EXPLANATORY STATEMENT
Social Security (Loan Fringe Benefits – Market Rate of Interest) Determination 2018
The Social Security (Loan Fringe Benefits – Market Rate of Interest) Determination 2018 (the Determination) is made under subsection 1157Q(4A) of the Social Security Act 1991 (the Act).
Background
Section 1157Q of the Act provides the method for working out the value of a loan fringe benefit. Under the method statement in subsection 1157Q(1), step 2 requires the notional rate of interest for the loan to be worked out in accordance with subsections 1157Q(2), (3) or (4). Subsections 1157Q(2) and (3) specify notional rates of interest for the tax years ending 30 June 1993 and 1995 respectively.
Subsection 1157Q(4) provides that the notional rate of interest for any subsequent tax year is the market rate of interest for 1 April in the preceding tax year. Subsection 1157Q(4A) defines the market rate of interest for the purposes of subsection 1157Q(4). The market rate of interest for a particular day is the lowest variable rate of interest for a housing loan or the lowest variable rate of interest for any other loan that is available on that day from a bank which is one of four banks specified in this Determination.
In addition to the power to make this Determination under subsection 1157Q(4A) of the Act, subsection 33(3) of the Acts Interpretation Act 1901 provides that 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. Accordingly, the Social Security (Loan Fringe Benefits) (Market Rate of Interest) Determination No. 1 will be repealed by this Determination.
Purpose
The purpose of the Determination is to specify the four banks for the purposes of subsection 1157Q(4A) of the Act.
Consultation
The Department of Human Services was consulted in the preparation of the Determination.
Regulatory Impact Analysis
The Determination is not regulatory in nature and will have no regulatory impact on individuals, business, activity or competition.
Explanation of provisions
Section 1 of the instrument states the name of the determination is the Social Security (Loan Fringe Benefits – Market Rate of Interest) Determination 2018.
Section 2 states that the determination commences the day after it is registered.
Section 3 provides that the determination is made under subsection 1157Q(4A) of the Social Security Act 1991.
Section 4 specifies that the Social Security (Loan Fringe Benefits) (Market Rate of Interest) Determination No. 1 is repealed as set out in Schedule 1.
Section 5 defines Act as the Social Security Act 1991.
Section 6 provides that for subsection 1157Q(4A) of the Act, the following banks are specified:
(a) Australia and New Zealand Banking Group Limited;
(b) Commonwealth Bank of Australia;
(c) National Australia Bank Limited;
(d) Westpac Banking Corporation.
Schedule 1 – Repeals
Item 1 repeals the Social Security (Loan Fringe Benefits) (Market Rate of Interest) Determination No. 1.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Social Security (Loan Fringe Benefits – Market Rate of Interest) Determination 2018
The Social Security (Administration) (Loan Fringe Benefits – Market Rate of Interest) Determination 2018 (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 specifies the four major banks that are used to establish the market rate of interest available on a particular day for housing and other loans for the purposes of calculating the amount of loan fringe benefit that is to be included as adjusted taxable income under the Commonwealth Seniors Health Card income test.
The banks are the Australia and New Zealand Banking Group Limited, the Commonwealth Bank of Australia, the National Australia Bank Limited and the Westpac Banking Corporation. As these banks provide over 80 per cent of housing loans in Australia, they are considered to be the most appropriate source for establishing the market rate of interest.
Human rights implications
The Determination engages the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights. 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 is compatible with human rights as it ensures that a person’s resources are appropriately assessed for the purposes of establishing qualification for a Commonwealth Seniors Health Card.
Conclusion
The Determination is compatible with human rights as it does not raise any human rights issues.
The Minister for Families and Social Services, the Hon Paul Fletcher MP