EXPLANATORY STATEMENT
Veterans’ Entitlements Income (Exempt Lump Sum – MBF and BUPA Australia Merger Payment) Determination
Instrument No. R14/2008
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 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 14 May 2008, the Federal Court approved the merger of MBF and BUPA Australia. As a result of the merger, eligible participating contributors will receive an entitlement in the form of a cash payment. An eligible contributor is defined as a person in whose name a current health insurance policy issued by MBF is held.
Entitlements are calculated according to the policy the contributor holds and how long they have been an MBF member. This determines the number of notional units allocated to each contributor. Notional units are attributed with a value and then converted into a cash payment. It is estimated that the value of the cash payment that eligible participating contributors will receive will be in the range of $100 to $7,000.
It is anticipated that MBF contributors will receive their cash payments by
30 June 2008.
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 a one-off cash payment as a result of the merger of MBF and BUPA Australia because the cash payment will not be regarded as income for the purposes of the VEA income test.
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 MBF and BUPA Australia.
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 MBF and BUPA Australia from the VEA income test. Public consultation was therefore seen as unnecessary.