EXPLANATORY STATEMENT

Social Security (Pension Bonus Scheme  —  Non-accruing Members – Major Disaster) Declaration 2006

Summary

Under Part 2.2A of the Social Security Act 1991 (the Act) customers may register for a single lump sum bonus, provided they satisfy the qualification requirements for Age Pension.

The Pension Bonus Scheme (the scheme) allows people of age pension age to choose to continue working and defer claiming Age Pension in return for a tax-free lump sum bonus payable when they eventually claim and receive Age Pension.  The bonus is calculated as a multiple of the rate of Age Pension payable at the time the person claims Age Pension, and depends on the person's rate of Age Pension on the date of claim and the length of time over which his or her bonus has accrued.  The maximum bonus payment accrues where a person has worked for a total of five years past age pension age and has deferred claiming Age Pension.  To qualify for a bonus, a person must, among other things, not have received a social security pension or benefit after qualifying for Age Pension and must engage in gainful work of at least 960 hours a year.

It has become apparent that, as a result of some major disasters, such as Cyclone Larry in March 2006, some people who are registered in the scheme may become unemployed or have their hours of employment reduced, which may result in them failing the scheme’s work test.  Generally, a person must claim Age Pension and their Pension Bonus within 13 weeks of failing the pension bonus work test.  People affected by a major disaster may, therefore, have to claim Age Pension and their bonus earlier than they would otherwise have done, resulting in a reduced bonus (or no bonus).

The intention of the Declaration is to enable people registered with the scheme who are affected by a major disaster, to be non-accruing members of the scheme for a maximum period of 13 weeks after a loss, or reduction, of employment as a result of the major disaster.  The making of this Declaration will mean that these customers are not required to pass the work test for that period.  This means, in effect, that the period in which they are required to pass the work test is extended by the period (of up to 13 weeks) in which they have been disadvantaged by the Major Disaster. 

Scheme members benefiting from this declaration will include those who cannot return to their workplace due to a major disaster.  The members may not necessarily be involved in disaster recovery efforts but may, for example, have signed up as a volunteer with a charitable, community or welfare organisation to help with disaster recovery efforts.  This declaration will give them extra time in which to look for further work, rather than claiming Age Pension and their bonus.  Scheme members will also have the time to decide whether to work or, alternatively, claim Age Pension and their bonus.

Section 1 sets out that the name of the declaration is the Social Security (Pension Bonus Scheme – Non-accruing Members – Major Disaster) Declaration 2006 (the 2006 Declaration).

Section 2 provides that the 2006 Declaration commences on the day after it is registered in accordance with the Legislative Instruments Act 2003. 

Subsection 92Q(1) of the Act requires that a declaration be made by written notice published in the Gazette.  Section 56 of the Legislative Instruments Act 2003 provides that this requirement under subsection 92Q(1) is satisfied if the instrument is registered on the Federal Register of Legislative Instruments.

Section 3 contains interpretation provisions. 

Section 4 provides that a member of the Pension Bonus Scheme is a non‑accruing member (as provided by Subdivision B, Division 3, Part 2.2A of the Act) if that person is a member, for the period specified in section 6, of any of the following: 

• a member, whose amount of gainful work has been reduced by a major disaster (subsection 4(a)); or
• a member, whose partner is a scheme member, and the person’s partner’s period of gainful work has been reduced by a major disaster (paragraph 4(b)(i)); or 
• a member, whose partner is a member of the corresponding scheme under Part IIIAB of the Veterans’ Entitlements Act 1986, and the person’s partner’s period of gainful work has been reduced by a major disaster (paragraph 4(b)(ii)).

Although a member’s bonus does not continue to accrue during any period of non-accruing membership, this period may give the member more time to find work before having to make a decision about claiming Age Pension and the pension bonus.

Section 5 provides for members of the Pension Bonus Scheme to request that this Declaration does not to apply to them for all, or part, of the period.  For example, some members may have their working hours reduced by a major disaster but not to the extent that, at the end of the full-year, or part-year, period the member will be unable to pass the work test.  In these circumstances, members may wish to continue to be an accruing member of the scheme.

Section 6 provides that members of the Pension Bonus Scheme, or a member’s registered partner, whose period of gainful work has been reduced due to a major disaster can be taken to be non‑accruing members of the scheme for a period up to a maximum of 13 weeks from the date the Major Disaster occurred. 

Consultation

Consultation was undertaken with the Department of Veterans’ Affairs.

This instrument is beneficial to customers and, accordingly, public consultation was seen as unnecessary.

Retrospectivity

None.