EXPLANATORY STATEMENT
Issued by the authority of the Minister for Families and Social Services
Social Security Act 1991
Social Security (Pension Loans Scheme—Rate of Simple Interest) Determination 2018
Purpose
The Social Security (Pension Loans Scheme—Rate of Simple Interest) Determination 2018 (the Determination) is made under subsection 1135(4) of the Social Security Act 1991 (the Act), as continued in effect by subclause 86(2) of Schedule 1A to the Act.
The purpose of this Determination is to set the rate of simple interest that is payable on a loan under the previous Pension Loans Scheme at 7 per cent. A person could have qualified for a loan under the previous Pension Loans Scheme until 10 July 1996.
In addition to the power to make this Determination under subsection 1135(4) 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 Accordingly, the Pension Loans Scheme—Rate of Simple Interest Determination 1997 will be repealed by this Determination.
Background
The previous Pension Loans Scheme allowed eligible Australians of Age Pension age to improve their income in retirement by taking out a loan in the form of a reverse mortgage on their real estate from the Australian Government. The previous Pension Loans Scheme was replaced by the current Scheme in July 1996. While there are no new entrants to the previous Pension Loans Scheme, some loans under that Scheme are still in existence. The interest rate applied to loans under the previous Pension Loans Scheme is a simple interest rate.
This Determination sets the rate of simple interest that is payable on a loan under the previous Pension Loans Scheme at 7 per cent. This has been the simple interest rate since 1997. As this Determination applies only to people who are participating in the previous Pension Loans Scheme, maintaining the simple interest rate at 7 per cent is appropriate, given the small number of people remaining in that Scheme.
Commencement
This Determination commences on the day after it is registered.
Consultation
The Department of Human Services was consulted regarding implementation of this Determination.
This Determination maintains the existing simple interest rate of 7 per cent. Public consultation was therefore seen as unnecessary.
Regulation Impact Statement (RIS)
This Determination does not require a Regulatory Impact Statement, as it is not regulatory in nature, does not impact on business activity and will have no, or minimal compliance costs.
Explanation of the provisions
Section 1 provides the name of this instrument is the Social Security (Pension Loans Scheme—Rate of Simple Interest) Determination 2018.
Section 2 provides that the Determination commences on the day after it is registered on the Federal Register of Legislation.
Section 3 provides that the authority for making the Determination is subsection 1135(4) of the Social Security Act 1991, as continued in effect by subclause 86(2) of Schedule 1A to that Act.
Section 4 provides that each instrument that is specified in a Schedule to this instrument is amended or repealed as set out in the applicable items in the Schedule concerned, and any other item in a Schedule to this instrument has effect according to its terms.
Section 5 provides that the rate of simple interest that is payable on a loan under the previous Pension Loans Scheme is 7 per cent. The note following this section makes clear that this Determination applies only to people who are participating in the previous Pension Loans Scheme.
Schedule 1, item 1 repeals the Pension Loans Scheme—Rate of Simple Interest Determination 1997.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
This Legislative Instrument is the Social Security (Pension Loans Scheme – Rate of Simple Interest) Determination 2018
The Social Security (Pension Loans Scheme – Rate of Simple 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
This Determination is made under Subsection 1135(4) of the Social Security Act 1991 (the Act) and determines the rate of simple interest that is payable on a loan under the previous Pension Loans Scheme at 7 per cent, as continued in effect by subclause 86(2) of Schedule 1A to the Act.
Human rights implications
The Determination engages the right to social security.
The previous Pension Loans Scheme allowed eligible Australians of Age Pension age to improve their income in retirement by taking out a loan in the form of a reverse mortgage on their real estate from the Australian Government. This supports the right to social security.
Subsection 1135(4) of the Act allows the Minister for Families and Social Services to determine the rate of simple interest that is payable on a loan under the previous Pension Loans Scheme.
The Pension Loans Scheme has an interest rate to provide fair and reasonable loans to those eligible by providing protection against the risk of non-recovery of debt, and covering capital and administrative costs. This Determination provides that interest rate for the previous Pension Loans Scheme. The Determination therefore enables the sustainable operation of the previous Pension Loans Scheme.
Conclusion
This Determination provides that individuals participating in the previous Pension Loans Scheme are applied the simple interest that is payable on a loan under the previous Pension Loans Scheme at 7 per cent. The Determination ensures the sustainable operation of the previous Pension Loans Scheme. As the Pension Loans Scheme is a part of the Australian social security system, this Determination furthers the right to social security, and is therefore compatible with Australia’s human rights obligations.
The Hon Paul Fletcher MP, Minister for Families and Social Services