EXPLANATORY STATEMENT
Social Security Exempt Lump Sum (Exceptional Circumstances Exit Grant) (DEEWR) Determination 2008
Summary
Paragraph 8(11)(d) of the Social Security Act 1991 (the Act) allows the Secretaries of the Department of Education, Employment and Workplace Relations (DEEWR) and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to determine that an amount, or class of amounts, is an exempt lump sum for the purpose of the Act. This instrument determines that, for the purpose of social security payments for which the Minister for Education and the Minister for Employment and Workplace Relations is responsible, an Exceptional Circumstances Exit Grant (‘Exit Payment’) paid to Australian farmers under the Exceptional Circumstances Exit Package 2007 (DAFF scheme) is an exempt lump sum under paragraph 8(11) (d) of the Social Security Act 1991 (the Act).
The Exit payment relates only to payments made under the Exceptional Circumstances Exit Grant of the DAFF Scheme. For the avoidance of doubt, this instrument does not exempt any payments made under the Exceptional Circumstances Advice and Retraining Grant, which also forms part of the DAFF Scheme.
The Exit Payment is a response to the extent and the severity of the drought and is designed to assist farmers leaving the land and to have capacity to continue their lives outside of farming the land.
In general terms, the Exit Payment is a one-off payment of up to $150,000, made to a person or a person’s partner where the person was an Australian farm owner who has sold their farm enterprise and who meet the Department of Agriculture, Fisheries and Forestry eligibility guidelines under the DAFF Scheme.
The effect of this instrument is that an Exit payment paid under the DAFF Scheme will not be regarded as income under the Act. Consequently, if a recipient of a DEEWR administered social security payment receives an Exit payment under the DAFF Scheme, 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 an Exit Payment under the DAFF Scheme 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 an Exit Payment under the DAFF Scheme, the amount will not be assessed as income under the social security law.
Explanation of Provisions
Part 1
Section 1 of the determination states the name of the determination.
Section 2 states that the determination commences on the day after registration.
Section 3 contains interpretation provisions. The term Exit Payment is defined as a payment to a person of up to $150,000 made by the Commonwealth Department of Agriculture Fisheries and Forestry under the Exceptional Circumstances Exit Package 2007.
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 an Exit Payment as defined in section 3, then the Exit Payment received by the person is an exempt lump sum.
Section 5 specifies that an Exit 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 determination.
Consultation
The Department of Families, Housing, Community Services and Indigenous Affairs and the Department of Veteran’s Affairs 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 customers because it exempts from the income test an Exit Payment under the Exceptional Circumstances Exit Package 2007. Public consultation was therefore seen as unnecessary.
Regulatory Impact Analysis
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 as a result of this exemption.