EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) Determination (DEST) 2007
Summary
The Social Security Act 1991 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 $38,400 of a single person’s financial assets ($63,800 for pensioner couples and $31,900 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, Science and Training determines the below threshold and above threshold rates in respect of the social security payments administered under the Education, Science and Training portfolio. Until 20 March 2007 the below threshold rate is 3% and the above threshold rate is 5%.
The Minister for Education, Science and Training, the Minister for Families, Community Services and Indigenous Affairs and the Minister for Employment and Workplace Relations have determined that the deeming rates would be increased from 20 March 2007. The ‘below threshold’ rate would be increased to 3.5% and the ‘above threshold’ rate would also be increased to 5.5%.
The attached determination sets out the below and above threshold rates at 3.5% and 5.5%, respectively, from 20 March 2007.
Explanation of Provisions
Section 1 of the instrument states the name of the instrument.
Section 2 states that the instrument commences on 20 March 2007.
Section 3 contains a definition of the term “Act”.
Section 4 revokes the Social Security (Threshold Rates) Determination 2004 (No. 1).
Section 5 sets out the below threshold rate of 3.5%.
Section 6 sets out the above threshold rate of 5.5%.
Consultation
The Department of Families, Community Services and Indigenous Affairs and the Department of Employment and Workplace Relations were 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.
This instrument is beneficial to customers because it increases the thresholds for calculating income. Public consultation was therefore seen as unnecessary.
Regulatory Impact Analysis and Business Cost Calculator
The Office of Best Practice Regulation has confirmed that a Regulatory Impact Statement and a Business Cost Calculator are not required as the proposal does not have a significant impact on business or individuals, nor on the economy. The proposal also does it restrict competition. The Office of Best Practice Regulation Regulatory Impact Statement identification number is 9031.
Overview
The Social Security (Deeming Threshold Rates) Determination (DEST) 2007, enacted on 20 March 2007, was introduced to update the rates at which income from financial investments is deemed for the purposes of calculating social security payments under the Social Security Act 1991. This legislation was enacted by the Minister for Education, Science and Training, in collaboration with the Minister for Families, Community Services and Indigenous Affairs and the Minister for Employment and Workplace Relations, to address the need for revised deeming rates that reflect changes in economic conditions and policy objectives aimed at ensuring a coordinated and consistent approach across different social security portfolios. The primary policy objective behind this determination was to adjust the rates at which income from financial investments is calculated to ensure that the income test remains fair and effective in targeting social security benefits appropriately.
Scope and Application
The Social Security (Deeming Threshold Rates) Determination 2007 applies to individuals and couples receiving social security payments under the portfolios of Education, Science and Training, Families, Community Services and Indigenous Affairs, and Employment and Workplace Relations. The legislation determines the rates at which financial assets are deemed to earn income for the purpose of assessing eligibility for these payments. Specifically, the Act sets a below threshold rate of 3.5% for the first $38,400 of a single person's financial assets, $63,800 for pensioner couples, and $31,900 for allowee couples. Any balance over these amounts is deemed to earn an above threshold rate of 5.5%. The Act’s application extends across the Commonwealth of Australia and came into effect on 20 March 2007, replacing the previous rates set by the Social Security (Threshold Rates) Determination 2004. The Act does not explicitly provide for exclusions or exemptions, but its application is governed by the deeming rules under the Social Security Act 1991. The rates may be subject to further adjustments through subsequent determinations by the relevant Ministers.
Key Provisions
The Social Security (Deeming Threshold Rates) Determination (DEST) 2007 sets out the rates at which the income of individuals' financial assets is deemed for the purposes of calculating social security payments under the Social Security Act 1991. According to the Determination, from 20 March 2007, the below threshold rate is 3.5% and the above threshold rate is 5.5%. These rates apply to the calculation of income from financial investments, where the value of an individual's financial assets are added together and income is deemed on these assets using the specified rates (section 5 and section 6).
The Determination imposes specific obligations on the parties involved, primarily the government agencies responsible for administering social security payments. These agencies must use the revised deeming rates to calculate the income of individuals' financial assets for the purposes of determining their eligibility for social security benefits. The revised rates aim to provide a more accurate reflection of the income derived from financial investments, ensuring that social security payments are allocated fairly and efficiently.
Breach of the provisions outlined in the Determination may result in incorrect calculations of income for social security purposes, potentially leading to overpayment or underpayment of benefits. While the Determination does not explicitly outline specific offences or penalties for non-compliance, it is important to note that incorrect calculations of income for social security purposes may be subject to the general provisions of the Social Security Act 1991, which may include recovery of overpayments and imposition of financial penalties. Additionally, any failure to comply with the Determination may be considered an administrative breach, which could result in internal disciplinary actions or other consequences within the relevant government agencies.