EXPLANATORY STATEMENT
Social Security (Exempt Lump Sum) (South Australian River Murray Sustainability Irrigation Industry Improvement Program) (Agriculture) Determination 2015
Summary
Paragraph 8(11)(d) of the Social Security Act 1991 (the Act) allows the Secretary to determine that an amount or class of amounts received by a person is an exempt lump sum for the purposes of the Act. The Secretary as far as paragraph 8(11)(d) relates to Farm Household Allowance, is the Secretary of the Department of Agriculture. The effect of this determination is that a grant under the South Australian River Murray Sustainability Irrigation Industry Improvement Program (3IP) is an exempt lump sum under paragraph 8(11)(d) of the Act.
Background
Under social security law, an income test is used to determine a person’s eligibility for a social security payment and, if they are eligible, the rate of a social security payment that is payable. An income amount earned, derived or received for a person’s own use or benefit is generally assessable as income. However, some amounts that would otherwise be income are specifically exempted.
Paragraph 8(11)(d) of the Act allows the 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 excluded from the definition of “ordinary income” under subsection 8(1) of the Act, meaning the lump sum amount is not to be taken into account under the social security income test. The exemption of grants under the 3IP from the assessment of a person’s income will beneficially impact that person’s eligibility for a social security payment or, if they are already eligible, the rate of the payment they are entitled to receive.
The determination exempts all components of the 3IP, notwithstanding that some of the components do not have a net effect on a recipient’s income for the purpose of the FHA income test. The effect of the determination is that the exemption will not apply to a component that is already not assessable income for social security purposes and will therefore be redundant. The exemption of all components of the 3IP reduces the administrative complexity of the determination.
The operation of the determination is beneficial, as the grant is not taken into account for the purposes of the FHA income test. The determination will apply retrospectively (from 1 July 2014) to ensure that individuals who have received a 3IP grant since FHA was implemented are not adversely affected. The determination is compliant with section 12 of the Legislative Instruments Act 2003.
The initial exemption of grants under the 3IP 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.
The South Australian River Murray Sustainability Irrigation Industry Improvement Program
The 3IP is jointly funded by the Department of Agriculture and Department of Environment and administered by Primary Industries and Regions South Australia (PIRSA) on behalf of the South Australian Government. The purpose of the program is to achieve water savings for the Murray Darling Basin. There are three streams under the program:
- Stream 1 – This stream offers investment in water infrastructure developments in return for the transfer of tradable water rights, funded at up to 2.5 times the average market price of Eligible Water Access Entitlement (WAE).
- Stream 2 – Under this stream, participating irrigators can sell or transfer water rights for market value.
- Stream 3 – This stream is a grant to undertake activities including the purchase of capital items. Activities are aimed at increasing the viability of farm businesses and create opportunities for economic diversification and regional development.
Effect of determination
This determination is a legislative instrument.
Explanation of Provisions
Section 1 of the determination states the name of the determination and how it is to be cited.
Section 2 states that the determination commences on 1 July 2014.
Subsection 3(1) states that for the purpose of paragraph 8(11)(d) of the Act, a payment made under the South Australian River Murray Sustainability Irrigation Industry Improvement Program is an exempt lump sum.
Subsection 3(2) states that the South Australian River Murray Sustainability Irrigation Industry Improvement Program is also known as the Irrigation Industry Improvement Program and is jointly funded by the Department of Agriculture and the Department of Environment and administered by PIRSA on behalf of the South Australian Government.
Consultation
The Department of Social Services, the Department of Human Services, the Australian Taxation Office and PIRSA were consulted regarding this determination.
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) (South Australian River Murray Sustainability Irrigation Industry Improvement Program) (Agriculture) Determination 2015
The Legislative Instrument 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 effect of the determination is that a person who receives a grant under the South Australian River Murray Sustainability Irrigation Industry Improvement Program will not have that payment assessed as income for the purposes of Farm Household Allowance.
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 changes made by the determination will operate beneficially as the grant amount will not be taken into account when assessing a person’s eligibility or rate of Farm Household Allowance (FHA) entitlements under the income test. If the grant amount is not exempted, a person in receipt of the grant may not be eligible for FHA or, if they are eligible, their rate of payment might be reduced.
The exemption of the grant 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 Social Security Act 1991.
The exemption provided by the determination will ensure that receipt of a grant will not be taken into account when assessing a person’s eligibility or rate of FHA under the Farm Household Support Act 2014 and is therefore consistent with the promotion of the right to social security.
Conclusion
This determination supports a person’s human right to social security.
Phillip Glyde, Acting Secretary of the Department of Agriculture.