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.
Overview
The Veterans’ Entitlements Income (Exempt Lump Sum – MBF and BUPA Australia Merger Payment) Determination 2008, made under the Veterans’ Entitlements Act 1986, was introduced to address the financial implications for veterans receiving income support following the merger of MBF and BUPA Australia. The instrument, enacted by the Parliament of Australia, ensures that eligible contributors who receive a cash payment as a result of this merger are not penalised by having their income support payments reduced. This determination was established to provide clarity and relief to veterans, ensuring that the merger-related payments are exempt from being considered as ordinary income for the purposes of the income test under the Veterans’ Entitlements Act 1986. The policy objective is to prevent any detrimental impact on veterans' income support due to the receipt of these specific payments.
Scope and Application
The Veterans’ Entitlements Income (Exempt Lump Sum – MBF and BUPA Australia Merger Payment) Determination 2008, associated with the Veterans' Entitlements Act 1986, applies to eligible contributors of MBF, defined as individuals holding a current health insurance policy with MBF. This legislative instrument specifically addresses the exemption of certain lump sum payments from the income assessment process for the purposes of service pensions or income support supplements under the VEA. The geographic and jurisdictional reach of this instrument is national, as it pertains to the Commonwealth’s administration of veterans' entitlements. This Determination ensures that eligible contributors who receive a cash payment as a result of the merger between MBF and BUPA Australia will not have their income support payments reduced due to the one-off nature of the payment. It is designed to exempt these payments from ordinary income for means-testing under the VEA, thereby maintaining the financial support for veterans without penalising them for receiving a merger-related payment.
Key Provisions
The main operative sections of the Veterans’ Entitlements Income (Exempt Lump Sum – MBF and BUPA Australia Merger Payment) Determination 2008 (No. R14/2008) relate to the exemption of specific cash payments from income assessments under the Veterans’ Entitlements Act 1986 (VEA). Specifically, Part 2 of the Schedule to the instrument details the exempt lump sum, which is determined to be not ordinary income for the purposes of means-testing under the VEA. This means that the cash payments resulting from the merger of MBF and BUPA Australia will not be considered as part of an individual's income when calculating their eligibility for service pension or income support supplement. This determination aligns with the provisions outlined in paragraph 5H(12)(c) of the VEA, ensuring that these lump sum payments do not impact the income test for veterans’ entitlements.
The Act imposes certain obligations and requirements on the entities involved. Firstly, the Department of Veterans’ Affairs must ensure that the cash payments are calculated according to the policy held by the contributors and the duration of their membership with MBF. This includes the allocation of notional units to each contributor, which are then valued and converted into cash. Secondly, the Department must ensure that these payments are exempt from the income assessment process for those receiving income support under the VEA. This obligation extends to consulting with other relevant departments, such as the Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA), to ensure that the exemption is applied consistently across different government support schemes.
Failure to comply with the provisions of this instrument could result in unintended financial consequences for eligible contributors. The Act does not explicitly outline specific offences or penalties for non-compliance with the exemption determination. However, any breach of the VEA’s income test provisions could lead to civil or criminal consequences, depending on the nature and severity of the breach. Typically, penalties for breaches of the VEA can include fines and, in severe cases, imprisonment. It is crucial that all parties adhere to the provisions of this instrument to avoid any adverse legal or financial repercussions.
The instrument is designed to protect the financial interests of eligible veterans and their families by ensuring that a one-off cash payment resulting from the merger of MBF and BUPA Australia does not negatively affect their income support payments. This protection is particularly important as the cash payments are expected to range between $100 and $7,000, which could significantly impact the recipients’ financial stability if not appropriately exempted. The determination ensures that the recipients can receive these payments without worrying about a reduction in their government support.