EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2009 (No. 1)
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 $41,000 of a single person’s financial assets ($68,200 for pensioner couples and $34,100 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 below threshold and above threshold rates are determined, by legislative instrument, by the Minister. Until the end of 25 January 2009, the below threshold rate is 3 per cent and the above threshold rate is 5 per cent.
The Minister has determined that there will be a change to the above threshold rate, from 26 January 2009. The below threshold rate will remain at 3 per cent and the above threshold rate will decrease to 4 per cent.
The attached Determination sets out the below and above threshold rates, at 3 per cent and 4 per cent, respectively, from 26 January 2009. The Determination is made by the Minister for Housing for the Minister for Families, Housing, Community Services and Indigenous Affairs.
Explanation of Provisions
Section 1 of the Determination states that the name of the Determination is the Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2009 (No.1).
Section 2 states that the Determination commences on 26 January 2009.
Section 3 contains a definition of the term “Act”.
Section 4 revokes the Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2008 (No.2).
Section 5 sets out the below threshold rate of 3 per cent.
Section 6 sets out the above threshold rate of 4 per cent.
Consultation
The Department of Education, Employment and Workplace Relations was 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.
Public consultation was seen as unnecessary as the Determination is beneficial to customers.
Regulatory Impact Analysis and Business Cost Calculator
The Determination does not require a Regulatory Impact Statement (RIS) and/or a Business Cost Calculator Figure. The Determination is not regulatory in nature and will not have any direct impact on business activity.
Overview
The Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2009 (No. 1), enacted by the Minister for Housing on behalf of the Minister for Families, Housing, Community Services and Indigenous Affairs, addresses the calculation of income from financial investments under the Social Security Act 1991. The legislation aims to streamline the process by which financial assets are deemed to earn income at specified rates, thereby ensuring consistent and fair assessment of social security benefits eligibility. Specifically, the Determination sets out new rates for deeming income on financial assets, effective from 26 January 2009, where the below threshold rate remains at 3 per cent while the above threshold rate decreases to 4 per cent. The policy objective is to provide a transparent and predictable framework for deeming income, enhancing the accuracy and efficiency of social security income assessments. The Department of Education, Employment and Workplace Relations was consulted to align this Determination with other related policies, although public consultation was deemed unnecessary due to the beneficial nature of the changes for customers.
Scope and Application
The Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2009 (No. 1) applies to individuals and couples who are recipients of social security benefits under the Social Security Act 1991. These recipients include both single individuals and couples, with specific deeming rates applicable to pensioner couples, allowee couples, and single individuals. The determination outlines the income deeming rates for financial investments, distinguishing between a below threshold rate of 3% for the first $41,000 of assets for a single person, and an above threshold rate of 4% for any amount exceeding this threshold. The rates for couples are set at $68,200 for pensioner couples and $34,100 for allowee couples. The geographic reach of this determination is national, as it applies across Australia in accordance with the Commonwealth's jurisdiction over social security. There are no exclusions or exemptions stated in the determination, but the applicability of these rates is contingent on the legislative instrument determining the rates under section 1082 of the Social Security Act 1991. The determination may be extended or restricted through subordinate instruments, although this is not explicitly detailed in the explanatory statement.
Key Provisions
The Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2009 (No.1) outlines specific rates for calculating income from financial investments for social security purposes. Section 5 of the Determination sets the below threshold rate at 3 per cent, while Section 6 sets the above threshold rate at 4 per cent. These rates apply from 26 January 2009 and are used to determine the income derived from an individual's or couple's financial assets. The below threshold rate is applied to the first $41,000 of a single person's assets, $68,200 for pensioner couples, and $34,100 for allowee couples. Any amount exceeding these thresholds is subject to the above threshold rate. This approach ensures that income from financial investments is accurately assessed under the deeming rules stipulated in the Social Security Act 1991.
The Determination imposes specific obligations on the entities and individuals it governs. Primarily, it requires the application of the specified rates when calculating the deemed income from financial assets for social security purposes. This involves determining the value of the assets, categorising them into below and above threshold amounts, and applying the respective rates to these amounts. This ensures that the income test for social security eligibility is conducted in a standardised and consistent manner, reflecting the financial capacity of the individual or couple. The obligation to use these rates is critical for the accurate assessment of social security benefits.
Breach of the provisions outlined in the Determination can lead to various consequences. While the Determination itself does not explicitly state specific penalties for non-compliance, failure to adhere to the prescribed rates and methodology could result in inaccurate assessments of income for social security purposes. This could lead to overpayment or underpayment of benefits, which may attract corrective actions under the Social Security Act 1991. Such actions might include the requirement to repay any overpaid amounts, interest on those overpayments, and potential sanctions if the non-compliance is found to be deliberate or negligent. The Determination ensures that the deeming rules are applied correctly, maintaining the integrity of the social security system.