EXPLANATORY STATEMENT

MILITARY REHABILITATION AND COMPENSATION (LUMP SUM RATE OF INTEREST) DETERMINATION 2016

EMPOWERING PROVISIONS

Subsection 79(3) of the Military Rehabilitation and Compensation Act 2004.

PURPOSE

The attached instrument (No. M8 of 2016) revokes and re-makes the Military Rehabilitation and Compensation (Determination of Rate of Interest) Determination 2006 (Instrument No. M18 of 2006) – “the instrument” – made by the then Minister for Veterans’ Affairs, Bruce Billson, on 6th July 2006.  On 1 October 2016 the instrument will “sunset” (expire) unless re-made. 

The Department of Veterans’ Affairs (DVA) has reviewed the instrument and found it is still required.  Accordingly the instrument has been re-made in essentially the same terms as the instrument it replaces.

The instrument is made under the Military Rehabilitation and Compensation Act 2004 (MRCA) which provides compensation payments for injury, disease or death caused by service in the Australian Defence Force.

Section 78 MRCA provides that a person may choose to receive compensation payments in the form of a lump sum.  Where a person chooses to receive a lump sum, subsection 79(1) MRCA requires that it be paid within 30 days after the date on which the Military Rehabilitation and Compensation Commission became aware of the choice.

If the lump sum is not paid within this time, subsection 79(2) MRCA requires the

Commonwealth to pay interest at a rate determined by the Minister for Veterans’ Affairs in writing under subsection 79(3) MRCA. 

The purpose of the attached instrument is to determine that the rate of interest for the purposes of subsection 79(3) MRCA is the weighted average yield of 90 day bank-accepted bills (or 3 months), as published by the Reserve Bank of Australia, settled immediately prior to the last day of the 30 day settlement period.

This formula is consistent with the interest rate formula in place for instruments administered by Comcare and DVA for interest on compensation payments made under Safety, Rehabilitation and Compensation Act 1988 (SRCA).

The attached instrument points to an interest rate that is published by the Reserve Bank of Australia. That interest rate may change from day to day.  It can be found at the following website address:

http://www.rba.gov.au/statistics/tables/index.html#interest-rates at Interest Rates and Yields – Money Market – Daily - F1 XLS. 

The spreadsheet at that link shows the latest daily rate under the column title “3-month BABs/NCDs” (Bank Accepted Bills/Negotiable Certificates of Deposit-3 months). The calculation of interest payable uses the latest daily rate in that column.

RETROSPECTIVITY

No. 

CONSULTATION

Section 17 of the Legislation Act 2003 requires the rule-maker to be satisfied that any consultation that is considered appropriate and reasonably practicable to undertake, has been undertaken.

The subject matter of the instrument is technical in nature in that it provides a basis for calculating the rate of interest in the rare event that a permanent impairment payment is not paid within the 30 day timeframe. It is in the same terms as the one it replaces. It does not change existing entitlements nor does it impose any additional obligation on any party.

The Department of Employment has been consulted as that Department administers a similar 

Lump Sum Interest Rate Determination under SRCA which has recently been remade in identical terms.  The nature of consultation with the Department of Employment was e mail correspondence.

In these circumstances, it is considered that the requirements of section 17 of the Legislation Act 2003 have been met.

DOCUMENTS INCORPORATED BY REFERENCE

Nil.

REGULATORY IMPACT

None.

HUMAN RIGHTS STATEMENT

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

The attached instrument does engage a human right or freedom recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview

The Military Rehabilitation and Compensation Act 2004 provides for compensation and other benefits to be provided for current and former members of the Defence Force who suffer a service injury or disease.

This instrument provides an administrative basis for calculating the rate of interest on the late payment of the lump sum.

Article 9 of the International Covenant on Economic, Social and Cultural Rights provides for the right of everyone to social security, including social insurance.

The interest rate in respect of a lump sum for compensation payments engages the right to social security by ensuring that, if a lump sum amount is due to a claimant under section 78 MRCA, that it be paid promptly or the claimant will be entitled to interest on that lump sum, as specified in this instrument.

Conclusion

This legislative instrument is compatible with human rights because, where it engages the right to social security, it encourages the prompt payment of an amount of compensation to a claimant or compensates for the late payment of that amount by awarding interest to the claimant in respect of the overdue amount.

Dan Tehan

Minister for Veterans’ Affairs

Rule-Maker