EXPLANATORY STATEMENT
Social Security (Exempt Lump Sum – Emergency Services and State Super Compensation Payments) Determination 2016
Summary
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 Social Security Act 1991 (the Act) allows the Secretary of the Department of Social Services to determine that an amount or class of amounts received by a person 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.
In late 2015, Emergency Services and State Super (ESSSuper) became aware of an issue with the calculation of the deductible amount being reported to Centrelink for a small group of pensioners. The deductible amount was incorrectly calculated during changes to taxation laws effective 1 July 2007. ESSSuper notified Centrelink on 15 December 2015 about the issue and to determine the impact that this issue had upon the group of pensioners. Subject to the pensioners’ circumstances, this could have resulted in Centrelink calculating an incorrect rate of pension for people receiving a social security payment. ESSSuper now intend to compensate pensioners for any loss of social security payment. To ensure that affected pensioners receive the full benefit of these compensation payments ESSSuper applied for the payments to be exempt from the social security income test.
This Determination provides that a compensation payment made by ESSSuper is an exempt lump sum for the purpose of paragraph 8(11)(d) of the Act.
The effect of this Determination is that such a payment will not be regarded as income under the Act, so that if a social security recipient receives such a payment, it will be exempt from the social security income test.
Explanation of Provisions
Section 1 of the Determination states the name of the Determination.
Section 2 provides that the Determination commences on the day after it is registered.
Section 3 provides that the authority for making this Determination is paragraph 8(11)(d) of the Act.
Section 4 contains definitions of certain terms used in the Determination. The terms “Act”, “ESSSuper”, “Centrelink pensioners” and “ESSSuper compensation payment” are defined.
Section 5 specifies that an ESSSuper compensation payment is an exempt lump sum for the purposes of paragraph 8(11)(d) of the Social Security Act 1991. Such an amount will be regarded as an exempt lump sum from the date the payment is received by the person.
Consultation
This determination was made at the request of ESSSuper.
The Department of Veterans' Affairs and the Department of Agriculture and Water Resources were consulted.
This determination will be beneficial to persons affected as it exempts ESSSuper compensation payments from the social security income test. As a result, public consultation was considered unnecessary.
Regulatory Impact Analysis
The Determination does not require a Regulatory Impact Statement. The Determination is not regulatory in nature, will not impact on business activity and will have no, or minimal, compliance costs or competition impact.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Social Security (Exempt Lump Sum – Emergency Services and State Super Compensation Payments) Determination 2016
The effect of the Determination is that a person who receives an ESSSuper compensation payment will not have that payment assessed as income under the social security law.
Human rights implications
The Determination engages the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR). The right to social security requires that a system be established under domestic law, and that public authorities must take responsibility for the effective administration of the system. The social security scheme must provide a minimum essential level of benefits to all individuals and families that will enable them to acquire at least essential health care, basic shelter and housing, water and sanitation, foodstuffs, and the most basic forms of education.
The Determination will operate beneficially as an ESSSuper compensation payment will not be taken into account when assessing a person’s eligibility or rate of social security entitlements under the social security income test. If an ESSSuper compensation payment is not exempted, a person in receipt of that payment may not be eligible for a social security payment or, if they are eligible, their rate of payment might be reduced. The Determination is therefore consistent with the promotion of the right to social security.
The exemption of an ESSSuper compensation payment from the income test does not mean that any ongoing income generated by the lump sum is exempt from the income test, nor does it mean that any asset produced from the lump sum is exempt from the social security assets test. This is consistent with the treatment of other lump sum payments exempted under paragraph 8(11)(d) of the Act.
Conclusion
This Determination supports a person’s human right to social security.
Anita Davis, Acting Branch Manager, International and Means Test Policy Branch, as a delegate of the Secretary of the Department of Social Services.