person' income unit. Specifically, non-dependent children of any age, lone parents without dependent children, other related individuals and non-family members in family households - and all persons in group households and lone person households - comprise 'One person' income units.

Any child under 15, who is not the natural, adopted, step or foster child of anyone in the household, is allocated to an income unit as a 'nominal child'. The ABS uses the concepts of the 'nominal child' and 'nominal parent' where to all intents and purposes a 'parent-child' relationship exists, to facilitate a more accurate and analytically useful picture of the arrangements that may exist in the household. Children under 15 who are not the natural, adopted, step or foster child of anyone in the household are allocated to an income unit in the same way as a 'nominal child' is allocated to a 'nominal parent' in family coding. See the 'Family composition' standard for more details. A nominal parent is allocated to a nominal child by applying the following rules in the order shown below. The role of nominal parent is given to:

• The nominal child's eldest sibling who is over the age of 25.
• The nominal child's closest non-sibling relative aged 25 or more. If necessary, relationships by lineage (vertical) take precedence over other types of relationships, e.g. a grandmother over an aunt, or an aunt over a cousin.
• Persons in a couple relationship.
• A female in preference to a male, e.g. an aunt over an uncle.
• The eldest person usually resident in the dwelling.

Where an unattached child under 15 is allocated to an income unit in accordance with the procedures detailed above, the child is treated in the same way as a natural, adopted, step or foster child. The composition of the nominal parent's income unit is then established in accordance with the procedures set out above. This may result in a 'Couple only' income unit becoming a 'Couple with dependent children' income unit or a 'One person' income unit becoming a 'One parent with dependent children' income unit.

In summary:

• Couple relationships are identified first. Each identified couple, along with their own dependent children, comprises a separate 'Couple only' or 'Couple with dependent children' income unit.
• Any lone parents and their own dependent children form separate 'One parent with dependent children' income units.
• Any other person aged 15 or over forms a separate 'One person' income unit.
• Children under 15 who are not the children of any couple or lone parent in the household are attached to an income unit as a nominal child as prescribed above.

Income unit composition is coded from 'Relationship in household' information and the recommended methodology and questionnaire modules are explained in the 'Relationship in household' standard. It may be necessary to identify an income unit reference person, using the same criteria described to identify Family and Household reference persons (see Appendix A of the 'Relationship in household' standard).

The standard input categories are:

The standard output categories for 'Income unit composition' are the same as the input categories:

As it is a single level classification, the categories may be grouped and subtotalled to suit different analytical purposes. For example:

or

Although all output stated above is standard, every standard output label used must have a Glossary definition.

The 'Income unit composition' classification is related to the following classifications:

• 'Relationship in household'.
• 'Household composition'.
• 'Family composition'.
• 'Social marital status'.

Changes to any of these classifications cannot be considered in isolation and all possible ramifications concerning the other classifications must be investigated before any changes are adopted.