EXPLANATORY STATEMENT
Social Security (Exempt Lump Sum) (Dependants’ Pension Lump Sum Payment and Closure) (DEEWR) Determination 2009 (No. 1)
Summary
Paragraph 8 (11) (d) of the Social Security Act 1991 (the Act) empowers the Secretary of the Department of Education, Employment and Workplace Relations (DEEWR) and the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to determine that a payment or class of payments will be an exempt lump sum for the purposes of income tests under the Act.
The effect of a determination that a payment is an exempt lump sum is that it is not part of a person’s “ordinary income” for the purposes of the Act, and hence not taken into account in determining the extent to which the person’s ordinary income affects the amount of a social security payment they are entitled to.
This instrument determines that, for the purpose of social security payments for which the Minister for Education, Employment and Workplace Relations is responsible, a payment made under subsection 198N(3) of the Veterans’ Entitlements Act 1986 is an exempt lump sum.
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 income amounts specifically exempted under the social security law. Paragraph 8 (11) (d) of the Act allows the Secretary to determine that an amount, or class of amounts, is an exempt lump sum for the purposes of section 8 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 Determination provides that a payment made under subsection 198N (3) of the Veterans’ Entitlements Act 1986 is an exempt lump sum for the purposes of paragraph 8 (11) (d) of the Act. A payment made under subsection 198N (3) of the Veterans’ Entitlements Act 1986 is not a periodic amount within the meaning of subsection 8 (11A) of the Act; not a leave payment within the meaning of point 1067G-H20, 1067L-D16 and 1068-G7AR of the Act; and is not income from remunerative work undertaken by the person. A payment made under subsection 198N (3) of the Veterans’ Entitlements Act 1986 satisfies paragraphs 8 (11) (a), (b) and (c) of the Act and as a consequence of this determination, is an “exempt lump sum” as defined in subsection 8 (11) of the Act.
Pensions under the Veterans’ Entitlements (Transitional Provisions and Consequential Amendments) Act 1986 will no longer be payable on or after 22 September 2009. Instead, those previously in receipt of these pensions are entitled to receive a lump sum payment, to be paid on or after 24 September 2009, equal to 3 years’ worth of their pension. It is this lump sum payment that is made under subsection 198N (3) of the Veterans’ Entitlements Act 1986.
This Determination is a legislative instrument. FaHCSIA will make a complementary Determination in relation to those matters that the Minister for Families, Housing, Community Services and Indigenous Affairs has responsibility for under the Administrative Arrangements Order. This will ensure that payments made under subsection 198N (3) of the Veterans’ Entitlements Act 1986 received by a recipient of a FaHCSIA-administered social security payment will also be an exempt lump sum for the purposes of the Act.
DVA will make a similar determination exempting payments made under subsection 198N (3) of the Veterans’ Entitlements Act 1986 from the veterans’ entitlements income test.
Explanation of Provisions
Section 1 of the determination states the name of the determination.
Section 2 states that the determination commences on 24 September 2009.
Section 3 provides that payment made under subsection 198N (3) of the Veterans’ Entitlements Act 1986 is an exempt lump sum.
Consultation
The Department of Veterans Affairs was consulted during the preparation of this determination.
This instrument is beneficial to recipients of social security payments and payments under the Veterans’ Entitlements Act 1986 and no other people are affected by the instrument. Public consultation was therefore seen as unnecessary.
Business Cost Calculator Figure
This Determination does not require a Regulatory Impact Statement (RIS) or a Business Cost Calculator Figure. This Determination is not regulatory in nature, will not impact on business activity and will have no compliance costs or competition impact.
Overview
The Social Security (Exempt Lump Sum) (Dependants’ Pension Lump Sum Payment and Closure) (DEEWR) Determination 2009 (No. 1) was enacted to address the issue of exempting certain lump sum payments from the income tests under the Social Security Act 1991. This legislative instrument was introduced by the Secretary of the Department of Education, Employment and Workplace Relations (DEEWR) and the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) in accordance with paragraph 8(11)(d) of the Social Security Act 1991. The primary objective of this Determination is to ensure that certain payments made under subsection 198N(3) of the Veterans’ Entitlements Act 1986 are not included in the definition of "ordinary income" for the purposes of assessing social security payments, thereby not affecting the amount of social security payments recipients are entitled to. This Determination aims to provide clarity and consistency in the application of the social security income test for recipients of veterans' entitlements.
Scope and Application
The Social Security (Exempt Lump Sum) (Dependants’ Pension Lump Sum Payment and Closure) (DEEWR) Determination 2009 applies to individuals who receive a lump sum payment under subsection 198N(3) of the Veterans’ Entitlements Act 1986, ensuring that such payments are treated as exempt lump sums for the purposes of social security income tests under the Social Security Act 1991. The determination applies to payments made to individuals who were previously receiving pensions under the Veterans’ Entitlements (Transitional Provisions and Consequential Amendments) Act 1986, which ceased on 22 September 2009, and who are now entitled to a lump sum payment equal to three years’ worth of their pension. The geographic reach of this determination is nationwide, given the federal nature of the Social Security Act 1991 and the Veterans’ Entitlements Act 1986. There are no stated exclusions or exemptions within this determination, but it should be noted that the determination does not affect any other payments or individuals outside the scope of these specific Acts. The application of the determination may be extended or clarified through subordinate instruments, such as complementary determinations by other departments, to ensure consistency in how these lump sum payments are treated across different social security schemes.
Key Provisions
The main operative sections of the Social Security (Exempt Lump Sum) (Dependants’ Pension Lump Sum Payment and Closure) (DEEWR) Determination 2009 (No. 1) (the Determination) establish that certain payments are exempt lump sums for the purposes of social security income tests. Specifically, Section 3 of the Determination provides that a payment made under subsection 198N(3) of the Veterans’ Entitlements Act 1986 is an exempt lump sum. This means that this specific payment is not considered part of a person's ordinary income when calculating their eligibility for social security benefits. This exemption is significant as it prevents the lump sum payment from affecting the amount of social security payments a person is entitled to receive, thereby potentially increasing their overall financial support.
The Determination imposes obligations on several parties, including the Department of Education, Employment and Workplace Relations (DEEWR), the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), and the Department of Veterans' Affairs (DVA). The primary obligation is to ensure that the specified payment under subsection 198N(3) of the Veterans’ Entitlements Act 1986 is treated as an exempt lump sum for the purposes of social security income tests. Additionally, each department must issue complementary determinations to ensure consistency across different social security and veterans' entitlements programs. This coordinated approach ensures that the lump sum payment is appropriately exempted from income tests for all relevant beneficiaries.
Breach of the provisions outlined in the Determination could lead to various civil or administrative consequences. Although the Determination does not explicitly detail specific offences or penalties for non-compliance, it is implicit that failure to correctly apply the exempt lump sum provisions could result in erroneous social security payments. This might include overpayments or underpayments of social security benefits, which would need to be rectified by the relevant department. While the Determination does not specify maximum penalties, such administrative errors could lead to investigations, recovery of incorrectly paid amounts, and potential administrative sanctions against the responsible officials.
Overall, the Determination aims to streamline the treatment of certain lump sum payments for social security purposes, ensuring that veterans and their dependants are not unfairly disadvantaged by the inclusion of these payments in income tests. By clearly delineating the conditions under which these payments are exempt, the Determination provides clarity and predictability for both the administrators of social security programs and the beneficiaries who rely on these payments for their financial support.