EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (DEEWR) Determination 2008 (No. 2)
Summary
The Social Security Act 1991 prescribes rules for calculating income from financial investments. Because these rules deem a person to have received a certain rate of return on their financial investments, the rules are generally known as deeming rules. Under these rules the value of a customer's financial assets are added together and income is deemed on these assets using a “below threshold rate” and an “above threshold rate”. The first $41,000 of a single person’s financial assets ($68,200 for pensioner couples and $34,100 for allowee couples) is deemed to earn the below threshold rate, and the balance over this amount is deemed to earn the above threshold rate.
Background
Under section 1082 of the Social Security Act 1991 the Minister for Education, Employment and Workplace Relations determines the below threshold and above threshold rates. Between 20 March 2008 and 17 November 2008 the below threshold rate was 4 per cent and the above threshold rate was 6 per cent.
The Minister for Education, Employment and Workplace Relations has determined that the deeming rates will be decreased from 17 November 2008. The below threshold rate will be decreased to 3.5 per cent and the above threshold rate will also be decreased to 5 per cent.
The Determination sets out the below and above threshold rates at 3.5 per cent and 5 per cent, respectively, from 17 November 2008.
The reduction in the below and above threshold rates is being done so that the deeming rates reflect lower market returns following movements in financial markets since the deeming rates were last adjusted in March 2008.
Explanation of Provisions
Section 1 states that the name of the Determination is the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2008 (No.2).
Section 2 states that the Determination commences on 17 November 2008.
Section 3 revokes the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2008.
Section 4 contains a definition of the term “Act”.
Section 5 sets out the below threshold rate of 3 per cent for the purposes of subsection 1082 (1) of the Act.
Section 6 sets out the above threshold rate of 5 per cent for the purposes of subsection 1082 (2) of the Act.
Consultation
The Department of Families, Housing, Community Services and Indigenous
Affairs was consulted during the preparation of this determination. This was done to ensure a co-ordinated and consistent approach for calculating income from financial investments under income tests for social security payments.
Public consultation was seen as unnecessary as the instrument is beneficial to social security recipients. It reduces the income that social security recipients are deemed to receive from their financial investments, thereby lowering their incomes for the purposes of income tests for social security payments.
Regulatory Impact Analysis and Business Cost Calculator
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