Overview

The Social Security Exempt Lump Sum Determination No. 3 of 1999 was enacted to address a specific issue arising from the conversion of annuity contracts to asset test exempt products under the Social Security Act 1991. This determination was made by Evan Mann, the Assistant Secretary of the Seniors and Means Test Branch and a delegate of the Secretary to the Department of Family and Community Services. It was designed to ensure that any lump sums arising from such conversions, for individuals who were receiving income support payments as of 19 September 1998, are considered exempt from certain asset tests. The underlying policy objective is to facilitate the transition to asset test exempt products while protecting the income support entitlements of eligible individuals. The determination became effective from the date it was signed, 24 June 1999.

Scope and Application

The Social Security Exempt Lump Sum Determination No. 3 of 1999 applies to individuals who were receiving income support payments as of 19 September 1998 and had annuity contracts or contracts with a life office or a superannuation fund that were current on 20 September 1998. These contracts or products must have been converted to an asset test exempt product between 20 September 1998 and 31 July 1999. Specifically, it applies to lump sums paid as a result of these conversions, provided that the amount paid is the minimum necessary to convert the existing annuity contracts or products to an asset test exempt product. The determination is made under the Social Security Act 1991 and is intended to exempt certain lump sums from the asset test for social security benefits. The jurisdictional reach of this legislation is Commonwealth, applying across Australia as it is a federal determination. The application of the determination can be extended or restricted through subordinate instruments, though no such instruments are noted in the provided text. There are no explicit exclusions or exemptions mentioned other than the conditions specified for the lump sum to be considered exempt.

Key Provisions

The main operative sections of the Social Security Exempt Lump Sum Determination No. 3 of 1999 (the Determination) include section 1.3, which provides definitions for key terms used in the Determination, and section 2.1, which outlines the circumstances under which a lump sum payment is deemed an exempt lump sum. According to section 2.1, a lump sum payment qualifies as an exempt lump sum if certain conditions are met, specifically if the payment results from the conversion of an annuity contract or contracts to an asset test exempt product or products between 20 September 1998 and 31 July 1999, and if the individual was receiving an income support payment at 19 September 1998. The Determination imposes obligations on life offices and superannuation funds, requiring them to adhere to specific criteria when converting annuity contracts to asset test exempt products. It mandates that the lump sum payment must be the minimum amount necessary to effect the conversion and must be paid to individuals who meet the specified conditions. Additionally, life offices and superannuation funds must ensure that the payment is made in accordance with the requirements set out in the Determination to qualify as an exempt lump sum. Failure to comply with the provisions of the Determination may result in serious consequences. Under the Social Security Act 1991, any breach of the requirements could lead to civil or criminal penalties. Although specific penalties are not detailed in the Determination itself, breaches of the Social Security Act 1991 may result in substantial fines and, in severe cases, imprisonment. The exact penalties would depend on the nature and severity of the breach, as well as any relevant case law and statutory provisions. Overall, the Determination aims to ensure that certain lump sum payments arising from the conversion of annuity contracts are exempt from certain social security assessments, provided that all conditions are strictly adhered to by the relevant parties. Compliance with these provisions is crucial to avoid potential legal repercussions.