EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (DIISRTE) Determination 2013
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 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.
Explanation of Provisions
Section 1 of the Determination specifies that the name of the Determination is the Social Security (Deeming Threshold Rates) (DIISRTE) Determination 2013.
Section 2 provides that the Determination commences on 20 March 2013.
Section 3 provides that ‘Act’ means the Social Security Act 1991.
Section 4 revokes any. previous Determination made under section 1082 of the Act on the commencement of the Determination, but only so far as the previous Determination applies to persons receiving Austudy and Youth Allowance (in respect of apprentices and full time students) and any other payment, allowance or supplement under the Act, insofar as that payment, allowance or supplement relates to persons receiving Austudy and Youth Allowance (in respect of apprentices and full time students).
The effect of this section is to ensure that all previous determinations made under section 1082 of the Act that were made with respect to the portfolio responsibility of the Minister for Tertiary Education, Skills, Science and Research have been revoked.
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 Education, Employment and Workplace Relations and the Department of Families, Housing, Community Services and Indigenous Affairs 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.
Regulatory Impact Analysis
The Determination is not regulatory in nature and will not have any direct impact on business activity.
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) (DIISRTE) Determination 2013
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 Chris Bowen MP, Minister for Tertiary Education, Skills, Science and Research
Overview
The Social Security (Deeming Threshold Rates) (DIISRTE) Determination 2013 was enacted to adjust the rates at which income from financial investments is deemed for the purposes of calculating social security benefits under the Social Security Act 1991. This legislation was introduced to address the need for regular adjustments to the deeming rates to ensure they reflect current economic conditions and maintain the integrity of the social security system. The determination is made by the Minister under section 1082 of the Act and was enacted by the Parliament of Australia. The policy objective of this Determination is to ensure that the deeming rates used to assess the income from financial investments for social security purposes are fair and reflect current economic conditions, thereby maintaining the integrity and effectiveness of the social security system. This legislative instrument effectively changes the deeming rates from 3 per cent and 4.5 per cent to 2.5 per cent and 4 per cent respectively, impacting how financial investments are assessed for social security and Veterans' Affairs pension and allowance purposes.
Scope and Application
The Social Security (Deeming Threshold Rates) (DIISRTE) Determination 2013 applies to individuals and entities that are subject to the deeming rules under the Social Security Act 1991. These deeming rules are used to calculate income from financial investments for the purpose of determining eligibility and the amount of social security benefits, including payments like Austudy and Youth Allowance. The rates set by this Determination are applicable to the first $45,400 of a single person’s financial assets, which is deemed to earn the below threshold rate, and the balance over this amount is deemed to earn the above threshold rate. The Determination specifically targets financial assets held by individuals receiving certain social security payments, ensuring that their income from investments is accurately assessed. The rates were set to 2.5 per cent for the below threshold and 4 per cent for the above threshold, effective from 20 March 2013, and this Determination revokes any previous Determinations made under section 1082 of the Act in relation to the portfolio responsibility of the Minister for Tertiary Education, Skills, Science and Research.
Key Provisions
The main sections of the Social Security (Deeming Threshold Rates) (DIISRTE) Determination 2013 include Section 1, which specifies the name of the Determination; Section 2, which sets the commencement date as 20 March 2013; Section 3, which defines ‘Act’ as the Social Security Act 1991; Section 4, which revokes previous Determinations under section 1082 of the Act in relation to certain payments and allowances; Section 5, which specifies the below threshold rate at 2.5 per cent; and Section 6, which specifies the above threshold rate at 4 per cent. These provisions collectively establish the new deeming rates and ensure that the Determination applies to the specified payments and allowances, replacing any previous rates.
The Act imposes specific obligations on the parties governed by the Determination. The Minister for Tertiary Education, Skills, Science and Research is required to determine the below and above threshold rates for deeming purposes under section 1082 of the Social Security Act 1991. The Department of Education, Employment and Workplace Relations and the Department of Families, Housing, Community Services and Indigenous Affairs must be consulted to ensure a coordinated approach for calculating income from financial investments under the income test. Additionally, the Determination ensures that any previous Determinations made under section 1082 of the Act are revoked to the extent they apply to the specified payments and allowances.
Failure to comply with the provisions of the Social Security Act 1991 or the requirements of the Determination could result in civil or administrative consequences. However, the Determination itself does not outline specific offences, penalties, or consequences for breach. Instead, it provides a framework for calculating income from financial investments under the deeming rules. The primary focus is on ensuring that the new rates are applied correctly to assess income for social security and Veterans’ Affairs pension/allowance purposes. Any breaches or non-compliance with the deeming rules would be addressed under the Social Security Act 1991, which may include penalties or adjustments to the benefits received.