EXPLANATORY STATEMENT
Social Security (Deeming Threshold Rates) (FaHCSIA) 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) (FaHCSIA) 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 the Social Security (Deeming Threshold Rates) (FaHCSIA) Determination 2010 (No. 1).
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 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.
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) (FaHCSIA) 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 Jenny Macklin MP, Minister for Families, Community Services and Indigenous Affairs and Minister for Disability Reform