Veterans' Entitlements (Attribution of Income — Ineligible Deductions) Determination 2020

Administered by Department of Veterans' Affairs

Legislation au F2020L00177 In force Legislative Instrument

Legislation content

EXPLANATORY STATEMENT

Issued by the authority of the Minister for Veterans’ Affairs

Veterans’ Entitlements Act 1986

Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020

Purpose

Sections 52ZZO and 52ZZZO of the Veterans’ Entitlements Act 1986 (the Veterans’ Entitlements Act) provide that to calculate the income of a company or trust, for the purposes of Division 11A of Part IIIB, any deductions allowable under the Income Tax Assessment Act 1936 (ITAA 36) or Income Tax Assessment Act 1997 (ITAA 97) can be deducted from the gross income of the company or trust, unless the Repatriation Commission (the Commission) has determined that they are an ineligible deduction, or an ineligible part of a deduction.

The purpose of this Determination is for the Commission to determine those tax deductions that are ineligible to be applied against the gross income of a company or trust for means test purposes.

This Determination revokes Schedule 8 (the Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2001 - Instrument 2014 No. R70) of the Veterans’ Affairs (Legislative Instrument Re-making Exercise) Instrument 2014 (Instrument 2014 No. R62) (the 2014 Instrument).

The revoked Schedule is remade as the Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020 (Instrument 2020 No. R2) (the 2020 Determination) and has been updated to address changes made to the ITAA 36 and ITAA 97 since the 2014 Instrument was made and to include new ineligible deductions of a similar nature to those deductions that were ineligible under the revoked Schedule.

Background

The Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000 amended both the Social Security Act 1991 and the Veterans’ Entitlements Act to give effect to a measure in the Government's 2000-2001 Budget to revise the means test treatment of private companies and private trusts.

The aim of the measure was to ensure that clients who hold their assets in private companies or private trusts receive comparable treatment under the means test to those customers 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.

Commencement

This Determination commences on the day after it is registered on the Federal Register of Legislation.

Consultation

The Determination has been made to align with the current instrument (the Social Security (Attribution of Income – Ineligible Deductions) Determination 2017) which is applicable to the equivalent provisions of the Social Security Act 1991.

Both Treasury and the Department of Human Services were consulted by the Department of Social Services in the preparation of that Determination.

Regulation Impact Statement (RIS)

This Determination is not regulatory in nature and will have no regulatory impact on individuals, business, activity or competition.

Explanation of the provisions

Part 1

Section 1 of the Determination states the name of the Determination and section 2 states that the Determination commences the day after it is registered on the Federal Register of Legislation.

Section 3 states that this Determination revokes Schedule 8 (the Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2001 - Instrument 2014 No. R70) of the Veterans’ Affairs (Legislative Instrument Re-making Exercise) Instrument 2014 (Instrument 2014 No. R62) (the 2014 Instrument).

 

Section 4 contains the interpretation provisions for the Determination.

Part 2

Section 5 of the Determination provides that for the purposes of subsections 52ZZO(3) and 52ZZZO(3) of the Veterans’ Entitlements Act, those deductions listed in Parts 1 and 2 of Schedules 1 and 2 (respectively) of the Determination, that would normally be allowable deductions under the ITAA 36 or ITAA 97 are ineligible deductions, for the purposes of Division 11A of Part IIIB of the Veterans’ Entitlements Act.

Sections 6 to 11 provide rules that deal with the application of subsections 52ZZO(5) and 52ZZZO(5) of the Veterans’ Entitlements Act in relation to particular types of deductions.

Section 6 provides that, where a company or trust pays wages or a salary to an attributable stakeholder of that entity, or an associate of such a person, then such part of the salary or wages payment that is greater than reasonable remuneration for the work undertaken will be an ineligible part of the allowable deduction.

Section 7 provides that any part of an interest payment to a creditor of a company or trust will be an ineligible part of the allowable deduction in so far as it is greater than a reasonable rate of interest.

Section 8 provides that, where a company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock from one year to the next in accordance with an election under section 70-45 of the ITAA 97, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.

Section 9 provides that, where a primary production company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock from one year to the next in accordance with an election under section 70-45 of the ITAA 97, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.

Section 10 provides that, where a company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock during an income year in accordance with an election under section 70-50 of the ITAA 97, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.

Section 11 provides that, where a primary production company or trust artificially depreciates the value of its trading stock by changing its method of valuing the stock during an income year in accordance with an election under section 70-50 of the ITAA 97, then any part of the depreciation which is solely attributable to this altered valuation method will be an ineligible part of the allowable deduction.

Schedule 1 – Part 1

This part provides a list of deductions, which would otherwise be allowable under ITAA 36, but are determined to be ineligible deductions for the purposes of section 52ZZO of the Veterans’ Entitlements Act.

This list has been updated to reflect amendments to the ITAA 36 since the 2014 Instrument was made and to include new deductions of a similar nature to those contained in the 2014 Instrument.

Schedule 1 – Part 2

This part provides a list of deductions, which would otherwise be allowable under the ITAA 97, but are determined to be ineligible deductions for the purposes of section 52ZZO of the Veterans’ Entitlements Act.

This list has been updated to reflect amendments to the ITAA 97 since the 2014 Instrument was made and to include new deductions of a similar nature to those contained in the 2014 Instrument.

Schedule 2 – Part 1

This part provides a list of deductions, which would otherwise be allowable under the ITAA 36, but are determined to be ineligible deductions for the purposes of section 52ZZZO of the Veterans’ Entitlements Act.

This list has been updated to reflect amendments to the ITAA 36 since the 2014 Instrument was made and to include new deductions of a similar nature to those contained in the 2014 Instrument.


Schedule 2 – Part 2

This part provides a list of deductions, which would otherwise be allowable under ITAA 97, but are determined to be ineligible deductions for the purposes of section 52ZZZO of the Veterans’ Entitlements Act.

This list has been updated to reflect amendments to the ITAA 97 since the 2014 Instrument was made and to include new deductions of a similar nature to those contained in the 2014 Instrument.


Statement of Compatibility with Human Rights

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

 

Veterans’ Entitlements (Attribution of Income - Ineligible Deductions) Determination 2020

 

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

Sections 52ZZO and 52ZZZO of the Veterans’ Entitlements Act 1986 (the Veterans’ Entitlements Act) provide that to calculate the income of a company or trust, for the purposes of Division 11A of Part IIIB, any deductions allowable under the Income Tax Assessment Act 1936 (ITAA 36) or Income Tax Assessment Act 1997 (ITAA 97) can be deducted from the gross income of the company or trust, unless the Repatriation Commission has determined that they are an ineligible deduction, or an ineligible part of a deduction.

The Veterans’ Entitlements (Attribution of Income - Ineligible Deductions) Determination 2020 (the Determination) specifies the tax provisions in the ITAA 36 and ITAA 97 that are ineligible to be applied against the gross income of a company or trust for means test purposes under the Veterans’ Entitlements Act.

The ineligible deductions in the Determination are not allowable deductions means test purposes since they do not relate to the operating expenses of the trust or company in current reporting period.  They relate to transactions such as prior year expenses that are allowed under tax rules to be expensed over a number of future years, prior year losses, capital investment, changes in valuation of trading stock for accounting purposes, setup costs, costs involves in changes of ownership. 

Means test assessments under the Veterans’ Entitlements Act measure a person's current capacity to contribute towards their own support. As such, these transactions are not relevant in determining the current level of income support a person needs based on their individual circumstances.

Human rights implications

The Determination 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 Determination is compatible with human rights as it ensures a person’s current resources are appropriately assessed for the purposes of ascertaining the person’s assessable income for means testing purposes under Division 11A of Part IIIB of the Veterans’ Entitlements Act.

Conclusion

The Determination is compatible with human rights as they do not raise any human rights issues.

 

 

 

Repatriation Commission

Rule-maker

 

 

Overview

The Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020 was enacted to address the issue of ineligible deductions being applied against the gross income of companies and trusts for means test purposes under the Veterans’ Entitlements Act 1986. This Determination was made under the authority of the Minister for Veterans’ Affairs and aims to ensure that the means test assessments for veterans' entitlements accurately reflect the current capacity of individuals to contribute towards their own support. The Determination revokes the previous Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2001 and updates the list of ineligible deductions to align with changes in the Income Tax Assessment Act 1936 and 1997, as well as including new ineligible deductions of a similar nature. The Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020 specifies the tax provisions in the Income Tax Assessment Act 1936 and 1997 that are ineligible to be applied against the gross income of a company or trust for means test purposes under the Veterans’ Entitlements Act. The ineligible deductions are those that do not relate to the operating expenses of the trust or company in the current reporting period, such as prior year expenses, prior year losses, capital investment, changes in valuation of trading stock for accounting purposes, setup costs, and costs involved in changes of ownership. This Determination ensures that the means test assessments under the Veterans’ Entitlements Act appropriately assess a person's current resources to determine the level of income support they need based on their individual circumstances.

Scope and Application

The Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020 applies to private companies and trusts, providing specific rules for the calculation of income for means test purposes under the Veterans’ Entitlements Act 1986. This legislation is designed to ensure that clients holding their assets in private companies or trusts receive equitable treatment under the means test compared to those holding assets directly. It identifies tax deductions that are ineligible to be applied against the gross income of these entities when determining a person's current capacity to support themselves. The scope of this Determination is national, extending across the Commonwealth of Australia, and it revokes the previous Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2001. The Determination is updated to reflect changes in the Income Tax Assessment Acts 1936 and 1997 and includes new ineligible deductions. While the Determination itself does not extend or restrict application through subordinate instruments, it is part of a broader legislative framework that may be supplemented by further regulations or administrative decisions by the Repatriation Commission.

Key Provisions

The Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020 (the Determination) specifies the tax deductions that are ineligible for the means test purposes under the Veterans’ Entitlements Act 1986. Sections 52ZZO and 52ZZZO of the Veterans’ Entitlements Act allow for deductions under the Income Tax Assessment Act 1936 (ITAA 36) and Income Tax Assessment Act 1997 (ITAA 97) to be deducted from the gross income of a company or trust, unless the Repatriation Commission has determined that they are ineligible deductions. The Determination lists the ineligible deductions in Schedules 1 and 2, which include deductions for excessive wages, unreasonable interest payments, artificially depreciated trading stock, and other similar deductions. The Determination imposes several obligations on companies and trusts. Firstly, it requires them to ensure that any deductions claimed are eligible under the Veterans’ Entitlements Act. Specifically, companies and trusts must avoid claiming deductions that are listed as ineligible in Schedules 1 and 2 of the Determination. Additionally, if a deduction is partially ineligible, such as a salary payment that exceeds reasonable remuneration, only the ineligible part will be disallowed. Companies and trusts must also maintain proper records and documentation to substantiate their deductions and demonstrate compliance with the Determination. Breaching the provisions of the Determination can result in serious consequences. Although the Determination itself does not specify penalties, the Veterans’ Entitlements Act contains provisions for penalties in case of non-compliance. For instance, under section 240 of the Veterans’ Entitlements Act, an individual may be subject to a pecuniary penalty of up to $22,200 for each offence if they knowingly or recklessly make a false statement or representation in relation to an entitlement. Additionally, the Repatriation Commission may impose administrative penalties for incorrect claims or failure to report income accurately, which can further impact the individual's eligibility for veterans' entitlements. In summary, the Veterans’ Entitlements (Attribution of Income – Ineligible Deductions) Determination 2020 plays a crucial role in ensuring that only legitimate deductions are considered when calculating the income of companies and trusts for means test purposes. By specifying ineligible deductions, the Determination helps maintain the integrity of the means test and ensures that veterans' entitlements are awarded based on the individual's current financial capacity. Companies, trusts, and individuals must adhere to the requirements of the Determination to avoid potential penalties and maintain their eligibility for veterans' benefits.

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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.