EXPLANATORY STATEMENT

Military Rehabilitation and Compensation (Payment into Bank or Foreign Corporation Account) Specification 2011

EMPOWERING PROVISION

Subsection 430(3C) of the Military Rehabilitation and Compensation Act 2004 (the Act).

PURPOSE

The attached instrument (M7/2011) is a legislative instrument made under subsection 430(3C) of the Act and sets out the circumstances in which a person’s compensation under the Act must be paid to the credit of an account with a bank or to the credit of an account with a foreign corporation that takes money on deposit (account).  The circumstances are:

• the compensation is within a particular category of compensation (set out below); and
• the compensation is to be paid to the person as a lump sum.

Subsection 430(3B) of the Act provides that where compensation is paid to a person in the circumstances in the attached instrument, the account to which it is paid must be nominated and maintained by the person (which may be an account maintained by the person jointly or in common with another person).

The categories of compensation are:

(a) permanent impairment compensation, including interest, payable under subsections 79(1) and (2) of the Act;

(b) permanent impairment compensation payable                                            under section 80 of the Act;

(c) incapacity compensation payment payable                               under section 138 of the Act;

(d) compensation for wholly dependent partner payable under paragraph 234(1)(a) or subparagraph 234(1)(b)(i) of the Act;

(e) compensation payment for wholly dependent                              partner under section 242 of the Act, the amount of                             which is specified under section 243 of the Act;

(f) compensation for eligible young person under                section 251 of the Act, the amount of which is                             specified under section 252 of the Act;

(g) compensation for eligible young person under section 255 of the Act, the amount of which is specified under section 256 of the Act;

(h) compensation for dependant under                  section 262 of the Act, the amount of which is specified under section 263 of the Act;

(i) funeral compensation under section 266 of the Act where the compensation is payable to a dependant of the deceased member, the amount of which is specified under section 267 of the Act.

By paying the relevant lump sum compensation monies of a person (beneficiary) into an account maintained by the beneficiary, the Department of Veterans’ Affairs (DVA), on behalf of the Military Rehabilitation and Compensation Commission, avoids the situation where it is paying a beneficiary’s lump sum compensation to a third-party such as a solicitor, even though the beneficiary may have directed the compensation be paid to a third-party.

The Parliament, by enacting the provisions of the Act that require DVA to pay a beneficiary’s compensation into an account maintained by the beneficiary (subsections 430(3A)-430(3C)), intended to safeguard the compensation, as far as practical, from deductions beyond the control of the beneficiary and to ensure the beneficiary had access to the monies as soon as possible. 

Where the compensation first passes through the hands of a solicitor, deductions for fees/disbursements may be made, which may be unreasonable, and there may be an unreasonable delay in the monies reaching the beneficiary which could financially disadvantage the beneficiary.

The new approach (payment directly into a beneficiary’s account) potentially avoids these problems and complements the provision of the Act (section 425) that makes a compensation payment inalienable in certain circumstances – i.e. protects it from assignment, set-off or attachment.

In making subsections 430(3A)-430(3C), Parliament overturned a decision of the Queensland Supreme Court in Hansen v Military Rehabilitation and Compensation Commission which found that section 430 of the Act, in the form it existed at the time, did not require DVA, on behalf of the Military Rehabilitation and Compensation Commission, to pay a beneficiary’s lump sum compensation to the credit of an account maintained by the beneficiary at a bank and that DVA, on behalf of the Military Rehabilitation and Compensation Commission, could, at the direction of the beneficiary, pay the lump sum compensation to the credit of a bank account maintained by a solicitor:

http://www.austlii.edu.au/au/cases/qld/QSC/2007/360.html

Because the court decision was at odds with the way the Military Rehabilitation and Compensation Commission considered section 430 should operate i.e. to provide an additional safeguard for a beneficiary’s compensation by enabling a beneficiary to control it in the first instant, the Commission took steps to have the Act amended.

The attached instrument, in conjunction with section 430 of the Act is not intended, to any extent it could, to impinge on the ability of the Military Rehabilitation and Compensation Commission to appoint a trustee of a person’s compensation under section 432 of the Act nor on the ability of DVA to pay the person’s compensation to that trustee under section 433 of the Act.

RETROSPECTIVE

No.  The legislative instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.

CONSULTATION

None because the instrument is beneficial and, in the interests of safeguarding the compensation of beneficiaries, the Military Rehabilitation and Compensation Commission wanted to have it made as quickly as possible.

DOCUMENTS INCORPORATED-BY-REFERENCE

No.

FURTHER EXPLANATION

Attachment A.

Attachment A

Items    Explanation

[1] sets out the name of the instrument.

[2] provides that the instrument commences on the day after it is registered on the Federal Register of Legislative Instruments.

[3] is a definition provision.

[4] specifies, for the purposes of subsection 430(3A) of the Act, the circumstances when a person’s compensation under the Act must be paid to the credit of an account nominated and maintained by the person (including with another person) at a bank or a foreign corporation that takes money on deposit. 

 Those circumstances are that the compensation falls within a category of compensation set out in section [4] and is to be paid to the person as a lump sum.

The Note to section [4] makes it clear that the attached instrument is not intended to affect the operation of sections 432 and 433 of the Act.  Under these provisions the Military Rehabilitation and Compensation Commission may appoint a trustee of a beneficiary’s compensation and the compensation is to be paid to that trustee.