Overview

The Social Security Exempt Lump Sum Determination No. 7 of 2004 was enacted under the authority of the Social Security Act 1991 to address the issue of residual balances in market-linked income streams. This determination, signed by Alex Dolan, Assistant Secretary of the Seniors and Means Test Branch and a delegate of the Secretary of the Department of Family and Community Services, aims to clarify the circumstances under which residual balances in such income streams are treated as exempt lump sums for social security purposes. Specifically, it ensures that any residual balance that must be paid to a beneficiary within 28 days of the end of the market-linked income stream's term, as required by the Superannuation Industry (Supervision) Regulations 1994, is exempt from affecting the recipient’s social security payment eligibility. This determination is crucial in maintaining the integrity of social security assessments while accommodating the specific requirements of superannuation regulations.

Scope and Application

The Social Security Exempt Lump Sum Determination No. 7 of 2004 applies to individuals who are beneficiaries of a market-linked income stream and who are also recipients of a social security payment. This determination clarifies that certain lump sums paid to these beneficiaries from residual balances in their market-linked income stream accounts are exempt from being considered in the assessment of their social security payments. Specifically, if a beneficiary of a market-linked income stream receives a residual balance payment from that account within 28 days of the conclusion of the income stream, this payment qualifies as an exempt lump sum under the Social Security Act 1991. This applies from the date the lump sum is received. The determination is made under the authority granted by the Act and is effective from the date of its signing. The scope of the determination is confined to lump sums paid under specific circumstances, as outlined in the determination, and it does not extend to other forms of income or lump sums that do not meet the specified criteria.

Key Provisions

The key operative sections of the Social Security Exempt Lump Sum Determination No. 7 of 2004 (the Determination) establish that certain payments are exempt lump sums for the purposes of the Social Security Act 1991. Section 4(1) provides that the Secretary can determine an amount or class of amounts as an exempt lump sum, as per paragraph 8(11)(d) of the Act (section 4(1)). Section 4(2) outlines the specific conditions under which this determination applies. If a person is a beneficiary of a market-linked income stream, and after the payment of the final year’s annual payment from that market-linked income stream, there is a residual balance in the relevant account (section 4(2)(b)), and this residual balance must be paid to the beneficiary within 28 days of the end of the market-linked income stream’s term as required by clause 3 of Schedule 6 of the Superannuation Industry (Supervision) Regulations 1994 (section 4(2)(c)), and the person is receiving a social security payment (section 4(2)(d)), then any amount paid by the market-linked income stream to the person is an exempt lump sum (section 4(2)). Section 5 clarifies that such amounts are considered exempt lump sums from the date they are received. The Determination imposes specific obligations and requirements on the parties it governs. It mandates that any amount or class of amounts that meets the criteria specified in section 4(2) be recognised as an exempt lump sum. This includes ensuring that the residual balance of a market-linked income stream is paid to the beneficiary within 28 days of the end of the stream's term, as required by the Superannuation Industry (Supervision) Regulations 1994. Furthermore, the Determination requires that the recipient of the lump sum be a beneficiary of a market-linked income stream and be receiving a social security payment at the time of the lump sum payment. There are no specific offences, penalties, or consequences outlined within the Determination itself. However, any breach of the conditions or requirements stipulated in the Determination could potentially result in the lump sum no longer being considered exempt for the purposes of the Social Security Act 1991, thereby affecting the recipient's eligibility for social security payments. The implications of such a breach would need to be assessed in accordance with the broader provisions of the Social Security Act 1991, which may include re-evaluation of the recipient’s means test and social security benefits. The penalties for non-compliance with the Social Security Act 1991 generally can include fines and other civil or criminal consequences as prescribed by the Act.