Social Security (Exempt Lump Sum - Market-linked Income Stream) Determination 2017

Administered by Department of Social Services

Legislation au F2017L00060 In force Legislative Instrument

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EXPLANATORY STATEMENT

Social Security (Exempt Lump Sum - Market-linked Income Stream) Determination 2017

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 2004, a determination was made that provided that where 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 is made there is a residual balance in the relevant account which is required to be paid to the beneficiary, that residual balance is an exempt lump sum under paragraph 8(11)(d).

Some of the people in receipt of a market-linked income stream may also be in receipt of a social security payment.  The effect of the 2004 determination was that such a payment was not to be regarded as income under the Act. Accordingly, if a social security customer receives such a payment, it will be exempt from the social security income test.

This instrument remakes the 2004 determination.  Had the 2004 determination not been re-made, it would automatically be repealed on 1 April 2017. The Department of Social Services has reviewed the 2004 determination and determined that an exemption for the payment mentioned above is still required. 

Aside from this change of name and some other minor updates and streamlining, this instrument has the same legal effect as the determination it replaces.

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 revokes the previous determination made in 2004, made by the then Department of Family and Community Services.

Section 5 contains definitions of certain terms used in the Determination. The terms “Act”, market-linked income stream and “social security payment” are defined.

Section 6 specifies that a payment made to a person by way of a residual balance of a market-linked income stream 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 remade as it would otherwise have been automatically repealed on 1 April 2017.

This determination remakes a current determination and will be beneficial to persons affected as it exempts payments of a residual balance of a market-linked income stream from the social security income test. As a result, public consultation was seen as unnecessary.

Regulatory Impact Analysis

The Determination remakes a current determination and 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 - Market-linked Income Stream) Determination 2017

The effect of the Determination is that a person who receives a payment of a residual balance of a market-linked income stream 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 a payment of a residual balance of a market-linked income stream 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 the payment of a residual balance of a market-linked income stream 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 the payment of a residual balance of a market-linked income stream 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.

Overview

The Social Security (Exempt Lump Sum - Market-linked Income Stream) Determination 2017 was enacted to ensure that specific payments made to beneficiaries of market-linked income streams are not considered as income for the purposes of the social security income test. This determination was necessary to prevent the automatic repeal of the 2004 determination, which had exempted such residual balances from the income test under the Social Security Act 1991. The determination was made by the Department of Social Services, and its policy objective is to support the human right to social security by ensuring that the income test does not unfairly penalise individuals who receive these payments. The exemption of the residual balance from the income test helps maintain the eligibility and rate of social security entitlements for those who receive such payments, thereby upholding the minimum essential level of benefits required under the right to social security.

Scope and Application

The Social Security (Exempt Lump Sum - Market-linked Income Stream) Determination 2017 applies to individuals who are beneficiaries of market-linked income streams and who may also be recipients of social security payments. It specifically addresses the exemption of a residual balance in a market-linked income stream from being counted as income under the Social Security Act 1991. This residual balance is designated as an exempt lump sum, which is not included in the definition of "ordinary income" under the Act, thereby exempting it from the social security income test. The Determination ensures that such payments do not impact the eligibility or rate of social security entitlements for the beneficiaries. The jurisdictional reach of this Determination is at the Commonwealth level, administered by the Department of Social Services. It does not extend to state or territory laws, and no exemptions or exclusions are specified beyond the scope of payments from market-linked income streams. The application of this Determination may be further clarified or extended through subordinate instruments, although the current instrument itself focuses on the specified exemption without imposing additional regulatory burdens.

Key Provisions

The Social Security (Exempt Lump Sum - Market-linked Income Stream) Determination 2017 (the Determination) is a legislative instrument that specifies certain payments as exempt from the social security income test. Section 6 of the Determination (s6) states that a payment made to a person by way of a residual balance of a market-linked income stream is an exempt lump sum under paragraph 8(11)(d) of the Social Security Act 1991 (the Act) (s4). This means that such a payment is not considered income when determining a person's eligibility or rate of social security entitlements under the income test. This exemption applies from the date the payment is received by the person (s6). The Determination is designed to ensure that beneficiaries of market-linked income streams who may also be receiving social security payments are not disadvantaged by having to account for these lump sums as income. Under the Act, the obligations imposed by the Determination include the requirement for the Department of Social Services to ensure that payments made as residual balances of market-linked income streams are identified as exempt lump sums (s6). This involves confirming that these payments are not included in the calculation of a person's income for the purposes of the social security income test. The Determination also places an obligation on the Department to review and, if necessary, update the determination to ensure its continued relevance and effectiveness (s4). This review process ensures that the exemption remains aligned with the broader objectives of the social security system. In terms of breaches and penalties, the Determination itself does not prescribe specific offences or penalties. However, any failure to correctly apply the Determination in determining social security entitlements could lead to incorrect assessments of a person’s eligibility or rate of payment. Such errors could result in the overpayment or underpayment of social security benefits, which may incur financial and administrative consequences for the individual and the Department. The Social Security Act 1991 outlines various penalties for incorrect claims or fraudulent activity, including financial penalties and, in severe cases, criminal charges. The Determination ensures that the exemption for market-linked income stream payments is applied correctly to avoid these consequences. In summary, the Social Security (Exempt Lump Sum - Market-linked Income Stream) Determination 2017 provides a clear framework for the exemption of certain payments from the social security income test. It identifies the conditions under which a residual balance payment from a market-linked income stream is exempt and imposes obligations on the Department to administer this exemption correctly. While the Determination itself does not specify penalties, any failure to apply it correctly could result in consequences under the broader social security legislation.

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Area of Law
Social Security Law
Instrument
Regulation
Concepts
Definitions & Interpretation
Exemptions & Exclusions
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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.