EXPLANATORY STATEMENT
Veterans’ Entitlements Income (Exempt Lump Sum – Compensation paid by Aviva Australia) Determination
Instrument No. R8/2008
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 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
Compensation paid by Aviva Australia is a one-off compensation payment paid by Aviva Australia to certain people whose income support payments were affected (directly or indirectly) as a result of Aviva Australia incorrectly recording the purchase price for one or more of the following income stream products:
(i) the Navigator Personal Retirement Plan – Allocated Pension;
(ii) the Navigator Personal Retirement Plan – Growth Pension; and
(iii) the PremiumChoice Retirement Service – Allocated Pension.
This Compensation paid by Aviva Australia is to meet any shortfall in income support payments, or repayment of debts to the Department of Veterans’ Affairs for overpayments made as a result of the incorrect purchase price being assessed.
The purpose of this instrument is to ensure that Compensation paid by Aviva Australia is an exempt lump sum for the purposes of paragraph 5H(12)(c) of the VEA.
The effect of this 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 Compensation paid by Aviva Australia because Compensation paid by Aviva Australia will not be regarded as income for the purposes of the VEA income test.
Consultation
In the interest of consistency of approach, the Department has worked closely with the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to ensure that this instrument has the same effect as a similar instrument executed on 4 July 2007 under the social security law.
This instrument is beneficial to pensioners because it exempts from the VEA income test Compensation paid by Aviva Australia. Public consultation was therefore seen as unnecessary.
Retrospectivity
FaHCSIA has already exempted Compensation paid by Aviva Australia. The relevant instrument under the social security law operates from 4 July 2007. The payments are entirely beneficial to eligible Department of Veterans’ Affairs income support recipients and does not disadvantage them in any way.
Overview
The Veterans’ Entitlements Income (Exempt Lump Sum – Compensation paid by Aviva Australia) Determination Instrument No. R8/2008, enacted under the Veterans’ Entitlements Act 1986, addresses the issue of ensuring that compensation payments made by Aviva Australia to affected individuals are exempt from income assessment for means-testing purposes. This was introduced to provide relief to pensioners who received compensation due to Aviva Australia's incorrect recording of purchase prices for specific pension products, which had led to shortfalls or overpayments in their income support. The policy objective is to ensure that these compensation payments do not reduce the income support payments of affected veterans, thereby maintaining the integrity and adequacy of their support. The instrument was developed in consultation with the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) to align with similar provisions in the social security law, effective from 4 July 2007, and deemed not to require public consultation due to its entirely beneficial nature for eligible recipients.
Scope and Application
The Veterans’ Entitlements Income (Exempt Lump Sum – Compensation paid by Aviva Australia) Determination 2008 applies to compensation payments made by Aviva Australia to certain individuals whose income support payments were adversely affected due to errors in the purchase price assessment of specific income stream products. This instrument specifies that such compensation payments are exempt lump sums for the purposes of the Veterans’ Entitlements Act 1986 (VEA), ensuring they are not considered ordinary income for means-testing. This exemption protects the income support payments of eligible recipients, preventing any reduction in their pension or income support supplement. The Determination extends its application across the Commonwealth of Australia, as it is a federal instrument under the VEA. It does not explicitly exclude any particular group or category of recipients but rather provides a broad exemption for the specified compensation payments, thereby safeguarding the financial stability of affected veterans and their partners.
Key Provisions
The main operative sections of this Determination, specifically Part 2 of the Schedule, designate the specific compensation payment made by Aviva Australia as an exempt lump sum for the purposes of the Veterans' Entitlements Act 1986 (VEA). This means that the compensation, which is intended to correct any shortfalls or overpayments of income support resulting from Aviva Australia's incorrect purchase price assessments for certain pension products, will not be considered ordinary income when assessing a pensioner's eligibility for or amount of service pension or income support supplement. This is explicitly stated in section 5H(12)(c) of the VEA, which defines what constitutes ordinary income for means-testing purposes.
Under this Determination, the obligations imposed on the parties primarily revolve around the correct classification and treatment of the compensation payments from Aviva Australia. The Department of Veterans' Affairs is tasked with ensuring that these payments are correctly identified as exempt lump sums, thereby exempting them from income assessment. The requirement is that these payments must not be included in the income test for the purposes of determining the pension or supplement payable to a veteran or their partner. This obligation is clearly set out in the Schedule of the Determination, which specifies the amount that is exempt from income assessment.
Breach of the provisions of this Determination could potentially lead to incorrect income assessments for pensioners, which could result in overpayment or underpayment of their pensions or supplements. However, the Determination does not explicitly outline specific offences, penalties, or consequences for breach. Instead, it relies on the general legal framework provided by the VEA and associated regulations to handle any such breaches. This means that any breach could potentially be addressed under the general provisions of the VEA, which might include administrative or legal actions to rectify any incorrect payments.