EXPLANATORY STATEMENT
Social Security (Exempt Lump Sum) (Thalidomide Class Action Payment) Determination 2014
Summary
Paragraph 8(11)(d) of the Social Security Act 1991 (the Act) allows the Secretary of the Department of Social Services (DSS) 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 effect of this Determination is that a Thalidomide Class Action Payment, a one-off lump sum payment made pursuant to the settlement of a class action by persons in Australia and New Zealand who suffered thalidomide-caused injuries that was approved by the Victorian Supreme Court on 7 February 2014, 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 DSS 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 the Thalidomide Class Action Payment from the assessment of a person’s income will beneficially impact that person’s eligibility for a social security payment or if they are eligible, the rate of the payment they are entitled to receive.
The initial exemption of the Thalidomide Class Action 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.
Class Action by Thalidomide Survivors
A class action was brought against the distributor of the drug thalidomide by persons in Australia and New Zealand who suffered thalidomide-caused injuries (thalidomide survivors). On 7 February 2014, settlement of the class action was approved by the Victorian Supreme Court. As a result of the settlement of the class action, each of the thalidomide survivors will be paid directly a one-off lump sum amount. The amount of each payment varies based on the severity of injury suffered. Several thalidomide survivors receive income support payments, most commonly Disability Support Pension payments. There is potential for the payments resulting from the settlement of the class action to reduce or cancel income support entitlements of thalidomide survivors unless exempted under the Act. This Determination is consistent with previous determinations made under paragraph 8(11)(d) of the Act for lump sum payments that are compensatory in nature.
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 the day after it is registered on the Federal Register of Legislative Instruments.
Section 3 defines “Thalidomide Class Action Payment” to mean a lump sum payment made pursuant to the settlement of a class action by persons in Australia and New Zealand who suffered thalidomide-caused injuries that was approved by the Victorian Supreme Court on 7 February 2014.
Section 4 states that for the purpose of paragraph 8(11)(d) of the Act a Thalidomide Class Action Payment is an exempt lump sum.
Consultation
Consultation was not necessary as the Determination is only relevant to the administration of the Act. No other Government department or authority, business or community group is impacted in regard to social security payments.
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) (Thalidomide Class Action Payment) Determination 2014
The effect of the Determination is that a person who receives a Thalidomide Class Action Payment (Thalidomide Payment) will not have that Thalidomide 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 changes made by the Determination will operate beneficially as a Thalidomide 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 the Thalidomide Payment is not exempted, a person in receipt of the Thalidomide Payment may not be eligible for a social security payment or, if they are eligible, their rate of payment might be reduced.
The exemption of the Thalidomide 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.
The exemption provided by the Determination will ensure that receipt of a Thalidomide 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 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.
Ian Joyce, A/g Branch Manager, Seniors and Means Test Branch, as a delegate of the Secretary of the Department of Social Services.