Veterans' Entitlements (Attribution of Income) Principles 2025

EXPLANATORY STATEMENT

Veterans' Entitlements (Attribution of Income) Principles 2025

EMPOWERING PROVISION

The Repatriation Commission makes this instrument under section 52ZZZQ of the Veterans’ Entitlements Act 1986 (the Act).

PURPOSE

This instrument revokes schedule 4 to the Veterans’ Affairs (Legislative Instrument Re-making Exercise) Instrument 2014 (the 2014 Instrument) and remakes it as a new standalone instrument ahead of its sunsetting date. Schedule 4 contains the Veterans’ Entitlements (Attribution of Income) Principles 2002. 

The instrument has been re-made with no substantive changes from Schedule 4 to the 2014 Instrument.

OVERVIEW

Section 52ZZZQ of the Act provides that the Repatriation Commission may formulate principles to be complied with by the Commission when making decisions under a number of sections of the Act, including sections 52ZZK, 52ZZL, 52ZZP and 52ZZQ.

This instrument sets out decision-making principles that the Commission must comply with in making determinations under sections 52ZZK, 52ZZL, 52ZZP and 52ZZQ of the Act. Such determinations relate to preventing the double counting of attribution and distribution income from a company or trust in relation to an attributable stakeholder of that entity and also the appropriate treatment of capital distributions. The determinations made under sections 52ZZP and 52ZZQ relate to finding appropriate derivation and attribution periods for the company or trust and the attributable stakeholders so that the typical earnings of the company or trust are fairly attributed to an effected individual. An equivalent instrument exists under the Social Security Act 1991.

Part IIIB of the Act specifies the means test treatment of private companies and private trusts. The provisions in Part IIIB aim to ensure that people who hold their assets in private companies or private trusts receive comparable treatment under the means test 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.

Sections 52ZZK and 52ZZL Act relate to the way in which income of a company or trust can be attributed, or not attributed, to an attributable stakeholder of that entity. Section 52ZZP and 52ZZQ deals with finding a typical earnings period for a company or trust, the derivation period and attribution period during which an amount equal to these ‘typical earnings’ will be held against the individual as personal income for means testing purposes. These decision-making principles will assist the Commission in making these various determinations.

The following minor technical changes have been made to the drafting of schedule 4 to the 2014 Instrument:

• authority provision added—new section 3;
• repeal provision added as new section 3A—noting this section will be automatically repealed under section 48C of the Legislation Act 2003. Again, this is intended to preserve consistency with the numbering in the equivalent Social Security Act instrument.

EXPLANATION OF PROVISIONS

Part 1 deals with preliminary matters.

Section 1 provides that the name of the instrument is the Veterans' Entitlements (Attribution of Income) Principles 2025.

Section 2 provides that the instrument commences on the day after the day it is registered.

Section 3 sets out the authority for the Repatriation Commission making the instrument, namely section 52ZZZQ of the Act.

Section 3A repeals schedule 4 to the 2014 Instrument.

Section 4 is the definition section. It signposts terms used in the instrument that have a defined meaning in the Act. It also defines other terms used in the instrument, namely “Act”—to mean the Veterans’ Entitlements Act 1986; and “attributable income”—in relation to an individual who is an attributable stakeholder of a company or trust, to mean income that the individual is taken to receive during an attribution period of the company or trust.

Section 4A sets out the purpose of the instrument.

Part 2 deals with excluded income.

Division 2.1 consists of sections 5, 6, 7 and 8 and deals with no double counting – both members of couple are attributable stakeholders.

This Division, and Division 2.2, are intended to stop the double counting of attributable income and distribution income from a company or trust to a couple, where the operation of section 52ZZL of the Act would be unable to prevent the double counting by itself. This problem comes about because of the rules under the Act that relate to working out a couple’s income and assets for veterans' entitlements purposes.

Section 5 provides that this division will apply, in relation to an individual, where:

• the individual is a member of a couple;
• both members of the couple are attributable stakeholders of a particular company or trust;
• both members of the couple have been attributed income from the company or trust  during the relevant period; and
• the individual’s partner has also received a distribution from the company or trust  during this same time.

Section 6 states that where the sum of a couple’s distribution income from a company or trust  is equal to their attribution income from that same source and the partner’s distribution income is greater than his or her attribution income then, the Commission must consider whether an amount equal to the difference between the partner’s two income levels should be excluded income in relation to the individual.

Section 7 provides that where the sum of a couple’s distribution income from a company or trust is less than their attribution income from that same source and the partner’s distribution income is greater than his or her attribution income then the Commission must consider whether an amount equal to the difference between the partner’s two income levels should be excluded income in relation to the individual.

Section 8 states that where the sum of a couple’s distribution income from a company or trust is greater than their attribution income from that same source and the individual’s distribution income is less than his or her attribution income then the Commission must consider whether an amount equal to the difference between the individual’s two income levels should be excluded income in relation to the individual.

Division 2.2 consists of section 9 and deals with no double counting – one member of a couple is not attributable stakeholder.

Section 9 provides that this division will apply, in relation to an individual, where:

• the individual is a member of a couple;
• the individual is an attributable stakeholder of a particular company or trust but his or her partner is not;
• the individual has been attributed income from the company or trust during the relevant period; and
• the individual’s partner has received a distribution from the company or trust during this same period.

If this section applies, the Commission must consider determining that an amount equal to the amount of the distribution received by the individual’s partner is excluded income in relation to the individual.

Division 2.3 consists of sections 10, 11 and 12 and deals with when individuals who are investors makes genuine transfer of capital.

Section 10 provides that this division will apply where an individual (the investor) makes a genuine transfer of capital to a company or trust in regard to which the investor is not an attributable stakeholder.

Section 11 states that for a genuine transfer of capital to exist the investor must:

• receive shares or units in the company or trust equivalent in value to the value of the capital transferred as consideration for the transfer;
• receive a legal or equitable right to a share of the capital of the company or trust;
• receive a legal or equitable right to receive dividends or distributions from the company or trust; and
• be over 18 years of age.

Section 12 provides that where an individual, who is an attributable stakeholder of a company or trust, is attributed with income that has actually been distributed to a genuine investor, then the Commission must consider excluding income in relation to the individual equal to the amount of the distribution paid to the genuine investor, multiplied by the individual’s income attribution percentage.

Part 3 deals with excluded income – no double counting of attributed income.

Division 3.1 consists of sections 13 and 14 and deals with no double counting of attributed income – general.

Section 13 states that for the purposes of determining whether income distributed to an individual, who is an attributable stakeholder, is to be excluded from the individual’s income for income testing purposes under section 52ZZL of the Act, the Commission must take into account whether the individual is an attributable stakeholder of more than one controlled private company or trust. The Commission also needs to consider whether any company or trust, in relation to which the individual is an attributable stakeholder, has received, whether directly or indirectly, a dividend or distribution from another controlled private company or trust.

Generally, where section 46A of the Act applies to a dividend or distribution payment, this payment will be held against an income support pensioner, for income testing purposes, for the following 12 months. 

Section 14 provides that where section 46A does apply to a payment in relation to an individual and the company or trust that made the payment to the individual has suffered a significant decrease in its earning capacity due it either having been wound up, or otherwise ceasing to exist, or has been subject to circumstances that have adversely affected its profitability then the Commission needs to consider whether the application of section 46A of the Act to the individual would be unfair or unreasonable. If the Commission decides that this is the case then the Commission can determine, under section 52ZZL of the Act, that the amount, or part of the amount, that is subject to the application of section 46A should not be included in the income of the individual for income testing purposes.

Division 3.2 consists of sections 15 and 16 and deals with no double counting of attributed income – distribution by company to all attributable stakeholders.

Section 15 provides that where an individual is an attributable stakeholder of a company and that company gives an equal, taking into account each attributable stakeholders asset attribution percentage, distribution of capital to all of its attributable stakeholders then the Commission must consider whether all, or a part, of the distribution should not be included within the ordinary income of the individual for veterans' entitlements purposes.

Section 16 states that where a company makes a distribution to an individual who is an attributable stakeholder, which does not fall within the operation of sections 14 and 15, above, and the amount of the distribution is less than or equal to the income attributed to the individual under section 52ZZK of the Act then the Commission must consider whether the amount of the distribution should be excluded from the individual's income assessment for veterans' entitlements purposes. Alternatively, if the amount of the distribution is greater than the amount of income attributed to the individual under section 52ZZK of the Act then the Commission must consider whether a part of the distribution equal to the amount of income attributed to the individual should be excluded from the individual’s income assessment for veterans' entitlements purposes.

Division 3.3 consists of sections 17 and 18 and deals with distribution by trusts.

Section 17 provides that where an individual is an attributable stakeholder of a trust and that trust gives an equal, taking into account each attributable stakeholders asset attribution percentage, distribution of capital to all of its attributable stakeholders then the Commission must consider whether all, or a part, of the distribution should not be included within the ordinary income of the individual for veterans' entitlements purposes.

Section 18 states that where a trust makes a distribution to an individual who is an attributable stakeholder, which does not fall within the operation of sections 14 and 17, above, and the amount of the distribution is less than or equal to the income attributed to the individual under section 52ZZK of the Act then the Commission must consider whether the amount of the distribution should be excluded from the individual's income assessment for veterans' entitlements purposes. Alternatively, if the amount of the distribution is greater than the amount of income attributed to the individual under section 52ZZK of the Act then the Commission must consider whether a part of the distribution equal to the amount of income attributed to the individual should be excluded from the individual’s income assessment for veterans' entitlements purposes.

Part 4 consists of section 19 and deals with determination of derivation period.

Generally a derivation period in relation to a company or trust will be a tax year. However, at times, a tax year will not give an accurate indication of the current rate of income of a company or trust. Where this is the case the Commission can determine that another period more accurately reflects the company or trust’s typical income. In determining what is a suitable derivation period, section 19 says that the Commission must take the following matters into account:

• the ordinary income of the company or trust during the relevant tax year;
• the ordinary income of the company or trust for any other period/s that is/are a typical earnings period/s for that entity;

• any circumstances affecting the company or trust during any of the above periods; and
• whether those circumstances would justify using a different derivation period than the relevant tax year.

Part 5 consists of section 20 and deals with determination of attribution period.

Section 20 provides for the determination of an appropriate attribution period, both in relation to an individual, and the company or trust in regard to which he or she is an attributable stakeholder, and also in relation to a derivation period. To determine an attribution period the Commission must have regard to the following matters:

• the ordinary income of the individual for the derivation period;
• the ordinary income of the individual for any other period/s that is/are a typical earnings period/s for the individual;
• any circumstances affecting the individual during any of the above periods; and
• any circumstances that could be regarded as likely to affect the individual’s ordinary income.

CONSULTATION

The Department did not consult directly with individuals likely to be affected by the remake of this instrument. This was not considered necessary given the remake is administrative in nature to prevent the instrument from arbitrarily sunsetting on 1 April 2025. The remaking of this instrument will maintain the same policy intent and treatment to set out decision-making principles that the Commission must comply with in making determinations under sections 52ZZK, 52ZZL, 52ZZP and 52ZZQ of the Act. These determinations relate to modifying the way in which Division 11A of Part IIIB of the Act would otherwise maintain the assets and liabilities of a company or trust against an individual receiving a means tested income support payment.

HUMAN RIGHTS IMPLICATIONS

This instrument is compatible with the human rights and freedoms recognised or declared under section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011. A full statement of compatibility is set out in Attachment A.

Repatriation Commission

Rule-Maker

Attachment A

Statement of Compatibility with Human Rights

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

Veterans' Entitlements (Attribution of Assets) Principles 2025

This disallowable legislative instrument 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 Disallowable Legislative Instrument

The Veterans' Entitlements (Attribution of Income) Principles 2025 (the instrument) repeals Schedule 4 to the Veterans’ Affairs (Legislative Instrument Re-making Exercise) Instrument 2014 and remakes it as a standalone instrument ahead of its sunsetting date of 1 April 2025.

Sections 52ZZK and 52ZZL of the Veterans Entitlements Act 1986 (‘the Act’) allow the Commission to disregard certain income when determining the total assessable income for a controlled private trust or a controlled private company. Sections 52ZZP and 52ZZQ of the Act allow the Commission to determine the derivation period and attribution period for assessing a person’s attributed income.

This instrument specifies the principles that the Commission must comply with when deciding to disregard certain income and when determining the derivation and attribution periods.

A determination under section 52ZZK or 52ZZL of the Act ensures that a person’s income is not double counted, by preventing the same amount being treated as both ordinary income and attributed income. A determination under section 52ZZP or 52ZZQ of the Act allows the derivation and attribution periods to be set with regard to the trust or company’s ordinary earnings, to ensure the person’s attributed income reflects the amount the person is receiving in actual income.

Human rights implications

This disallowable legislative instrument engages and promotes the right to social security contained in article 9 of the International Covenant on Economic Social and Cultural Rights. 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 instrument 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 Part IIIB of the Act.

Conclusion

This disallowable legislative Instrument is compatible with human rights as it engages and promotes the right to social security by ensuring that rules designed assess pension under the Act are applied flexibly and fairly.

Repatriation Commission

Rule-Maker