EXPLANATORY STATEMENT
Safety, Rehabilitation and Compensation (Defence-related Claims) (Weekly Interest on the Lump Sum) Notice 2021 (Instrument 2021 No. M5)
EMPOWERING PROVISION
Subsection 21(5) of the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA).
PURPOSE
The attached instrument (Instrument 2021 No. M5) specifies the rate which is used for the purposes of the definition of “weekly interest on the lump sum” in the Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 (DRCA). The specified rate of interest is used to calculate the amount that is deemed to accrue on the (superannuation) lump sum of retired ADF members who are in receipt of compensation under the DRCA. The weekly incapacity payment to which the veteran is entitled is reduced by the deemed amount of interest.
Subsection 21(5) of the DRCA allows the Minister to specify the rate that applies for a period of 12 months commencing on 1 July in any year, for the purposes of the definition of “weekly interest on the lump sum” in subsection 21(3) and subsection 21A(3).
Section 21 of the DRCA applies when an injured Australian Defence Force (ADF) member has received a lump sum superannuation benefit as a result of retirement. Section 21A of the DRCA applies when the injured ADF member has received both a lump sum superannuation benefit and superannuation pension following retirement. In both cases, the weekly amount of the incapacity benefit to which the member is entitled is reduced by the weekly interest on the lump sum.
The weekly interest amount is calculated by multiplying the value of the lump sum benefit by the interest rate specified by the Minister, by this instrument, and dividing the result by 52.
This instrument specifies the rate of 1.01 per cent as the applicable interest rate for the period 1 July 2021 to 30 June 2022.
This rate has been derived by obtaining the daily 10 year Government Bond rates from the Reserve Bank of Australia, averaging them for the period 1 April 2020 to 31 March 2021 and rounding to two decimal places. Over this period, the average 10 year Government Bond rate has been calculated to be 1.01 per cent.
This instrument specifies the same interest rate as is specified under an equivalent instrument made for the same period under the Safety, Rehabilitation and Compensation Act 1988 (SRCA) ( the Safety, Rehabilitation and Compensation (Weekly Interest on the Lump Sum) Instrument 2021).
The SRCA establishes the Commonwealth workers’ compensation and rehabilitation scheme for employees of the Commonwealth, Commonwealth authorities and licensed corporations. Prior to 12 October 2017, members of the ADF were covered by the SRCA.
The instrument is taken to have commenced on 1 July 2021 and will be revoked on 30 June 2022.
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.
Consultation was undertaken with the Scheme Policy and Design Branch, Comcare, Attorney-General’s Department to ensure a consistent rate to the rate specified in the instrument under equivalent provisions of the SRCA.
Routine specification of the interest rate to be applied on the (superannuation) lump sum has been determined in accordance with a well-established method, the Government Bond rates, for a number of years. This method of calculating the weekly interest rate has not changed and is well known.
Further consultation was not considered necessary as the proposal is minor in nature and does not have regulatory impacts on businesses, community organisations or individuals.
In these circumstances it is considered that the requirements of section 17 of the Legislation Act 2003 have been met.
RETROSPECTIVITY
Not applicable.
DOCUMENTS INCORPORATED BY REFERENCE
None.
REGULATION IMPACT STATEMENT
The Office of Best Practice Regulation was consulted by Comcare regarding the SRCA equivalent of this instrument and the indication was that a Regulation Impact Statement was not required (OBPR ID: 20920).
FURTHER EXPLANATION OF PROVISIONS
See: Attachment A
HUMAN RIGHTS STATEMENT
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
This legislative instrument is compatible with the human rights and freedoms recognised or declared by the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Human rights implications
Article 9 of the International Covenant on Economic, Social and Cultural Rights provides for the right of every one to social security, including social insurance. General Comment 19 by the Committee on Economic, Social and Cultural Rights elaborates on Article 9, stating that the ‘States parties should … ensure the protection of workers who are injured in the course of employment or other productive work’.[1] Workers’ compensation is analogous to social insurance in that it provides payment of wages and medical costs to employees for injuries occurring as a result of their employment.
Overview
The purpose of this legislative instrument is to specify the annual rate of weekly interest deemed to accrue on the (superannuation) lump sum of retired ADF members who are in receipt of compensation under the DRCA. Where a retired injured ADF member has received a lump sum benefit under a superannuation scheme, the weekly amount of the incapacity benefit payable under section 21 or 21A is reduced by the weekly interest on the lump sum.
The instrument specifies a rate of 1.01 per cent per annum for the period 1 July 2021 to 30 June 2022 as the interest on the lump sum. The calculation of the rate of the weekly interest on the lump sum has been determined in accordance with a well-established method, the Government Bond rates. This method has been used to determine the rate of the weekly interest on the lump sum for the purposes of the SRCA for the past ten years and is considered to conservatively reflect interest rates able to be earned on long term investments.
Conclusion
The attached instrument is compatible with human rights.
Minister for Veterans’ Affairs
Rule-Maker
Attachment A
FURTHER EXPLANATION OF PROVISIONS
Section 1
This section provides that the name of the instrument is the Safety, Rehabilitation and Compensation (Defence-related Claims) (Weekly Interest on the Lump Sum) Notice 2021.
Section 2
This section provides that the instrument is taken to have commenced on 1 July 2021.
Section 3
This section provides that the instrument is revoked on 30 June 2022.
Section 4
This section sets out the primary legislation that authorises the making of the instrument, namely, subsection 21(5) of the DRCA.
Section 5
This section specifies the rate of interest for the purposes of the definition of weekly interest on the lump sum in subsections 21(3) and 21A(3) of the DRCA. The specified rate is 1.01 per cent per annum.
[1] Committee on Economic, Social and Cultural Rights, General Comment 19: The Right to Social Security (art. 9), U.N. Doc E/C.12/GC/19 (2008), [17].