EXPLANATORY STATEMENT
Veterans’ Entitlements Income (Exempt Lump Sum – Dependant Pension Lump Sum Payment and Closure) Determination
Instrument No. R10/2010
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 13 August 2009 legislation was passed by the House of Representatives that will see all remaining dependant pensions cancelled with effect from the day after the end of the pay period for payday 24 September 2009 (which is 22 September 2009). Each recipient will receive a lump sum equal to the total amount of dependant pension they would have received for the next three years.
Dependant pension is a form of pension previously paid under the Repatriation Act 1920 which, prior to 6 June 1985, was granted to the wife or dependent child of a veteran to compensate those dependants for the possible effects of the veteran's war-caused disablement.
Dependant pension rates have not been increased since 1964, except for a one–off increase for GST compensation in July 2000. The real value of these pensions has declined significantly during this time.
There have been no new grants of dependant pension since 6 June 1985. Those dependants who were in payment on 5 June 1985 had their payment frozen at the rate payable on that day for so long as they continued to be entitled to the pension.
Upon the introduction of the Veterans’ Entitlements Act 1986 (VEA), the transitional provisions allowed those in receipt of dependant pension to voluntarily cease receiving their pension and receive a lump sum equivalent to three years of payment. This was not taken up by all recipients.
The fortnightly payments are currently a maximum of $8.42p/f for partners and widows and $2.86p/f for children. The minimum payments are 84 cents p/f and 29 cents p/f respectively.
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 lump sum payment as a result of the cancellation of ongoing fortnightly payment of their dependant pension because the lump sum payment will not be regarded as income for the purposes of the VEA income test.
Commencement
The instrument is taken to have commenced on 24 September 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 exempt from the social security income test the one-off lump sum payment received as a result of the cancellation of ongoing fortnightly payment of the dependant pension paid by the Department of Veterans’ Affairs.
The attached instrument is beneficial to eligible Department of Veterans’ Affairs income support recipients because it exempts a lump sum payment received as a result of the cancellation of ongoing fortnightly payment of the dependant pension from the VEA income test. Public consultation was therefore seen as unnecessary.