EXPLANATORY STATEMENT
Social Security (Means Test Treatment of Private Companies – Excluded Companies) Declaration 2017
Summary
Subsection 1207N(5) of the Social Security Act 1991 (the Act) provides that the Secretary may, by legislative instrument, declare that each company included in a specified class of companies is an excluded company for the purposes of section 1207N.
The Social Security (Means Test Treatment of Private Companies – Excluded Companies) Declaration 2017 specifies a class of companies for the purposes of subsection 1207N(5).
The effect of a company being an excluded company is that the assets and income of such a company will not be attributed to an individual for the purposes of ascertaining the person's assets or income for means testing purposes under Part 3.18 of the Act.
Background
In 2000 the means test treatment of private companies and private trusts was revised and the Act and the Veterans’ Entitlements Act 1986 were amended by the Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000. As a result, the Secretary of the Department of Social Services can declare that a Private Company is an excluded company for the purposes of the means testing arrangements in the Act.
The measure was aimed at ensuring that people who hold their assets in private companies or private trusts receive comparable treatment under the means testing requirements to those who hold their assets directly. The assets and income of the structure will be attributed to the person or persons who control the company or trust, or to the person or persons who were the source of the capital or corpus of the company or trust.
One of the conditions for attributing an asset or the income of a company to an individual under the Act is that the company is a ‘designated private company’. Subsection 1207N(1) provides that a company is a designated private company if certain criteria are satisfied. One of these criteria is that ‘the company is not an excluded company’. In short, a designated private company cannot be an excluded company.
The Declaration, therefore, excludes a class of companies from the definition of designated private company with the result that the assets and income of such an excluded company will not be attributed, under Part 3.18 of the Act, to an individual for means testing purposes.
The Declaration maintains the exclusions set out in the Social Security (Means Test Treatment of Private Companies – Excluded Companies) Declaration 2001 (‘the 2001 Declaration’) made by the Acting Secretary of the Department of Family and Community Services on 18 December 2001.
The Declaration will commence on 1 October 2017 following the cessation of the 2001 Declaration on that date. The 2001 Declaration ceases operation on 1 October 2017 due to the sunsetting provisions in the Legislation Act 2003.
The Declaration is in substantially the same terms as the 2001 Declaration.
Explanation of Provisions
Part 1
Section 1 states the name of the Declaration.
Section 2 states that the Declaration commences on 1 October 2017.
Section 3 sets out the purpose of the Declaration.
Section 4 revokes the Social Security (Means Test Treatment of Private Companies – Excluded Companies) (DEEWR) Declaration 2008 (the 2008 DEEWR Declaration).
The 2008 DEEWR Declaration was made by the Secretary of the Department of Education, Employment and Workplace Relations (DEEWR) on 14 June 2008 when DEEWR had responsibility under the Administrative Arrangements Order for the means testing of certain social security payments. The Department of Social Services now has sole responsibility for the means testing of all social security payments.
The 2008 DEEWR declaration is no longer required as it excludes the same class of companies from the definition of ‘designated private company’ as this Declaration does.
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.
Section 5 provides definitions for the purposes of the Declaration.
community purpose means a purpose that is intended to benefit primarily the members of a particular community or group.
government body includes a department or agency of the Commonwealth; a department or agency of a State or Territory; a municipal corporation or other local government body; or a body corporate in which the Commonwealth, a State or a Territory body holds a controlling interest.
income has the same meaning as in subsection 1207P(7) of the Act. Subsection 1207P(7) of the Act defines income to have the ordinary meaning of that expression.
indigenous-held land has the same meaning as in section 4B of the Aboriginal and Torres Strait Islander Act 2005. Indigenous-held land is defined in that Act to be indigenous-held land if an interest in the land is held by an Aboriginal or Torres Strait Islander corporation, or an interest in the land is held by an Aboriginal person or Torres Strait Islander. Subsections 4B(2) to 4B(4) provide exceptions to this definition.
Part 2
Section 6 specifies that each company that meets the requirements of subsection 6(2) is an excluded company. Where the sole or dominant purpose of a company is to receive, manage and distribute property transferred to it, directly or indirectly, by a government body (as defined in section 5), for a community purpose, then the company is an excluded company. A company will also be an excluded company if it holds, manages or disposes of indigenous-held land for a community purpose.
Paragraph 6(2)(c) provides that where the sole or dominant purpose of a company is to receive, manage and distribute income generated from the use of indigenous-held land, for a community purpose, then, that company is an excluded company. This will include situations where a company’s sole or dominant purpose is to receive, manage or distribute income which can include mining royalties generated from the use of indigenous-held land for a community purpose.
Consultation
Consultation regarding this instrument was undertaken with the Department of Human Services.
Regulatory Impact Statement
This Declaration does not require a Regulatory Impact Statement (RIS). This declaration 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 (Means Test Treatment of Private Companies – Excluded Companies) Declaration 2017
Subsection 1207N(5) of the Social Security Act 1991 (the Act) provides that the Secretary may, by legislative instrument, declare that a company in a specified class of companies is an excluded company for the purposes of section 1207N.
The Social Security (Means Test Treatment of Private Companies — Excluded Companies) Declaration 2017 (the Declaration) specifies classes of companies that are excluded companies.
The effect of a company being an excluded company is that the assets and income generated within such a company will not be attributed to an individual for the purposes of ascertaining the person’s assets or income for means testing purposes under Part 3.18 of the Act in relation to payments administered by the Department of Social Services (DSS).
Human rights implications
The Declaration 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 Declaration will operate beneficially and support a person’s human rights as the effect of the Declaration is to ensure that assets and income generated within certain excluded companies will not be attributed to an individual for the purposes of ascertaining the person’s assets or income for means testing purposes under Part 3.18 of the Act.
Conclusion
This Declaration supports a person’s human right to social security and is therefore compatible with human rights.
Finn Pratt AO PSM
Secretary
Department of Social Services