EXPLANATORY STATEMENT

Social Security (Income Stream) Determination 2017

Summary

The Social Security (Income Stream) Determination 2017 (the Determination) is made under paragraph 9(1F)(ba) and subsection 1099DAA(3) of the Social Security Act 1991 (the Act).

This Determination is for the following purposes:

• To specify certain standards that a pre-1998 income stream must satisfy to meet the definition of a “defined benefit income stream” for social security purposes;
• to define the “minimum amount” in subsection 1099DAA(3) of the Act. This amount is part of the formula used to calculate the amount of income that a customer is taken to receive from an income stream product, at a minimum, where that product is subject to section 1099DAA of the Act.

The Determination commences on 1 October 2017 following the cessation of the Social Security (Income stream) Determination 2007 (‘the 2007 Determination’) on that date.

The 2007 Determination ceases operation on 1 October 2017 due to the sunsetting provisions in the Legislation Act 2003.

The Determination is in substantially the same terms as the 2007 Determination. Sections 5 and 6 of the 2007 Determination have been omitted from the Determination as these provisions were made under subparagraphs 1099DAA(1)(b)(i) and (ii) of the Act.

Subparagraphs 1099DAA(1)(b)(i) and (ii) of the Act were repealed by the Social Services and Other Legislation Amendment Act 2014 (the ‘2014 Amendment Act’) with effect from 1 January 2015.

Explanation of the Provisions

Section 1 of the Determination states the name of the Determination and section 2 sets out that the Determination commences on 1 October 2017.

Section 3 provides definitions of terms used in the Determination.

To satisfy the definition of a “defined benefit income stream” a pre-1998 lifetime income stream sourced from a defined benefit superannuation fund established before 20 September 1998 must satisfy, among other things, paragraph 9(1F)(ba) of the Act, which states that the income stream must satisfy rules that meet such standards as determined by the Minister.

Section 4 determines the relevant standards as being those included within paragraphs 1.06(2)(a) to (d) and (f) to (h) of the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regulations); ie lifetime income streams sourced from defined benefit superannuation funds established before 20 September 1998 must satisfy the requirements of paragraphs 1.06(2)(a) to (d) and (f) to (h) of the SIS Regulations to be able to be a “defined benefit income stream” for the purposes of the Act.

Section 5 sets out the method of calculating the “minimum amount”, which is used in the formula in subsection 1099DAA(3). The “minimum amount” is to be calculated in accordance with the method in Schedule 7 of the SIS Regulations; ie account balance multiplied by a specified percentage factor, with both of those terms defined in Schedule 7.

Consultation

Consultation was undertaken with the Department of Human Services and the Department of the Treasury.

Regulatory Impact Statement

This determination does not require a Regulatory Impact Statement (RIS).  This 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 (Income Stream) Determination 2017

Paragraph 9(1F)(ba) allows the Minister for Social Services to specify the standards that defined benefit pensions sourced from defined benefit superannuation funds established prior to 20 September 1998 must satisfy in order to be assessed as defined benefit income streams for social security purposes. This ensures that all defined benefit income streams are assessed for means test purposes in a consistent manner.

Subsection 1099DAA(3) of the Social Security Act 1991 (the Act) provides that the Minister for Social Services may, by legislative instrument, define the “minimum amount” to be assessed under the social security income test for certain account-based income stream products. The effect of the Determination is that it places a minimum floor for income test purposes, set in reference to the minimum level required under the Superannuation Industry (Supervision) Regulations 1994.

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 improves the administration of the means test system by ensuring greater accuracy of determining a person’s means of self-support.  The Determination is therefore consistent with the promotion of the right of social security.

Conclusion

This Determination supports a person’s human right to social security and is therefore compatible with human rights.

The Hon Christian Porter MP, Minister for Social Services