Explanatory Statement

Issued by the authority of the Secretary of the Department of Social Services

Social Security Act 1991

Social Security (Exempt Lump Sum – Income Apportionment Resolution Scheme Payments) Determination 2026

Purpose

The Social Security (Exempt Lump Sum – Income Apportionment Resolution Scheme Payments) Determination 2026 (Determination) ensures that the amount of a resolution payment paid to or on behalf of an entitled person under the Income Apportionment Resolution Scheme (Resolution Scheme), is an exempt lump sum under paragraph 8(11)(d) of the Social Security Act 1991 (the Act).

The Resolution Scheme is established to provide resolution payments to persons whose debts are reasonably likely to have been affected by income apportionment from 20 September 2003 to 6 December 2020 inclusive, and who meet the entitlement criteria under Schedule 3 to the Social Security and Other Legislation Amendment (Technical Changes No. 2) Act 2025 (Technical Changes No. 2 Act) and in the Income Apportionment Resolution Scheme Determination 2025 (Resolution Scheme Determination).

By determining a resolution payment is an exempt lump sum under the Act, the amount of such a payment will not be assessed as ordinary income for the purposes of the recipient’s social security payment.

Background

Exempt lump sums

An income amount earned, derived or received for a person’s own use or benefit is generally assessed as income under the social security law.  However, paragraph 8(11)(d) of the Act allows the Secretary of the Department of Social Services, or their delegate, 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 excluded from the definition of “ordinary income” in subsection 8(1) of the Act.  This means the amount is not taken into account under the social security income test, and will not have any effect on the person’s social security payment.

The exemption of a lump sum payment from the income test does not affect the assessment of any ongoing income generated by the lump sum, nor any assessable asset produced from the lump sum.   These will be counted under the social security income and assets tests respectively.   This is consistent with the treatment of other amounts as exempt lump sums under paragraph 8(11)(d) of the Act.

Income Apportionment Resolution Scheme

Income apportionment is a practice of apportioning employment income when calculating the rate of a means-tested social security payment.  It was commonly used to re-assess a person’s entitlement for the purpose of determining the quantum of debts arising under the Act.  The practice has been recognised as inconsistent with the law prior to 7 December 2020.

The Technical Changes No. 2 Act validates the use of income apportionment insofar as it was a method for assessing ordinary income from employment.  As recompense, Schedule 3 to the Technical Changes No. 2 Act establishes the Resolution Scheme to provide a resolution payment to entitled persons whose debts are reasonably likely to have been affected by income apportionment during a debt period between 20 September 2003 and 6 December 2020 inclusive.

The Resolution Scheme Determination sets out provisions for and in relation to the Resolution Scheme, including the amount of a resolution payment paid to or on behalf of an entitled person under the Resolution Scheme.

Authority

The Determination is made under paragraph 8(11)(d) of the Act, which provides that the Secretary may determine an amount, or class of amounts, to be an exempt lump sum for the purposes of the Act.

The Determination is a legislative instrument for the purposes of the Legislation Act 2003 and is subject to disallowance.

Commencement

The Determination commences on 30 January 2026.

Consultation

The Department of Social Services consulted the following agencies on the intention to make this Determination:

• Services Australia, given the impact on income support recipients;
• the Department of Veterans’ Affairs because determinations under paragraph 8(11)(d) of the Act apply automatically under the Veterans’ Entitlements Act 1986; and
• the Department of Agriculture, Fisheries and Forestry because paragraph 8(11)(d) determinations apply automatically in relation to payments of farm household allowance under the Farm Household Support Act 2014.

The above agencies supported the Determination.

The Department of Social Services did not consult with income support recipients likely to be affected by the Determination, given it is beneficial in nature. 

Availability of independent review

A decision made under the social security law, as informed by the Determination, is subject to internal and external review under Parts 4 and 4A of the Social Security (Administration) Act 1999.

Explanation of the provisions

Details of the Social Security (Exempt Lump Sum – Income Apportionment Resolution Scheme Payments) Determination 2026

Section 1 – Name

Section 1 states how the Determination is to be cited, that is, as the Social Security (Exempt Lump Sum – Income Apportionment Resolution Scheme Payments) Determination 2026 (Determination).

Section 2 - Commencement

Section 2 specifies that the Determination commences on 30 January 2026. 

Section 3 – Authority

Section 3 provides that the Determination is made under paragraph 8(11)(d) of the Social Security Act 1991 (the Act).

Section 4 – Definitions

Section 4 contains definitions of certain terms used in the Determination. 

The terms “Act”, “Income Apportionment Resolution Scheme” and “resolution payment” are defined in section 4.

The term “resolution payment” is defined in section 4 to mean an amount of reparation under the Income Apportionment Resolution Scheme (Resolution Scheme) as determined by the Minister by legislative instrument under subitem 3(1) of Schedule 3 to the Social Security and Other Legislation Amendment (Technical Changes No. 2) Act 2025 (Technical Changes No. 2 Act).

The legislative instrument made under subitem 3(1) of Schedule 3 to the Technical Changes No. 2 Act is the Income Apportionment Resolution Scheme Determination 2025, which prescribes the amount of a resolution payment paid to or on behalf of an entitled person under the Resolution Scheme.

Section 5 – Exempt lump sum

Section 5 specifies amounts determined by the Secretary to be exempt lump sums, in accordance with paragraph 8(11)(d) of the Act.

In particular, section 5 provides that where a person has received a resolution payment, that amount is an exempt lump sum. 

By determining that a resolution payment is an exempt lump sum under the Act, the amount of such a payment will not be assessed as ordinary income for the purposes of the recipient’s social security payment.

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 – Income Apportionment Resolution Scheme Payments) Determination 2026

The Social Security (Exempt Lump Sum – Income Apportionment Resolution Scheme Payments) Determination 2026 (the Determination) is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.

Overview of the legislative instrument

The Determination ensures that the amount of a resolution payment paid to or on behalf of an entitled person under the Income Apportionment Resolution Scheme (Resolution Scheme), is an exempt lump sum under paragraph 8(11)(d) of the Social Security Act 1991 (the Act).

The Resolution Scheme is established to provide resolution payments to persons whose debts are reasonably likely to have been affected by income apportionment from 20 September 2003 to 6 December 2020 inclusive, and who meet the entitlement criteria under Schedule 3 to the Social Security and Other Legislation Amendment (Technical Changes No. 2) Act 2025 and in the Income Apportionment Resolution Scheme Determination 2025.

By determining a resolution payment is an exempt lump sum under the Act, the amount of such a payment will not be assessed as ordinary income for the purposes of the recipient’s social security payment.

Human rights implications

The Determination engages the right to social security and the right to an adequate standard of living.

Article 9 of the International Covenant on Economic, Social and Cultural Rights (ICESCR) recognises the right to social security and requires a social security scheme be established under domestic law that provides 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.

Article 11 of the ICESCR recognises the right to an adequate standard of living, which provides that everyone is entitled to adequate food, clothing and housing and to the continuous improvement of living conditions.

Under the Act, social security payments are subject to a means test which assess the person’s income and assets to determine their eligibility for the payment, and their rate of payment.  The Determination operates beneficially as a resolution 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.  This exemption also flows through to means tested payments under the Veterans’ Entitlements Act 1986 and the Farm Household Support Act 2014.

If a resolution payment is not exempted, a person in receipt of such a payment may not be eligible for an income support payment or, if they are eligible, their rate of payment might be reduced.

Conclusion

This Determination is compatible with human rights as it promotes and supports a person’s right to social security and the right to an adequate standard of living.

Kirsty Johnson

Branch Manager of the Payment Structures and Seniors Branch

Delegate of the Secretary of the Department of Social Services