Explanatory Statement
Issued by the authority of the Minister for Social Services
Social Security Act 1991
Social Security (Home Equity Access Scheme – Rate of Compound Interest) Determination 2026
Purpose
The Social Security (Home Equity Access Scheme – Rate of Compound Interest) Determination 2026 (the Determination) repeals and remakes the Social Security (Pension Loans Scheme – Rate of Compound Interest) Determination 2021 (the 2021 Determination).
The Determination is in the same terms as the 2021 Determination, but gives effect to the renaming of the pension loans scheme in primary legislation, where the scheme is now referred to in the Social Security Act 1991 (Social Security Act) as the home equity access scheme. No substantive aspects of the scheme are affected by the Determination, and the rate of compound interest previously set by the 2021 Determination is unchanged. The Determination also rectifies a technical issue whereby the 2021 Determination was inadvertently registered incorrectly.
Background
Home equity access scheme
The home equity access scheme allows eligible Australian residents of age pension age to supplement their retirement incomes through an Australian Government loan, secured by a charge against the person’s real property in Australia. The loan becomes a debt payable to the Commonwealth and accrues interest, and the total amount a person can borrow (the maximum loan amount) is restricted based on the person’s age and the equity in their real assets. The debt is usually recovered from the person once the property is sold or, if the person dies, from the person's estate (see the explanatory memorandum to the Social Services and Other Legislation Amendment (Supporting Retirement Incomes) Bill 2018).
On 1 January 2022, as a result of market research conducted under the 2021-22 Budget measure Increasing the Flexibility of the Pension Loans Scheme, the pension loans scheme was renamed in policy to the home equity access scheme. The renaming of the scheme reflects that participation is not limited only to persons who receive a pension.
Division 4 of Part 3.12 of the Social Security Act provides for the home equity access scheme as administered by the Department of Social Services. Similarly, Subdivision E of Division 11 to Part IIIB of the Veterans’ Entitlements Act 1986 (Veterans’ Entitlements Act) sets out the legislative framework for participation in the scheme under that Act, as administered by the Department of Veterans’ Affairs.
Compound rate of interest
The Determination is made under subsection 1135(4) of the Social Security Act. The Determination sets the compound rate of interest that is payable on a loan under the home equity access scheme, for the purposes of subsection 1135(3) of the Social Security Act.
The Determination maintains the compound interest rate of 3.95 per cent per annum set by the 2021 Determination, which has been in place since 1 January 2022. Prior to this, the compound interest rate had been 4.50 per cent per annum since 1 January 2020. The reduction made by the 2021 Determination, and continued in this Determination, makes the home equity access scheme an accessible option for retirees who wish to use the equity in their home or other real estate assets to enhance their retirement living standards.
The Determination also impacts participants accessing the scheme under the Veterans’ Entitlements Act, due to the operation of subsection 52ZC(3) of that Act.
Determination
The Determination repeals and replaces the 2021 Determination to address a technical issue whereby the 2021 Determination was incorrectly registered as a notifiable instrument instead of a legislative instrument, due to administrative error. The 2021 Determination has been publicly available on the Federal Register of Legislation as a notifiable instrument. However, the Minister’s power to determine the compound interest rate under subsection 1135(4) of the Social Security Act is by legislative instrument. The repeal and remake of the 2021 Determination by the Determination provides certainty and ensures the Determination has clear status as a legislative instrument, in accordance with subsection 1135(4).
The Determination also incorporates references to “home equity access scheme”. This reflects amendments to the Social Security Act and the Veterans’ Entitlements Act, made by Part 2 of Schedule 5 to the Regulatory Reform Omnibus Act 2025, which formally renamed the pension loans scheme as the home equity access scheme in law. These amendments commenced on 5 December 2025. In addition to ensuring consistency with primary legislation, the amendments will make it easier for prospective and current participants in the home equity access scheme to locate information about the scheme, navigate the relevant legislative regime, and interact with the Australian Government regarding their participation.
Similar technical amendments to rename the scheme in other relevant legislative instruments are also provided in the Social Security Legislation Amendment (Renaming Pension Loans Scheme) Determination 2026, made by the Minister for Social Services, and the Social Security (Pension Loans Scheme – Market Value) Amendment (Renaming Scheme) Determination 2026, made by the Secretary of the Department of Social Services.
The Determination does not contain any substantive amendments to the legislative regime governing the operation of the home equity access scheme, including the compound interest rate. Rather, the Determination seeks to rectify a registration issue and make technical consequential amendments to rename the scheme, consistent with the changes made to primary legislation.
Commencement
The Determination commences on the day after it is registered on the Federal Register of Legislation.
Authority
The Determination is made under subsection 1135(4) of the Social Security Act. Subsection 1135(4) provides that the Determination is a legislative instrument.
Under subsection 33(3) of the Acts Interpretation Act 1901, where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend, or vary any such instrument. In making the Determination, the Minister is relying on this subsection in conjunction with the instrument-making power in subsection 1135(4) of the Social Security Act.
The Determination is a legislative instrument for the purposes of the Legislation Act 2003 and is subject to disallowance.
Consultation
Services Australia and the Department of Veterans’ Affairs were consulted on the text of the Determination. These agencies supported the Determination.
It was not necessary to consult with home equity access scheme participants. This is because the Determination addresses a technical issue and updates the name of the home equity access scheme, but does not make any substantive amendments affecting the operation of the scheme.
Availability of independent review
Decisions made under the social security law in relation to the home equity access scheme, including in relation to the amount of a participant’s loan debt and the interest rate applicable to the debt, are generally subject to internal and external merits review under Parts 4 and 4A of the Social Security (Administration) Act 1999.
Explanation of the provisions
Details of the Social Security (Home Equity Access Scheme – Rate of Compound Interest) Determination 2026
Section 1 – Name
Section 1 states how the instrument is to be cited, that is, as the Social Security (Home Equity Access Scheme – Rate of Compound Interest) Determination 2026.
Section 2 – Commencement
Section 2 sets out a table providing for the commencement of the Determination on the day after it is registered on the Federal Register of Legislation.
Section 3 – Authority
Section 3 provides that the Determination is made under subsection 1135(4) of the Social Security Act.
Section 4 – Schedules
Section 4 provides that each instrument that is specified in a Schedule to the Determination is amended or repealed as set out in the applicable items in that Schedule, and any other item in a Schedule to the Determination has effect according to its terms.
Schedule 1 to the Determination provides for the repeal of the 2021 Determination.
Section 5 – Rate of compound interest
This section provides that the rate at which compound interest is payable under subsection 1135(3) of the Social Security Act is 3.95 per cent per annum.
Schedule 1 – Repeals
Item 1 repeals the whole of the 2021 Determination. The 2021 Determination is replaced by the Determination in the same terms, including setting the same compound interest rate for the purposes of the home equity access scheme. However, references to the “pension loans scheme” are replaced with “home equity access scheme” to reflect recent amendments to the name of the scheme in the Social Security Act.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Social Security Act 1991
Social Security (Home Equity Access Scheme – Rate of Compound Interest) Determination 2026
The Social Security (Home Equity Access Scheme – Rate of Compound Interest) 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 repeals and remakes the Social Security (Pension Loans Scheme – Rate of Compound Interest) Determination 2021 (the 2021 Determination).
The Determination is in the same terms as the 2021 Determination, but gives effect to the renaming of the pension loans scheme in primary legislation, where the scheme is now referred to in the Social Security Act 1991 (Social Security Act) as the home equity access scheme. No substantive aspects of the scheme are affected by the Determination, and the rate of compound interest previously set by the 2021 Determination is unchanged. The renaming of the scheme reflects that participation is not limited only to persons who receive a pension.
The Determination also rectifies a technical issue whereby the 2021 Determination was inadvertently registered incorrectly.
Human rights implications
The Determination engages the following human rights under the International Covenant on Economic, Social and Cultural Rights:
- the right to social security (Article 9); and
- the right to an adequate standard of living (Article 11).
The home equity access scheme allows eligible Australians to improve their living standards in retirement by taking out a loan from the Australian Government, secured against the person’s real estate assets. This supports the right to social security and the right to an adequate standard of living by enabling older Australians, who are age pension age or older, to use the social security system to access financial support through the equity in their real estate assets. Participation in the home equity access scheme is entirely voluntary, and the scheme includes safeguards to limit the amount of debt participants can accrue.
Home equity access scheme debts incur compound interest which, together with the loan principal, is payable by the recipient. The interest rate is intended to be reasonable and proportionate, taking into account the cost of administration, risk of non-recovery of debt and the market in which the scheme is operating. The Determination provides that interest rate for the home equity access scheme, which is consistent with the rate provided in the 2021 Determination.
The Determination does not contain any substantive amendments to the legislative regime governing the operation of the home equity access scheme, including the compound interest rate. Rather, the Determination addresses a registration issue and makes technical consequential amendments to rename the scheme, consistent with the changes made to primary legislation. These consequential amendments will enhance the administration of the scheme, by making it easier for prospective and current participants in the home equity access scheme to locate information about the scheme, navigate the relevant legislative regime, and interact with the Australian Government regarding their participation in the scheme.
Conclusion
The Determination is compatible with human rights as it promotes and supports the right to social security and the right to an adequate standard of living. To the extent the Determination may limit these rights, those limitations are reasonable, necessary and proportionate.
The Hon Tanya Plibersek MP, Minister for Social Services