Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2008 (No. 2)

Overview

The Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2008 (No. 2) was enacted to address the issue of calculating income from financial investments under the Social Security Act 1991, particularly through the deeming rules. This instrument, introduced by the Minister for Families, Housing, Community Services and Indigenous Affairs, aims to ensure that the deeming rates reflect current economic conditions and remain consistent with the policy objectives of the Social Security Act. The Act empowers the Minister to determine these rates, and this Determination reduces the below threshold rate from 4% to 3% and the above threshold rate from 6% to 5%, effective from 17 November 2008. The purpose of these adjustments is to maintain the integrity of the income test, ensuring it remains a fair and effective measure within the social security system.

Scope and Application

The Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2008 (No.2) pertains to the calculation of income from financial investments under the Social Security Act 1991, applying deeming rules that sum the value of an individual's financial assets to determine income earned on these assets. The Act applies to single individuals, pensioner couples, and allowee couples, with specific financial asset thresholds exempt from higher income calculations. Geographically, the Act operates under the Commonwealth jurisdiction, affecting individuals who are subject to the income test for social security benefits. The determination specifies that the first $41,000 of a single person’s financial assets is subject to a lower income rate, with additional amounts subject to a higher rate. Effective from 17 November 2008, the Act reduces the below threshold rate to 3 per cent and the above threshold rate to 5 per cent, as outlined in the attached determination. The instrument does not extend application through subordinate instruments and is not considered regulatory, thus having no direct impact on business activities.

Key Provisions

The Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2008 (No.2) introduces changes to the rates at which financial assets are deemed to earn income for the purposes of calculating social security benefits under the Social Security Act 1991 (sections 5 and 6). The determination sets the below threshold rate at 3 per cent and the above threshold rate at 5 per cent, effective from 17 November 2008. This change reduces the rates from the previously set 4 per cent and 6 per cent, respectively, which were in place until 16 November 2008. The Act requires that financial assets are divided into two parts for the purpose of calculating income: the first $41,000 of a single person’s financial assets (or $68,200 for pensioner couples and $34,100 for allowee couples) earns the below threshold rate, and any balance over this amount earns the above threshold rate (section 1082). The obligations imposed by this Act primarily involve financial institutions and social security recipients. Financial institutions must adhere to the specified rates when reporting the income earned by their clients' financial assets for social security assessments. Recipients of social security benefits must ensure that their financial assets are accurately reported to the relevant authorities to maintain compliance with the deeming rules. The Act also requires the Minister to determine these rates periodically to ensure they reflect current economic conditions (section 1082). There are no direct offences or penalties specified in the determination itself, but the Social Security Act 1991 outlines potential consequences for non-compliance. For example, providing false or misleading information to obtain benefits can result in both civil and criminal penalties. Civil penalties can include financial penalties and recovery of benefits, while criminal penalties can include fines and imprisonment. The maximum penalties for providing false or misleading information are generally aligned with the severity of the offence and can include fines of up to $22,200 and imprisonment for up to two years under the Social Security Act 1991.