EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (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 person’s financial assets are added together and the person is deemed to receive income 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 can determine the below threshold and above threshold rates. Until the end of 19 March 2009, the below threshold rate is 3 per cent and the above threshold rate is 4 per cent.
The Minister for Education, Employment and Workplace Relations has determined that the deeming rates will decrease from 20 March 2009. The below threshold rate will decrease to 2 per cent and the above threshold rate will decrease to 3 per cent.
The Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2) (the Determination) sets out the below and above threshold rates at 2 per cent and 3 per cent, respectively, from 20 March 2009.
As responsibility for payments under the Social Security Act 1991 is shared between the Education, Employment and Workplace Relations portfolio and the Families, Housing, Community Services and Indigenous Affairs portfolio, the Minister for Families, Housing, Community Services and Indigenous Affairs will also make a determination under section 1082 of the Act to apply to payments for which she is responsible.
Explanation of Provisions
Section 1 of the determination states that the name of the determination is the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2).
Section 2 provides for the determination to commence on 20 March 2009.
Section 3 revokes the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 1).
Section 4 contains a definition of the term “Act”.
Section 5 sets out the below threshold rate of 2 per cent.
Section 6 sets out the above threshold rate of 3 per cent.
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 the income test in the Social Security Act 1991.
Public consultation was seen as unnecessary as the determination is beneficial to customers.
Regulatory Impact Analysis and Business Cost Calculator
This instrument does not require a Regulatory Impact Statement (RIS) and/or a Business Cost Calculator Figure. This determination is not regulatory in nature and will not have a direct impact on business activity.
Overview
The Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2) was introduced to address the need for adjusting the rates at which financial assets are deemed to earn income under the Social Security Act 1991. This Act, enacted in 1991, provides rules for calculating income from financial investments, commonly referred to as deeming rules. These rules add together the value of an individual's financial assets and deem income to be received on these assets using a below threshold rate and an above threshold rate. Initially, the below threshold rate was 3% and the above threshold rate was 4%, but these rates were set to decrease effective from 20 March 2009, to 2% and 3% respectively. The enactment of this determination by the Minister for Education, Employment and Workplace Relations ensures a coordinated approach to income calculation for financial assets under the Social Security Act 1991, with a shared responsibility between the relevant portfolios.
Scope and Application
The Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2) applies to individuals who receive benefits under the Social Security Act 1991, focusing on how their financial assets are assessed for income purposes. This Act affects single individuals, pensioner couples, and allowee couples by setting specific rates at which their financial investments are deemed to earn income. The determination outlines that the first $41,000 of a single person's financial assets will be deemed to earn a below threshold rate of 2 per cent, while the balance will earn an above threshold rate of 3 per cent, effective from 20 March 2009. This Act extends across the Commonwealth of Australia and is managed jointly by the Ministers for Education, Employment and Workplace Relations and Families, Housing, Community Services and Indigenous Affairs. The legislation does not specify exclusions or exemptions, and its scope is limited to the financial investment income calculations for social security purposes. The Act's application may be further extended or modified through subordinate instruments, though no such instruments are mentioned in the provided text.
Key Provisions
The main provisions of the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2) (the Determination) can be found in Sections 1 to 6. Section 1 identifies the name of the Determination, while Section 2 specifies that it commences on 20 March 2009. Section 3 revokes the previous Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 1). Section 4 provides a definition of the term “Act” which refers to the Social Security Act 1991. Sections 5 and 6 set out the new below threshold rate at 2 per cent and the above threshold rate at 3 per cent, respectively. These rates apply to the calculation of income from financial investments under the Social Security Act 1991.
The Determination imposes specific obligations on the parties governed by the Social Security Act 1991. Firstly, it requires that the value of a person’s financial assets be added together and deemed to earn income using the prescribed below and above threshold rates. Specifically, the first $41,000 of a single person’s financial assets will earn the below threshold rate, while any amount over this will earn the above threshold rate. For pensioner couples, the first $68,200 will earn the below threshold rate, and for allowee couples, the first $34,100 will earn this rate. This ensures that the calculation of income from financial investments is consistent and transparent.
Under this Determination, there are no direct offences or penalties outlined; however, the deemed income calculated in accordance with the below and above threshold rates may affect a person’s eligibility for social security benefits. Failure to accurately calculate and declare income from financial investments could potentially result in overpayment or underpayment of social security benefits, which may lead to repayment or debt to the government. The consequences of such breaches are governed by the Social Security Act 1991, rather than the Determination itself.
In conclusion, the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2) sets out the new below and above threshold rates for calculating income from financial investments under the Social Security Act 1991. This Determination imposes specific obligations on the parties governed by the Act, requiring them to accurately calculate and declare income from financial investments using the prescribed rates. While there are no direct offences or penalties outlined in the Determination, failure to comply with the requirements may result in overpayment or underpayment of social security benefits, which are governed by the Social Security Act 1991.