Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022

Administered by Department of Veterans' Affairs

Legislation au F2022L00443 In force Legislative Instrument

Legislation content

EXPLANATORY STATEMENT

 

Issued by the authority of the Minister for Veterans’ Affairs

 

Veterans’ Entitlement Act 1986

 

Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022

 

 

Summary

 

The Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022 (the Specification) is made under subparagraph 206(1)(b)(ii) of the Veterans’ Entitlements Act 1986 (the Act).

 

Subparagraph 206(1)(b)(ii) provides that the Repatriation Commission may, on behalf of the Commonwealth, by determination in writing, waive or defer the right of the Commonwealth to recover debts under the Act included in a class of debts specified by the Minister [for Veterans’ Affairs] by notice in the Gazette (publication in Gazette is satisfied by publication on the Federal Register of Legislative Instruments (see: section 56 of the Legislation Act 2003)).

 

The purpose of the Specification is to specify a class of debts.  The Repatriation Commission, on behalf of the Commonwealth, may waive or defer the right of the Commonwealth to recover a debt included in the class.  It is envisaged the Repatriation Commission, in line with the approach taken by the Secretary of the Department of Social Services, will choose to waive a debt rather than defer the right of the Commonwealth to recover it.

 

Background

 

This Specification remakes the Veterans’ Entitlement (Class of Debts – Self Managed Superannuation Funds and Small APRA Funds) Specification 2012 which is due to sunset on 1 April 2022.  As part of this Specification, income streams sourced from a self managed superannuation fund or a small APRA (Australian Prudential Regulation Authority) fund:

 

  • before 20 September 2004 (or that were commuted and rolled over on or after 20 September 2004 from those income streams and retained their 100 percent exemption); or
  • between 20 September 2004 and 19 September 2007 (or that were commuted and rolled over on or after 20 September 2007 from those income streams and retained their 50 percent asset-test exemption); and

 

which comply with the requirements of section 5JA or 5JB of the Act, are 100 per cent or 50 per cent asset-test exempt.  If these income streams are commuted, the asset-test exemption may be retained provided the new income stream complies with the requirements of the following instruments:

 

  • Veterans’ Entitlements (Guidelines for Determining whether Income Stream is Asset-test Exempt) Determination 2022; or

 

  • The Veterans’ Entitlements (Retention of Exemption for Asset-test Exempt Income Streams) Principles 2022. 

 

 

These requirements include commuting the income stream and purchasing a similar income stream product from a retail provider.  This option is available at any time to the owner of the income stream under this Specification.

 

These income streams are required, among other things, to meet a ‘high probability’ actuarial test that the provider of the income stream will be able to pay the income stream as required, so as to comply with the requirements of section 5JA or 5JB of the Act.  However, some self managed superannuation funds or small APRA funds may no longer be able to meet this requirement due to changes in the value of assets backing their income stream.

 

Where an income stream does not meet the high probability test, it may be restructured by purchasing a retail asset-test exempt product (which will comply with the requirements of the Act). In these circumstances, the income stream will continue to be assessed as asset-test exempt.

 

Alternatively, the income stream may be restructured into a market-linked income stream either from a retail provider or within the self managed superannuation fund.  However, this new income stream will no longer meet the requirements of section 5JA or 5JB of the Act.  The new market-linked income stream will also not meet the requirements of section 5JBA as the income stream’s commencement day would not meet the requirements of subparagraph 5JBA(1)(a)(i) of the Act.  Accordingly, the market-linked income stream will be 100 percent asset tested.

 

Under the Act, a consequence of restructuring an income stream which was sourced from a self managed superannuation fund or small APRA fund to a market-linked income stream, will mean that the difference between the amount that has been paid by way of income support where the income stream was asset-test exempt and the amount that would have been payable had the income stream been asset-tested, is a debt due to the Commonwealth under section 52ZMA of the Act. 

 

This Specification is a purely beneficial instrument that will allow for this class debts to be waived or the right to recover it deferred.  This will enable the Repatriation Commission to waive or defer the Commonwealth’s right to recover debts arising under the Act incurred by persons whose income streams, sourced from a self managed superannuation fund or a small APRA fund before 20 September 2004 (or were commuted and rolled over on or after 20 September 2004 from those income streams and retained their 100 percent exemption) and which complied with the requirements of sections 5JA and 5JB of the Act, are commuted to a market-linked income stream.  A waiver or deferral may apply irrespective of whether the asset-test exempt income stream does or does not meet the high probability test.  In other words, a waiver or deferral is available at any time, provided the income stream is commuted to a 100 percent asset tested market-linked income stream.

 

Commencement

 

The Specification commences on the day after registration.

 

Consultation

 

The Department has consulted with the Department of Social Service during the drafting of the equivalent instrument. 

 

Regulation Impact Statement (RIS)

 

The Department of Social Services advise that a Regulatory Impact Statement was not required for the equivalent Specification under the Social Security Act 1991 (OBPR Reference ID: 43680). The Office of Best Practice Regulation advised DVA that a RIS is not required.

 

Explanation of the provisions

 

Section 1 states the name of the Specification is the Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022.

 

Section 2 provides a table setting out the commencement date for the whole of the Instrument. All parts of the Instrument commences on the day after it is registered.

 

Section 3 provides that the authority for making this instrument is subparagraph 206(1)(b)(ii) of the Act.

 

Section 4 contains definitions relevant to the Specification as follows:

 

Act is defined to mean the Veterans’ Entitlements Act 1986.

 

APRA is defined to mean the Australian Prudential Regulation Authority.

 

Market-linked income stream is defined to mean an income stream that meets the requirements of section 5JBA of the Act, other than subparagraph 5JBA(1)(a)(i) which requires the income stream’s commencement day to happen during the period from 20 September 2004 to 19 September 2007 (both dates inclusive). This definition is intended to cover the income streams that are restructured into a market-linked income stream as they do not meet the high probability test.

 

Self managed superannuation fund is defined to have the same meaning as in section 17A of the Superannuation Industry (Supervision) Act 1993.

 

Small APRA fund is defined to have the same meaning as in subsection 1017BB(6) of the Corporations Act 2001.

 

The note to this section provides that the following terms are defined in the Act:

  • asset-test exempt income stream; and

asset-tested income stream (long term)

 

Section 5 provides that Schedule 1 repeals the Veterans’ Entitlement (Class of Debts – Self Managed Superannuation Funds and Small APRA Funds) Specification 2012.

 

Section 6 specifies the class of debt that may be waived or deferred.  A debt is in a specified class if a person owes a debt to the Commonwealth under section 52ZMA of the Act which did not arise because the person knowingly made a false or misleading statement, or knowingly provided false information to the Repatriation Commission or the Commonwealth (paragraphs 6(a) and (b)).

 

The specified class of debts must also meet the requirements of subparagraphs 6(c)(i)(A) and (B).  That is, immediately before the commencement of the Specification, the income stream that is relevant for the purposes of section 52ZMA:

 

  • was an asset-test exempt income stream that met the requirements of either section 5JA or 5JB of the Act; or

 

  • an asset-tested income stream (long term) that was previously an asset-test exempt income stream but due to changes in the value of the assets backing the income stream, failed to meet the high probability actuarial test.  As these income streams are no longer able to meet the requirements of either paragraph 5JA(1)(b) or 5JB(1A)(b) of the Act, they are unable to retain their asset-test exemption.  In these circumstances, these income streams would be assessed as asset‑tested income streams and this change of status would normally trigger the operation of section 52ZMA of the Act. 

 

Further, paragraph 6(c) provides that a debt is in a specified class if, before the commencement of the Specification, the income stream, being one that meets the requirements of subparagraphs 6(c)(i)(A) or (B) of the Specification, was also sourced from a self managed superannuation fund or a small APRA fund (subparagraphs 6(c)(ii)(A) and (B)).

 

Paragraph 6(d) provides that the debt is in the specified class if the relevant income stream for the purposes of subparagraph 206(1)(b)(ii) is commuted and rolled over into a 100 percent asset tested market-linked income stream on or after the commencement of this Specification (paragraph 6(d)).

 

Schedule 1 – Repeals

Item 1 repeals Veterans’ Entitlements (Class of Debts – Self Managed Superannuation Funds and Small APRA Funds) Specification 2012.

 


Statement of Compatibility with Human Rights

 

Prepared in accordance with Part 3 of the Human Rights

(Parliamentary Scrutiny) Act 2011.

 

Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022

 

Summary

 

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

 

The Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022 (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 legislative instrument

The instrument is made by the Minister for Veterans’ Affairs under subparagraph 206(1)(b)(ii)  of the Veterans’ Entitlement Act 1986 (the Act).  It replaces the previous Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2012, is due to sunset on 1 April 2022.

Subparagraph 206(1)(b)(ii) of the Act provides that the Repatriation Commission may decide to waive or defer the Commonwealth’s right to recover debts arising under the Act that are included as a class of debts specified by the Minister by legislative instrument.

The effect of this instrument is to specify a class of debt that may be waived or deferred for the purposes of subparagraph 206(1)(b)(ii) of the Act.

The class of debt is in respect of certain debts incurred by pensioners under the Act.  The debts relate to pension overpayments brought about because certain superannuation income streams (assets) should have been taken into account (assets test) when assessing the level of pension for the pensioners in question.  The more assessable assets a person has, the less their pension will be.  If assessable assets are not taken into account for the purposes of determining the level of pension for a person, as in the current case, then an overpayment occurs which is a debt to the Commonwealth.

In the current case, the assets that became assessable were previously not assessable and pension was not overpaid in respect of them.  The assets became assessable because, due to poor financial conditions generally, they could no longer meet the requirements that would make them non-assessable (i.e. exempt from the assets test). 

 

In particular the assets did not satisfy the “high probability test” i.e. that an independent actuary is satisfied that there is a high probability that the superannuation fund that governs the asset (income stream) will be able to make payments to the owner of the income stream as required under the contract that established the income stream.  In short, poor financial conditions meant the income streams underperformed and could not generate the necessary payments and it was the capacity to meet the required level of payment that made the income stream asset test exempt.

 

In these circumstances the Minister for Veterans’ Affairs decided to give the Repatriation Commission the option of waiving or deferring the debts arising from pension overpayments due to the income streams in question no longer being asset-test exempt, meaning the pension should have been reduced accordingly. 

 

Essentially this has the effect of enabling the previously asset-test exempt income streams to continue as asset-test exempt income streams which would have been the case but for the poor financial conditions that resulted in the underperformance of superannuation funds.

Human rights implications

This instrument engages the right to social security under 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 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 instrument is compatible with Australia’s obligations in relation to the right to social security, and does not restrict a person’s eligibility to receive a social security benefit or reduce the benefits to which a person may be entitled.

This instrument is entirely beneficial, as it specifies a class of debts that may be waived by the Repatriation Commission.

Conclusion

The instrument is compatible with human rights as it’s effects are wholly administrative in nature, and do not raise any human rights issues.

 

Andrew Gee

Minister for Veterans’ Affairs

Rule Maker

 

Overview

The Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022 was introduced to address the problem of pension overpayments due to changes in the financial conditions of certain superannuation income streams. The instrument was made under subparagraph 206(1)(b)(ii) of the Veterans’ Entitlement Act 1986 by the Minister for Veterans’ Affairs. It provides the Repatriation Commission the option to waive or defer the right of the Commonwealth to recover debts incurred by pensioners as a result of these income streams no longer being exempt from the asset test. This exemption means the pension should have been reduced accordingly. The policy objective of this instrument is to ensure that the social security system operates effectively by addressing the unintended consequences of financial changes in certain superannuation funds, thereby maintaining the integrity of the asset test. The Specification is a beneficial measure that ensures the previously asset-test exempt income streams can continue as such, despite poor financial conditions that resulted in the underperformance of superannuation funds. It engages the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights, ensuring that the social security scheme provides a minimum essential level of benefits to all individuals and families. This instrument is compatible with Australia’s obligations in relation to the right to social security and does not restrict a person’s eligibility to receive a social security benefit or reduce the benefits to which a person may be entitled.

Scope and Application

The Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022 applies to the debts incurred by individuals, specifically pensioners, under the Veterans’ Entitlements Act 1986. The legislation is concerned with the class of debts related to pension overpayments resulting from superannuation income streams that should have been considered in the assets test when determining the pension level for these individuals. These debts arise when previously exempt income streams, which should have been taken into account for pension assessment, become assessable due to poor financial conditions that make them unable to meet the high probability test required for exemption. The act applies to debts that did not arise from fraudulent statements or false information provided to the Repatriation Commission or the Commonwealth. The geographic reach of the act is national, as it applies to the whole of Australia. The act provides the Repatriation Commission with the authority to waive or defer the right of the Commonwealth to recover debts that fall into the specified class, offering a measure of relief to affected pensioners. This act replaces the Veterans’ Entitlements (Class of Debts – Self Managed Superannuation Funds and Small APRA Funds) Specification 2012, which is due to sunset on 1 April 2022.

Key Provisions

The Veterans’ Entitlements (Class of Debts – Self Managed Superannuation and Small APRA Funds) Specification 2022 specifies a class of debts that the Repatriation Commission can waive or defer for the Commonwealth under the Veterans’ Entitlements Act 1986 (the Act). This class of debts includes those incurred by pensioners due to overpayments that arose because certain superannuation income streams should have been considered in the asset test when determining their pension level. The debts fall under section 52ZMA of the Act and are those that did not result from the person knowingly making false statements or providing false information to the Repatriation Commission or the Commonwealth. Under section 6 of the Specification, the class of debts includes those where the income stream, prior to the commencement of the Specification, was an asset-test exempt income stream that met the requirements of either section 5JA or 5JB of the Act, or an asset-tested income stream (long term) that was previously an asset-test exempt income stream but failed to meet the high probability actuarial test due to changes in the value of the assets backing the income stream. Additionally, the income stream must have been sourced from a self managed superannuation fund or a small APRA fund and must have been commuted and rolled over into a 100 percent asset-tested market-linked income stream on or after the commencement of this Specification. The Repatriation Commission, acting on behalf of the Commonwealth, has the authority to waive or defer the right to recover these specified debts, providing relief to pensioners who would otherwise be liable for overpayments due to changes in the financial conditions of their superannuation funds. This waiver or deferral allows the previously asset-test exempt income streams to remain as such, despite the underperformance of the superannuation funds caused by poor financial conditions. The Specification also includes obligations and requirements for the parties governed by it. For example, section 5 provides that Schedule 1 repeals the Veterans’ Entitlement (Class of Debts – Self Managed Superannuation Funds and Small APRA Funds) Specification 2012, ensuring that the new Specification takes effect from the day after it is registered. Section 4 contains definitions relevant to the Specification, clarifying terms such as 'APRA', 'market-linked income stream', 'self managed superannuation fund', and'small APRA fund'. These definitions help ensure that all parties involved understand the scope and application of the Specification. In terms of consequences for breach, the Specification does not explicitly outline offences, penalties, or civil/criminal consequences for non-compliance. However, the overarching aim of the Specification is to provide administrative relief to pensioners and to ensure that the social security system operates effectively and fairly. By specifying a class of debts that can be waived or deferred, the Specification seeks to address situations where pensioners may be unfairly burdened due to changes in the financial conditions of their superannuation funds. The focus is on providing relief and ensuring the social security system operates as intended, rather than imposing penalties for non-compliance.

Legal classification tags

Area of Law
Veterans' Affairs
Instrument
Regulation
Concepts
Definitions & Interpretation
Offence Provisions
Reporting & Disclosure Obligations

Interactions

Authorises

All Versions

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.