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2008-2009-2010
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
VETERANS' ENTITLEMENTS AMENDMENT
(INCOME SUPPORT MEASURES) BILL 2010
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Veterans' Affairs,
The Honourable Alan Griffin MP)
Table of Contents
Outline and Financial Impact
............................................................. ii
1. Short Title
.................................................................
......................... iii
2. Commencement
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................ iii
3. Schedule(s)
.................................................................
....................... iii
Schedule 1 - Amendments
Veterans' Entitlements Act 1986 1
VETERANS' ENTITLEMENTS AMENDMENT
(INCOME SUPPORT MEASURES) BILL 2010
OUTLINE AND FINANCIAL IMPACT
Outline
The Bill will give effect to a number of minor measures and amendments that
will further align veterans' entitlements law with social security law.
These minor measures and amendments will:
. remove redundant references and provisions relating to "benevolent
homes";
. exempt from the income test, payments made under a "Labour Market
Program" for expenses associated with part-time work experience;
. require the partners of persons claiming or receiving a service
pension or income support supplement to claim a comparable foreign
pension;
. change the treatment of arrears payment of comparable foreign pensions
so that instead of being assessed as income in the twelve month period
following the date of grant or confirmation of the comparable foreign
pension, it will be treated as periodical payments for the arrears
period. This aligns with the treatment of arrears payments of
comparable foreign pensions under the social security law; and
. clarify that the value of certain superannuation investments cannot be
disregarded for the purposes of the deeming rules for financial assets
or the asset deprivation rules.
Financial Impact
The amendments have a nil or negligible financial impact.
Veterans' Entitlements Amendment
(Income Support Measures) Bill 2010
Short Title Clause 1 sets out how the Act is to be cited.
Commencement Clause 2 provides a table that sets out the commencement
dates of the
various items of Schedule 1 to the Act.
Schedules Clause 3 provides that each Act that is specified in the
Schedule to this Act is amended or repealed as set out in
the applicable items in the Schedule concerned, and any
other item in a Schedule to this Act has effect according
to its terms.
This explanatory memorandum uses the following abbreviations:
'Social Security Act' means the Social Security Act 1991;
'Veterans' Entitlements Act' means the Veterans' Entitlements Act 1986;
Schedule 1 - Amendment of the Veterans' Entitlements Act 1986
Overview
The amendments made in this Schedule to various income support provisions
in the Veterans' Entitlements Act will further align veterans' entitlements
law with social security law.
Explanation of the items
Benevolent homes
Items 1, 4, 27 and 28 remove all references to a "benevolent home" from
section 5, subsection 5Q(1) and repeal Subdivision B of Division 14 of Part
IIIB containing sections 55B, 55D and 55E.
The provisions in Subdivision B of Division 14 of Part IIIB are applicable
to service pensioners and income support supplement recipients who are
"inmates of a benevolent home".
The provisions replicate those that had been incorporated in the
Repatriation Act 1920 since the 1930s. Benevolent homes had been set up as
charitable institutions to provide accommodation for invalid and aged
persons with funding also provided by the Commonwealth and state
governments.
The Social Security Act and the Veterans' Entitlements Act provided that
persons who were resident in a "benevolent home" were to have a portion of
their pension payments directed to the home.
With the last benevolent home ceasing to exist in 1994 amendments were made
to the Social Security Act by the Social Security Legislation Amendment
(Carer Pension And Other Measures) Act 1995 to remove most of the
references and provisions that referred to a "benevolent home".
Similar amendments were not made to the Veterans' Entitlements Act as there
were pensioners receiving a reduced pension on the basis that they were
formerly residents of a "benevolent home". There are now no pensioners
receiving a reduced pension on that basis and the provisions are redundant.
Item 28 repeals Subdivision B of Division 14 of Part IIIB (containing
sections 55B, 55D and 55E).
As a consequence the listing of the definition in section 5 and the
definition in subsection 5Q(1) are repealed by Items 1 and 4.
Item 27 is a formatting amendment to remove the now redundant heading to
Subdivision A of Division 14 of Part IIIB.
Commencement
Clause 2 provides that items 1, 4, 27 and 28 commence on the day the Act
receives Royal Assent.
Labour Market Programs
Item 2 amends paragraph 5H(8)(v) by updating the reference to the "Labour
Force" Programs to a reference to the current title of "Labour Market"
Programs.
The term "Labour Market Programs" refers to the various programs funded and
administered by the Department of Education, Employment and Workplace
Relations that are designed to help meet the needs of job seekers while
looking for and starting employment.
The services provided include training for unemployed people, assistance to
employers and individuals, support services and formal vocational training.
The programs are currently delivered as part of the services provided by
the agencies that are contracted employment services under the national
employment services system, Job Services Australia.
Under the existing legislation, payments associated with expenses for part-
time training under a Labour Market Program are exempt from the veterans'
entitlements income test; however, payments associated with expenses for
part-time work experience under a Labour Market Program are not exempt.
Both these types of payment are exempt from the social security income
test.
These amendments will update the references to the pension categories
associated with the exemption for part-time training and will exempt, from
the veterans' entitlements income test, payments associated with expenses
for part-time work experience under a Labour Market Program. This will
align the treatment of these payments with the Social Security Act.
Item 3 repeals paragraph 5H(8)(w) and substitutes a new paragraph. New
paragraph 5H(8)(w) will exempt, from the veterans' entitlements income
test, payments received for expenses associated with the person's
participation in part-time training under a Labour Market Program. The
exemption will apply to a person who is receiving a service pension, income
support supplement, social security pension or a social security benefit.
New paragraph 5H(8)(w) will also exempt, from the veterans' entitlements
income test, payments received for expenses associated with the person's
participation in part-time work experience under a Labour Market Program.
The exemption will apply to a person who is receiving a service pension,
income support supplement, social security pension or a social security
benefit.
Commencement
Clause 2 provides that items 2 to 3 commence on the day the Act receives
Royal Assent.
Comparable foreign pension - partner to obtain
The Veterans' Entitlements Act currently provides that persons claiming a
service pension or income support supplement are also required, if
entitled, to claim a comparable foreign pension. However, the claimant's
partner is not required to do so, if that partner is not claiming a service
pension or income support supplement in their own right.
The same situation does not arise under the social security law, where the
partner of a claimant for an income support payment must, if entitled,
claim a comparable foreign pension, regardless of whether or not the
partner of the claimant is claiming a social security pension in their own
right.
Where the non-pensioner partner claims and receives a comparable foreign
pension, the Social Security pensioner's payments may be reduced, or
cancelled, due to the additional income of the partner being assessed under
the joint income test.
However, couples receiving a social security pension and a comparable
foreign pension benefit from having a higher overall pension income through
the combination of social security pension and the comparable foreign
pension.
In contrast, the Veterans' Affairs pensioner whose non-pensioner partner
does not claim a comparable foreign pension will receive a higher rate of
service pension or income support supplement but no comparable foreign
pension income, so the overall income of the couple may be lower.
Item 5 inserts new subsection 36JE(1A) after subsection 36JE(1). New
subsection 36JE(1A) enables the Secretary to give a notice to a person who
has claimed an age service pension, requiring the person's partner to take
reasonable action to obtain a comparable foreign pension if the partner may
be entitled to a comparable foreign pension.
The heading to section 36JE is altered by inserting "or claimant's partner"
after "claimant".
Items 6 and 7 make consequential amendments to subsections 36JE(2) and (4)
to insert references to new subsection 36JE(1A).
Item 8 inserts a reference to a "claimant's partner" in paragraph
36JE(4)(b). Thus, the Repatriation Commission may reject a claim for age
service pension if the claimant's partner fails to take reasonable action
to obtain a comparable foreign pension within the period specified in the
notice given under new subsection 36JE(1A).
Item 9 inserts new subsection 37JE(1A) after subsection 37JE(1). New
subsection 37JE(1A) enables the Secretary to give a notice to a person who
has claimed an invalidity service pension, requiring the person's partner
to take reasonable action to obtain a comparable foreign pension if the
partner may be entitled to a comparable foreign pension.
The heading to section 37JE is altered by inserting "or claimant's partner"
after "claimant".
Items 10 and 11 make consequential amendments to subsections 37JE(2) and
(4) to insert references to new subsection 37JE(1A).
Item 12 inserts a reference to a "claimants partner" in paragraph
37JE(4)(b). Thus, the Repatriation Commission may reject a claim for
invalidity service pension if the claimant's partner fails to take
reasonable action to obtain a comparable foreign pension within the period
specified in the notice given under new subsection 37JE(1A).
Item 13 inserts new subsection 38JE(1A) after subsection 38JE(1). New
subsection 38JE(1A) enables the Secretary to give a notice to a person who
has claimed a partner service pension, requiring the person's partner to
take reasonable action to obtain a comparable foreign pension if the
partner may be entitled to a comparable foreign pension.
The heading to section 38JE is altered by inserting "or claimant's partner"
after "claimant".
Items 14 and 15 make consequential amendments to subsections 38JE(2) and
(4) to insert references to new subsection 38JE(1A).
Item 16 inserts a reference to a "claimants partner" in paragraph
38JE(4)(b). Thus, the Repatriation Commission may reject a claim for
partner service pension if the claimant's partner fails to take reasonable
action to obtain a comparable foreign pension within the period specified
in the notice given under new subsection 38JE(1A).
Item 17 inserts new subsection 45NF(1A) after subsection 45NF(1). New
subsection 45NF(1A) enables the Secretary to give a notice to a person who
has claimed income support supplement, requiring the person's partner to
take reasonable action to obtain a comparable foreign pension if the
partner may be entitled to a comparable foreign pension.
Items 18 and 19 make consequential amendments to subsections 45NF(2) and
(4) to insert references to new subsection 45NF(1A).
Item 20 inserts a reference to a "claimants partner" in paragraph
45NF(4)(b). Thus, the Repatriation Commission may reject a claim for
income support supplement if the claimant's partner fails to take
reasonable action to obtain a comparable foreign pension within the period
specified in the notice given under new subsection 45NF(1A).
Item 23 inserts new subsection 54BA(1A) after subsection 54BA(1). New
subsection 54BA(1A) enables the Secretary to give a notice to a person who
is receiving a service pension or income support supplement, requiring the
person's partner to take reasonable action to obtain a comparable foreign
pension if the partner may be entitled to a comparable foreign pension.
A note at the end of the subsection advises that section 56EB sets out the
consequences of failing to comply with the notice.
The heading to section 54BA is altered by inserting "or the person's
partner" after "paid".
Items 24 and 25 make consequential amendments to subsections 54BA(2) and
56EB(1) to insert references to new subsection 54BA(1A).
Item 26 inserts a reference to a "person's partner" in paragraph
56EB(1)(b). Thus, the Repatriation Commission may cancel or suspend a
person's service pension or income support supplement if the recipient's
partner fails to take reasonable action to obtain a comparable foreign
pension within the period specified in the notice given under new
subsection 54BA(1A).
It is intended that, in relation to persons receiving service pension and
income support supplement at the time item 23 takes effect, the person's
partner will be given 6 months to claim any comparable foreign pension to
which the person may be entitled. This 6 month period will be specified in
the notice issued under new subsection 54BA(1A).
Item 34 inserts an application provision providing that items 5, 9, 13 and
17 apply to claims made on or after the commencement of those items. That
is, notices may only be issued under new subsections 36JE(1A), 37JE(1A),
38JE(1A) and 45NF(1A) in relation to claims for service pension or income
support supplement made on or after the commencement of those new
subsections.
Comparable foreign pension - treatment of arrears payments
Recipients of a comparable foreign pension often receive initial payments
in the form of a lump sum as claims for the pensions are usually made some
time after the person becomes eligible for the payment.
Under the Social Security Act, any lump sum payment of arrears of a
comparable foreign pension is treated as periodical payments for the period
of the arrears. For example, if a person receives a payment for two years
of arrears, the arrears payment is assessed as income over the two year
period to which it applied. The amount, if any, by which the social
security payment should have been reduced over that period is treated as a
debt due to the Commonwealth under section 1228A of the Social Security
Act.
The treatment of lump sums under the Veterans' Entitlements Act is
different as lump sums of comparable foreign pension are treated as income
in the twelve month period from the date of the grant of the comparable
foreign pension or the date of confirmation of the comparable foreign
pension, whichever is the later.
The effect of that treatment is that the person's service pension or income
support supplement is prospectively reduced or cancelled depending on the
calculation of income over that twelve month period.
The differences in the treatment of lump sums of comparable foreign pension
under the Social Security and Veterans' Entitlements Acts arose from the
amendments to the Social Security Act made by the Family and Community
Services and Veterans' Affairs Legislation Amendment (2003 Budget and Other
Measures) Act 2003 which inserted new section 1228A into the Social
Security Act.
The purpose of that amendment was to align the treatment of lump sums of
comparable foreign pension from countries which were not a party to a
social security agreement with the treatment of lump sums received from
countries who are a party to a social security agreement with Australia.
With the existing differential treatment of these payments under the two
Acts, under some circumstances, a person may be better off by being
assessed under the Social Security Act and in other circumstances a person
may be better off by being assessed under the Veterans' Entitlements Act.
These changes will align the treatment of arrears of comparable foreign
pension under the Veterans' Entitlements Act with that under the Social
Security Act.
This change is primarily beneficial as the majority of cases will benefit
from the changed treatment of arrears payments of comparable foreign
pensions. Furthermore, the alignment of the treatment of these arrears
payments with social security law will create consistency and remove the
opportunity for pensioners to change pension regimes to potentially avoid
the income test in relation to the arrears payment.
Item 29 inserts new section 204 relating to the recovery of overpayments of
service pension or income support supplement payable to persons who, or
whose partner have, subsequently received lump sum payments of a comparable
foreign pension.
The amendment to insert new section 204 will remove any incentive for a
person to transfer eligibility for an equivalent pension from one of the
Acts to the other.
New section 204 is applicable in the circumstances where service pension or
income support supplement was payable to a person for a particular period
and the person or the person's partner received a lump sum of comparable
foreign pension for the same period.
It provides that the amount by which the service pension or income support
supplement would have been reduced if the lump sum had been received as
periodical payments during the period is to be treated as a debt due by the
person to the Commonwealth.
The section also provides that section 46A (which provides for certain lump
sums to be treated as income for a period of 12 months from receipt) will
not apply to the person in respect of the lump sum of comparable foreign
pension.
The amendment to insert new paragraph 205(1)(fa) (by item 30) inserts a
reference to the debt incurred by a person under new subsection 204(2).
Paragraph 205(2)(b), paragraph (c) of the definition of "excluded amount"
in subsection 205(8) and paragraph (d) of the definition of "recoverable
amount" in subsection 205(8) are amended (by items 31 to 33 respectively)
to insert references to new paragraph 205(1)(fa).
Item 36 inserts an application provision concerning the recovery of debts
relating to payments of comparable foreign pension.
It provides that new section 204 will be applicable in relation to lump
sums paid on or after the commencement of the item (the day after Royal
Assent) whether or not the lump sum is payable in respect of a period
before, on or after the commencement of the item.
Commencement
Clause 2 provides that items 1 to 20, 23 to 26 and 34 commence on the day
the Act receives Royal Assent.
Clause 2 also provides that items 29 to 33 and 36 commence on the day after
the Act receives Royal Assent.
Disregarded superannuation assets
Section 52AA of the Veterans' Entitlements Act provides that the value of
certain superannuation investments is to be disregarded for the purposes of
the Act if the superannuation investment is of a type or class which has
been specified in a determination made by the Minister for Veterans'
Affairs.
A determination made under the section will not have any effect where an
asset is the subject of the asset deprivation rules or is held by a
participant in the pension loan scheme.
The discretion is usually sought by those persons who are unable to access
any part of their superannuation fund investment after they have reached
pension age on the basis of the applicable legislation or the
superannuation fund rules. Where the discretion is applicable the value of
their investment is disregarded for the purpose of the application of the
assets test.
The amendment made by item 21 to subsection 52AA(1) inserts a reference to
"Division 3" of Part IIIB in the list of provisions for which a
determination that the asset is to be disregarded will not have any effect.
The provisions of Division 3 concern the determination of deemed income
attributable to the financial assets that are held by a person.
The amendment made by item 22 insert a reference to sections 52JA, 52JB,
52JC and 52JD (located in Subdivision BB of Division 11 of Part IIIB) in
the list of provisions that apply the asset deprivation rules and for which
a determination that the asset is to be disregarded will not have any
effect.
The asset deprivation rules are applicable where assets are disposed of for
less than adequate consideration. Subsection 52AA(1) currently excludes
assets subject to the asset deprivation rules as set out in sections 52FA,
52G, 52GA and 52H. Those rules are located in Subdivision BA of Division
11 of Part IIIB and are applicable to certain disposals made before 1 July
2002. Sections 52JA, 52JB, 52JC and 52JD (located in Subdivision BB of
Division 11 of Part IIIB) apply to disposals made on or after 1 July 2002.
The amendments rectify an oversight made at the time when the amendments
which inserted section 52AA were made which failed to include references to
the deeming provisions of Division 3 of Part IIIB and the asset deprivation
rules set out in Subdivision BB of Division 11 of Part IIIB.
Item 35 is an application provision concerning the amendments to subsection
52AA(1) made by items 21 and 22.
Subclause 35(1) provides that the amendment made by item 21 excluding
assets subject to the deeming rules in Division 3 is applicable in working
out the value of a person's assets on or after the commencement of the
item.
Subclause 35(2) provides that the amendment made by item 22 excluding
assets subject to the asset deprivation rules in Subdivision BB of Division
11 is applicable in working out the value of a person's assets on or after
the commencement of the item where the relevant disposition has occurred on
or after the commencement of the item.
Commencement
Clause 2 provides that items 21, 22 and 35 commence on the day the Act
receives Royal Assent.