EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (DEEWR) Determination 2013 (No. 1) (the Determination)
Summary
The Social Security Act 1991 (the Act) prescribes rules for calculating income from financial investments. These 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 $45,400 of a single person’s financial assets (or $75,600 for pensioner couples and $37,800 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 Act, the below threshold and above threshold rates for the purposes of Division 1B of Part 3.10 of the Act are determined, by legislative instrument, by the Minister. From 20 March 2010 until the commencement of this instrument, the below threshold rate is 3 per cent and the above threshold rate is 4.5 per cent.
The attached Determination sets out the below and above threshold rates, at 2.5 per cent and 4 per cent, respectively, from 20 March 2013.
As responsibility for payments under the Act is shared between the Minister for Employment and Workplace Relations, the Minister for Families, Community Services and Indigenous Affairs, and the Minister for Tertiary Education, Skills, Science and Research, each Minister makes a determination under section 1082 of the Act to apply to payments for which they are responsible.
Explanation of provisions
Sections 1 and 2 of the Determination are mechanical provisions that provide for the name of the instrument and its commencement, respectively.
Section 3 revokes the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2010 (No. 1).
Section 4 provides that ‘Act’ means the Social Security Act 1991.
Section 5 sets out the below threshold rate of 2.5 per cent.
Section 6 sets out the above threshold rate of 4 per cent.
Consultation
The Department of Families, Housing, Community Services and Indigenous Affairs and the Department of Industry, Innovation, Science, Research and Tertiary Education were consulted during the preparation of the Determination. This was done to ensure a co‑ordinated and consistent approach for calculating income from financial investments under the income test.
This amendment is of a minor technical nature and so public consultation was not undertaken.
Regulatory Impact Analysis
The Determination does not require a Regulatory Impact Statement nor a Business Cost Calculator Figure. The Determination is not regulatory in nature, will not impact on business activity and will have no, or minimal, compliance costs or competition impact.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
This Legislative Instrument is the Social Security (Deeming Threshold Rates) (DEEWR) Determination 2013 (No. 1)
This Legislative Instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Overview of the Legislative Instrument
This legislative instrument will have the effect of changing the deeming rates from 3 per cent and 4.5 per cent for the lower and upper rates respectively, to 2.5 and 4 per cent. The deeming rates are used to assess income from financial investments for social security and Veterans’ Affairs pension/allowance purposes. The rates assume that financial investments are earning a certain rate of income, regardless of the amount of income they are actually earning. If pensioners earn more than these rates, the extra income is not assessed.
The legislative instrument may affect the rate at which individuals receive social security and Veterans’ Affairs pensions and allowances.
Human rights implications
This legislative instrument does not engage any of the applicable rights or freedoms.
Conclusion
This legislative instrument is compatible with human rights as it does not raise any human rights issues.
The Hon Bill Shorten MP, Minister for Employment and Workplace Relations