EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (DEEWR) Determination 2010 (No. 1)
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 $42,000 of a single person’s financial assets ($70,000 for pensioner couples and $35,000 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 2010, the below threshold rate is 2 per cent and the above threshold rate is 3 per cent.
The Social Security (Deeming Threshold Rates) (DEEWR) Determination 2010 (No. 1) (the Determination) sets out the below and above threshold rates at 3 per cent and 4.5 per cent, respectively, from 20 March 2010.
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 2010 (No. 1).
Section 2 provides for the determination to commence on 20 March 2010.
Section 3 revokes the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2009 (No. 2).
Section 4 contains a definition of the term “Act”.
Section 5 sets out the below threshold rate of 3 per cent.
Section 6 sets out the above threshold rate of 4.5 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) nor 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 2010 (No. 1) was enacted to address the need for updated rates under the deeming rules outlined in the Social Security Act 1991. These deeming rules calculate the income derived from financial investments, affecting the eligibility and amount of social security benefits. The Act specifies different rates for financial assets below and above certain thresholds, and the 2010 Determination updated these rates to 3 per cent and 4.5 per cent, respectively, effective from 20 March 2010. This change was made to ensure a coordinated and consistent approach in calculating income from financial investments under the income test provisions of the Act. The determination was developed following consultation with the Department of Families, Housing, Community Services and Indigenous Affairs, and it was deemed not to require a Regulatory Impact Statement or a Business Cost Calculator, as it does not impose regulatory burdens on businesses.
Scope and Application
The Social Security (Deeming Threshold Rates) (DEEWR) Determination 2010 (No. 1) applies to individuals who are subject to the deeming rules under the Social Security Act 1991, impacting how their financial assets are assessed for the purposes of social security payments. The Act primarily concerns the calculation of income from financial investments, deeming certain rates of return on these assets for individuals, with distinct rates for amounts held below and above specified thresholds. The determination specifies that, from 20 March 2010, the below threshold rate is set at 3 per cent, while the above threshold rate is set at 4.5 per cent. These rates apply to single individuals, pensioner couples, and allowee couples, with different thresholds for each category. The legislation's jurisdiction extends across Australia, as the responsibility for social security payments is shared between federal portfolios, and the determination is made under section 1082 of the Social Security Act 1991. The determination does not require a Regulatory Impact Statement or a Business Cost Calculator as it is not considered regulatory and does not directly impact business activities.
Key Provisions
The Social Security (Deeming Threshold Rates) (DEEWR) Determination 2010 (No. 1) sets forth specific rates for calculating income from financial investments under the Social Security Act 1991. Section 5 of the Determination stipulates that the below threshold rate is 3%, applicable to the first $42,000 of a single person's financial assets, $70,000 for pensioner couples, and $35,000 for allowee couples. Section 6, on the other hand, establishes the above threshold rate at 4.5%, applicable to any amount exceeding the specified thresholds. These rates are designed to deem a certain rate of return on financial investments, with the total value of a person’s financial assets being added together to calculate the income.
The Act imposes obligations on individuals and entities to accurately calculate their income from financial investments using the prescribed rates. For instance, under section 1082 of the Social Security Act 1991, the Minister determines these rates, ensuring consistency and fairness in the deeming process. The Determination, effective from 20 March 2010, mandates that these rates be applied to financial assets in accordance with the specified thresholds, ensuring that all relevant parties comply with the stipulated rules.
In terms of consequences for non-compliance, the Determination does not explicitly outline specific offences or penalties. However, inaccuracies in the calculation of income from financial investments can lead to incorrect assessments of eligibility for social security benefits, potentially resulting in overpayments or underpayments. Such errors might be subject to review and rectification by the relevant authorities, which could include requiring repayment of any overpaid benefits. The exact consequences of non-compliance would be governed by the broader provisions of the Social Security Act 1991 and any associated regulations or guidelines.