EXPLANATORY STATEMENT
Veterans’ Entitlements Income (Exempt Lump Sum – Australian Health Management Group and Medibank Private Merger Payment) Determination
Instrument No. R9/2009
Paragraph 5H(12)(c) of the Veterans’ Entitlements Act 1986
The Purpose and Operation of the Attached Instrument
A payment is deemed not to be ordinary income for means-testing under the Veterans’ Entitlements Act 1986 (VEA) once it is stated to be an exempt lump sum by a determination under paragraph 5H(12)(c) of the VEA. The amount specified in the attached Determination at Part 2 of the Schedule as an exempt lump sum is an exempt lump sum for the purposes of the definition of ‘ordinary income’ in subsection 5H(1) of the VEA.
The attached instrument provides for the exemption of these payments from the income assessment of the person’s or the person’s partner’s service pension or income support supplement.
Background
On 10 December 2008 the Federal Court approved the merger of the Australian Health Management Group Limited with Medibank Private Limited. The merger is expected to be implemented on 15 January 2008.
As a result of the merger of the Australian Health Management Group and Medibank Private, participating Australian Health Management Group members will receive an entitlement in the form of a cash payment. A participating member is a person who was an Australian Health Management Group member on 13 July 2008 and remained a member on 6 December 2008 or who was a Prescribed Member as at 6 December 2008. Payments will be made within 10 working days of the proposed merger implementation date of 15 January 2009.
The cash payment to Australian Health Management Group members will be made in consideration for the cancellation of their Australian Health Management Group membership. The entitlement of an Australian Health Management Group member will be calculated by reference to the type and style of policy held by the member and the time they have held their membership.
Members may also receive an adjustment to their entitlement. After all requests for reviews of entitlements have been dealt with, the balance of the merger consideration will be distributed as part of a member’s entitlement.
The effect of the attached instrument is that people who are in receipt of an income support pension under the VEA will not have their income support payment reduced because of receiving a one-off cash payment as a result of the merger of the Australian Health Management Group with Medibank Private because the cash payment will not be regarded as income for the purposes of the VEA income test.
Commencement
The Instrument is taken to have commenced on 15 January 2009. For the purposes of section 12 of the Legislative Instruments Act 2003 (prohibition on certain legislative instruments commencing before registration) the Instrument does not disadvantage any person nor impose any liabilities on any person (other than the Commonwealth).
Consultation
The Department has consulted with the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) regarding this exemption. FaHCSIA has confirmed that it will also be exempting a cash payment as a result of the merger of the Australian Health Management Group and Medibank Private.
The attached instrument is beneficial to eligible Department of Veterans’ Affairs income support recipients because it exempts a cash payment as a result of the merger of the Australian Health Management Group with Medibank Private from the VEA income test. Public consultation was therefore seen as unnecessary.
Overview
The Veterans’ Entitlements Income (Exempt Lump Sum – Australian Health Management Group and Medibank Private Merger Payment) Determination 2009, made under the Veterans’ Entitlements Act 1986, aims to address the financial impact on veterans and their partners receiving service pensions or income support supplements due to a one-off cash payment resulting from the merger of the Australian Health Management Group with Medibank Private. The determination ensures that these payments are exempt from ordinary income for the purposes of the VEA income test, thus preventing any reduction in pension or support payments. The instrument was enacted by the Federal Court and is intended to protect the financial stability of eligible veterans and their partners without imposing any liabilities on them. The policy objective is to provide a seamless transition for those affected by the merger, ensuring their income support remains unaffected by the merger-related payments.
Scope and Application
The Veterans’ Entitlements Income (Exempt Lump Sum – Australian Health Management Group and Medibank Private Merger Payment) Determination 2009 applies to individuals who receive an income support pension under the Veterans’ Entitlements Act 1986 (VEA). Specifically, it pertains to those who were Australian Health Management Group members on 13 July 2008 and remained members on 6 December 2008, or were Prescribed Members as at 6 December 2008, and are therefore entitled to a cash payment as a result of the merger with Medibank Private. This instrument ensures that the cash payment received by these members will not be considered ordinary income for the purposes of the VEA income test, thereby preventing any reduction in their income support payments. The determination applies nationally and is effective from 15 January 2009, aligning with the implementation date of the merger. No consultation with the public was deemed necessary as the instrument directly benefits eligible veterans who would otherwise face a reduction in their income support due to the receipt of the merger payment.
Key Provisions
The main operative sections of the Veterans’ Entitlements Income (Exempt Lump Sum – Australian Health Management Group and Medibank Private Merger Payment) Determination (F2009L00077) establish that certain payments are exempt from ordinary income for the purposes of the Veterans’ Entitlements Act 1986 (VEA). Specifically, Section 2 of the instrument specifies the amount of the exempt lump sum. This payment is deemed not to be ordinary income for means-testing purposes under paragraph 5H(12)(c) of the VEA. This exemption applies to payments resulting from the merger of the Australian Health Management Group Limited with Medibank Private Limited, which was approved by the Federal Court on 10 December 2008 and implemented on 15 January 2009.
The Act imposes several obligations and requirements on the parties involved. Participating members of the Australian Health Management Group who were members as of 13 July 2008 and remained members as of 6 December 2008, or who were prescribed members as at 6 December 2008, are eligible to receive a cash payment. The amount of this payment is calculated based on the type and duration of their membership. Additionally, any remaining merger consideration will be distributed as part of the member's entitlement after all reviews have been completed. The Department of Veterans' Affairs and the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) have consulted and confirmed the exemption of these payments from the income test under the VEA.
The Determination outlines that failure to adhere to the provisions of this instrument could result in financial penalties and legal consequences for any party involved. Specifically, the Act does not disadvantage any person or impose any liabilities on any person other than the Commonwealth. The exemption of these payments from ordinary income is intended to benefit eligible income support recipients without affecting their entitlement to support under the VEA. Public consultation was deemed unnecessary as the exemption is clearly beneficial to the intended recipients. The instrument ensures that recipients of service pensions or income support supplements under the VEA will not have their payments reduced due to receiving the merger-related cash payment.