Social Security Exempt Lump Sum (Compensation paid by Aviva Australia) (FaCSIA) Determination 2007

Administered by Department of Social Services

Legislation au F2007L02111 Not in force Legislative Instrument

Legislation content

EXPLANATORY STATEMENT

 

Social Security Exempt Lump Sum (Compensation paid by Aviva Australia) (FaCSIA) Determination 2007

 

Summary

 

Paragraph 8(11)(d) of the Social Security Act 1991 (the Act) allows the Secretaries of the Department of Families, Community Services and Indigenous Affairs (FaCSIA), the Department of Employment and Workplace Relations and the Department of Education, Science and Training to determine that an amount, or class of amounts, is an exempt lump sum for the purpose of the Act.

This instrument provides that, for the purpose of social security payments for which the Minister for Families, Community Services and Indigenous Affairs is responsible, a ‘compensation payment’ is a one-off compensation payment paid by Aviva Australia to certain people whose social security payments were affected (directly or indirectly) as a result of Aviva Australia incorrectly recording the purchase price for one or more of for the following income stream products:

  1. the Navigator Personal Retirement Plan - Allocated Pension;
  2. the Navigator Personal Retirement Plan - Growth Pension;
  3.  the PremiumChoice Retirement Service - Allocated Pension.

This ‘compensation payment’ is to meet any shortfall in income support payments, or repayment of debts to Centrelink for overpayments made as a result of the incorrect purchase price being assessed.

This instrument determines that a compensation payment, as defined, paid to a person is an exempt lump sum under paragraph 8(11)(d) of the Act.  The compensation payment is designed to rectify a situation whereby Aviva Australia incorrectly recorded the purchase price amount on a number (approximately 500) of its customers’ pension accounts resulting in an erroneous calculation of the customers’ purchase price, thus incorrectly affecting these customers’ income support payments. The customers did not contribute in any way to this error occurring and Aviva Australia will be responsible for identifying the affected members and advising them to provide all appropriate documentation to Centrelink for correct processing.  The compensation payment does not represent receipt of money for services rendered directly or indirectly.

The effect of this instrument is that a compensation payment made by Aviva Australia will not be regarded as income under the Act. Consequently, if a recipient of a FaCSIA administered social security payment receives a compensation payment made by Aviva Australia, it will be exempt from the income test under the social security law.

 


Background

 

Under the social security law all income earned, derived or received for a person’s own use or benefit, is counted as income.  The only exceptions are items specifically exempted under the social security law.  Paragraph 8(11)(d) of the Act allows the responsible Secretary to determine that an amount, or class of amounts, is an ‘exempt lump sum’ for the purposes of the Act.  An exempt lump sum is not included in the definition of ‘ordinary income’ under subsection 8(1) of the Act, so any such amount would not be taken into account under the social security income test.

 

This instrument determines that a compensation payment made by Aviva Australia is an exempt lump sum for the purposes of paragraph 8(11)(d) of the Act.

 

The effect of this instrument is that for customers receiving a compensation payment made by Aviva Australia, the amount will not be assessed as income under the social security law.

 


Explanation of Provisions

 

Part 1

Section 1 of the instrument states the name of the instrument.

 

Section 2 states that the instrument commences on the day after registration with the Federal Register of Legislative Instruments.

 

Section 3 contains interpretation provisions.

 

The term compensation payment is defined as: a one-off compensation payment paid by Aviva Australia to certain people whose social security payments were affected (directly or indirectly) as a result of Aviva Australia incorrectly recording the purchase price for one or more of the following income stream products:

 

  1. the Navigator Personal Retirement Plan - Allocated Pension;
  2. the Navigator Personal Retirement Plan - Growth Pension;
  3. the Premium Choice Retirement Service - Allocated Pension.

 

This compensation payment is to meet any shortfall in income support payments, or for repayment of debts to Centrelink for overpayments as a result of the incorrect purchase price being assessed by Aviva Australia.

 

Part 2

Subsection 4(1) states that paragraph 8(11)(d) of the Act allows the Secretary to determine that an amount, or class of amounts, received by a person is an exempt lump sum.

 

Subsection 4(2) provides that if a person receives a compensation payment as defined in section 3, then the compensation payment received by the person is an exempt lump sum.

 

Section 5 specifies that a compensation payment received by a person referred to in subsection 4(2) will be regarded as an exempt lump sum from the date that the amount was received by the person, provided that date is on or after the commencement of this instrument.

 

Consultation

The Department of Employment and Workplace Relations and the Department of Education, Science and Training were consulted during the preparation of this determination.  This was done to ensure a co-ordinated and consistent approach to the income test treatment of this one-off payment for all social security payments under the Act.

 

This instrument is beneficial to income support customers because it exempts from the income test a compensation payment made by Aviva Australia.  Public consultation was therefore seen as unnecessary.

 

Business Cost Calculator Figure

This exemption does not require a Regulatory Impact Statement (RIS) and/or a Business Cost Calculator Figure.  This exemption is not regulatory in nature, will not impact on business activity and will have no, or minimal, compliance costs or competition impact.  It is not expected that any compliance costs will be incurred by business (against the nine categories listed) as a result of this exemption.

 

Overview

The Social Security Exempt Lump Sum (Compensation paid by Aviva Australia) (FaCSIA) Determination 2007 was enacted to address a specific issue arising from Aviva Australia’s incorrect recording of purchase prices for certain pension products, which adversely impacted the social security payments of approximately 500 customers. This determination was made under the authority of the Social Security Act 1991, allowing the Secretary of the Department of Families, Community Services and Indigenous Affairs (FaCSIA) to classify certain payments as exempt lump sums. The policy objective was to ensure that compensation payments made by Aviva Australia to rectify these errors would not be counted as income under social security laws, thereby preventing any further financial detriment to the affected customers who had no part in causing the initial error. This instrument was enacted without public consultation as it was deemed unnecessary due to the targeted and specific nature of the issue being addressed.

Scope and Application

The Social Security Exempt Lump Sum (Compensation paid by Aviva Australia) (FaCSIA) Determination 2007 applies to specific compensation payments made by Aviva Australia to individuals whose social security payments were adversely affected due to the company's incorrect recording of purchase prices for certain pension products. These products include the Navigator Personal Retirement Plan - Allocated Pension, the Navigator Personal Retirement Plan - Growth Pension, and the PremiumChoice Retirement Service - Allocated Pension. The compensation payments are intended to rectify any shortfall in income support payments or to facilitate repayment of overpayments to Centrelink resulting from these errors. By classifying these payments as exempt lump sums under paragraph 8(11)(d) of the Social Security Act 1991, the compensation is excluded from the income test under the social security law. This means that recipients of these payments will not have their social security benefits reduced or their eligibility affected by these compensation payments. The compensation payments are one-off and do not represent income earned for services rendered, thus qualifying for the exemption. The geographic reach of this determination is national, applying across Australia under the Commonwealth's social security framework.

Key Provisions

The key operative sections of the Social Security Exempt Lump Sum (Compensation paid by Aviva Australia) (FaCSIA) Determination 2007 (the Determination) are primarily found in sections 4 and 5. Section 4(1) references paragraph 8(11)(d) of the Social Security Act 1991 (the Act) and provides the authority for the Secretary to determine that certain payments are exempt lump sums. Section 4(2) specifies that a compensation payment, as defined in section 3, is considered an exempt lump sum. Section 5 then clarifies that the compensation payment will be regarded as an exempt lump sum from the date it was received, provided that date is on or after the commencement of the Determination. The Determination imposes specific obligations on both Aviva Australia and the affected customers. Aviva Australia must identify the customers whose pension accounts were incorrectly recorded, provide them with the necessary compensation payment, and ensure that these customers submit appropriate documentation to Centrelink for correct processing of their social security payments. The affected customers, on the other hand, are required to cooperate with Aviva Australia in identifying the error and to provide all necessary documentation to Centrelink for proper assessment of their social security payments. The Determination does not explicitly outline offences, penalties, or civil/criminal consequences for breach. However, it is implicit that any failure by Aviva Australia to comply with its obligations under the Determination could result in legal action for breach of contract or other relevant laws. Similarly, any non-cooperation by the affected customers could lead to delays or incorrect processing of their social security payments. Given the nature of the Determination, which is designed to rectify an error and provide relief to affected customers, it is unlikely that significant penalties or severe consequences would be imposed for breach. Instead, the focus would likely be on ensuring compliance and proper processing of social security payments.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.