Veterans' Entitlements Act 1986 - Determination under subsection 46L(1) (23/06/2006)

Administered by Department of Veterans' Affairs

Legislation au F2006L02113 Not in force Legislative Instrument

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ATTACHMENT F

 

EXPLANATORY STATEMENT

 

Veterans' Entitlements Act 1986

Determination under subsection 46L(1)

No. R17/2006

 

 

EMPOWERING PROVISION

 

Subsection 46L(1) of the Veterans' Entitlements Act 1986.

 

PURPOSE

 

To specify financial investments that are not financial assets for the purposes of section 46D or 46E of the Veterans' Entitlements Act 1986 (VEA) with the result that the owner of the assets is not regarded as deriving deemed income under sections 46D or 46E VEA from such assets for the purposes of the means-test for certain benefits.

 

The Instrument sets out dates from which the financial investments are not to be regarded as financial assets.

BACKGROUND

 

Subsection 46L(1) is commonly used where financial investments made by pensioners have failed, that is, specifically where:

 

 

  • the financial investments (or a class of financial investments) are not operating to provide returns; and
  • investors have no access at all to their investment capital (this includes cases where the investors have commenced all reasonable action to obtain access to the investment and the investment is currently inaccessible); and
  • the cessation of returns and the inaccessibility of capital has been caused by either:

­         a legal impediment imposed by a third party (that is, other than the investor or the fund manager); or

­         conditions that were not reasonably foreseeable when the investor obtained the investment (this includes adverse economic conditions such as the 1987 share market crash or the 1990/91 property downturn).

 

The poor performance of an investment is insufficient grounds for a determination under subsection 46L(1).

Subsection 46L(1) is also used where investments are made by pensioners in church or charitable investment funds, which are used for expenditure on eligible capital works within Australia, for the purchase of:

 

 

  • land and the construction, extension or refurbishment of buildings, including the provision of integral fixtures and fittings, that are associated with the provision of community and welfare services, including churches, primary or secondary schools, hospitals and nursing homes; or
  • capital equipment by non-profit organisations for the purpose of assisting unemployed people and community groups establish income producing enterprises.

 

In the case of pooled church or charitable development funds, subsection 46L(1) is used only for those funds that:

           Bruce Billson

 

  • accept money for on-lending to various groups within their organisation, provided that at least 50% of those loans and deposits are used for expenditure on eligible capital works; or
  • accept money for reinvestment to generate income to be applied for use within their organisation, provided that at least 50% of the net income is used for expenditure on eligible capital works; or
  • use a combination of investment strategies provided that at least 50% of the deposits and loans and the income is used for expenditure on eligible capital works.

 

In the case of loans that are not paid into a pooled church or charitable development funds, then only that part of the loan which is used for capital expenditure on eligible capital works will be subject to a determination under subsection 46L(1).

 

In the case of failed financial investments, unless a determination under subsection 46L is made, the pensioner will be deemed by the income-deeming provisions in the VEA to receive an income from the investment because the investment may not yet have been valued by a liquidator as worthless and the deemed income will reduce the amount of pension otherwise payable to the person.

 

In the case of church and charitable investment funds, the pensioner's investment has not failed.  Instead the charitable nature of the investment enables the pensioner to invest their money interest free, or for a lower or higher return than the deeming provisions would otherwise apply.

 

Unless a determination under subsection 46L is made for a church or charitable investment fund, the pensioner may be deemed by the income-deeming provisions in the VEA to receive an income from the investment at a higher rate than the actual return the pensioner earns, derives or receives. 

 

By making a determination under subsection 46L for a church and charitable investment fund, the deemed (higher) rate of income will not apply where a pensioner chooses to invest their money interest free or at a lower rate than the deemed rate.  In these cases, the actual return the pensioner earns, derives or receives from the investment will be used to determine the amount of a pensioner’s benefit under the VEA. 

 

Where the pensioner chooses to earn, derive or receive a return which is higher than the deemed rate of income which would otherwise have been applied had a determination under subsection 46L not been made, then the higher actual return will be used to determine the amount of a pensioner’s benefit under the VEA.

SPECIFIC PURPOSE OF THE ATTACHED INSTRUMENT

 

The attached Instrument is only concerned with failed investments.

 

The Instrument is intended to operate as follows:

 

By specifying that financial investments made by a person with the Westpoint Group, are not to be regarded as a financial asset for the purposes of sections 46D or 46E of the Act from:

 

(a)   where a period can be established for which a return on the financial investment was last paid, the day after the end of that period; or

 

(b)   where no period under paragraph (a) is able to be established, the later of :

(i)     22 November 2005, being the date the Australian Securities and Investments Commission (ASIC) commenced legal proceedings in relation to a number of companies within the Westpoint Group; or

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(ii)  the day on which an application, or request, for exemption under subsection 46L(1) of the Act was made, or sought, by or on behalf of the person.

 

DATE OF MAKING

 

The date the attached Instrument was made by the Hon Bruce Billson, the Minister for Veterans' Affairs.

 

RETROSPECTIVITY

 

The attached instrument has retrospective effect.  It applies to financial investments from a date before the date of registration of the instrument on the Federal Register of Legislative Instruments.

Subsection 12(2) of the Legislative Instruments Act 2003 (LIA) provides (as paraphrased) that those retrospective legislative instruments that negatively affect citizens are of no effect.  The attached instrument does not fall within this prohibition because it is beneficial in nature and does not disadvantage any person or impose liabilities on any person (other than the Commonwealth).

CONSULTATION

None.  As the instrument is beneficial in nature, it was considered no useful purpose would be served by consulting interested parties.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

Subsection 4(1) LIA requires Explanatory Statements for legislative instruments to describe any document incorporated-by-reference into the Instrument and to indicate how the document may be obtained.

 

No documents are incorporated-by-reference into the Instrument.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Overview

The Veterans' Entitlements Act 1986 was enacted to ensure that veterans and their families receive the necessary financial support and benefits they are entitled to, particularly when it comes to pensions and other forms of assistance. This Act was introduced to address the specific needs of veterans and their families, providing them with the security and support they deserve after their service. The Act is overseen by the Parliament of Australia, with the policy objective being to provide fair and adequate support to those who have served in the Australian Defence Force. The Act includes provisions for deeming certain financial investments as assets for the purposes of calculating pension benefits, which can impact the income assessed for means-testing. The explanatory statement for the Veterans' Entitlements Act 1986 Determination under subsection 46L(1) No. R17/2006, made by the Hon Bruce Billson, the Minister for Veterans' Affairs, aims to address situations where financial investments have failed or are inaccessible, ensuring that veterans are not unfairly penalised for such circumstances. This determination has retrospective effect, applying to financial investments from a date before the instrument's registration on the Federal Register of Legislative Instruments, and is beneficial in nature, not imposing any disadvantages or liabilities on individuals other than the Commonwealth.

Scope and Application

The Veterans' Entitlements Act 1986 Determination under subsection 46L(1) No. R17/2006 applies to financial investments made by individuals, particularly pensioners, that have failed due to specific circumstances such as the cessation of returns and inaccessibility of capital, or investments made in church or charitable funds used for eligible capital works. The determination aims to ensure that the owner of these failed investments is not regarded as deriving income from them for the purposes of the means-test for certain benefits under the Act. The instrument has retrospective effect and applies to financial investments made prior to its registration on the Federal Register of Legislative Instruments. The attached instrument specifies that financial investments made by a person with the Westpoint Group are not to be regarded as financial assets for the purposes of sections 46D or 46E of the Act from a specific date determined by the cessation of returns or the commencement of legal proceedings against the group. The instrument does not disadvantage any person or impose liabilities on any person other than the Commonwealth, and no consultation was considered necessary due to its beneficial nature.

Key Provisions

The main operative sections of this determination, under subsection 46L(1) of the Veterans' Entitlements Act 1986 (VEA), specify certain financial investments that will not be regarded as financial assets for the purposes of sections 46D and 46E of the VEA. This means that the owner of these assets will not be considered to derive deemed income from them, thereby affecting the means-test for certain benefits. Specifically, financial investments made by individuals with the Westpoint Group are excluded from being considered financial assets from particular dates, which are determined based on the cessation of returns or the inaccessibility of capital due to legal impediments or unforeseen conditions (subsection 46L(1)). The obligations and requirements imposed by this determination involve ensuring that the specified financial investments are not treated as financial assets for the purposes of income-deeming provisions in the VEA. For failed investments, this means that if the investment was not operating to provide returns and the investor had no access to their capital due to legal impediments or unforeseen conditions, these investments will not be considered financial assets. For investments in church or charitable funds, if at least 50% of the funds are used for eligible capital works, the investment will also be excluded from being considered a financial asset. This determination is intended to provide relief to pensioners who have invested in such funds, ensuring that their actual returns, rather than a deemed rate, are used to calculate their benefits under the VEA. In terms of breaches and penalties, the determination itself does not specify any offences or penalties. However, the VEA outlines various penalties for non-compliance with its provisions. For example, section 46M of the VEA imposes penalties for failing to report income or assets accurately, which could include fines up to $11,000 for individuals and $55,000 for corporations. Additionally, section 46N of the VEA provides for the recovery of overpaid benefits, which could result in financial restitution being required from the individual or entity that received the overpayment. The specific penalties would depend on the nature and severity of the breach. Overall, this determination serves to clarify and protect the financial interests of pensioners by excluding certain failed or charitable investments from the deeming provisions of the VEA. It ensures that pensioners are not unfairly disadvantaged by the poor performance of their investments or the charitable nature of their investment choices. By specifying the exact dates from which these investments will not be considered financial assets, the determination provides clear guidance and legal certainty to those affected.

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Sourced from the Federal Register of Legislation at 26 August 2026. For the latest information on Australian Government law please go to https://www.legislation.gov.au.