EXPLANATORY STATEMENT
Veterans’ Entitlements Income (Exempt Lump Sum – Queensland Vegetation Management Framework Financial Assistance for Farm Businesses) Determination
2008 NO. R1
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
The introduction of the Vegetation Management Act 1999 in Queensland, which prevented broadscale clearing of remnant vegetation on farmland, meant that adjustments had to be made by some farmers to farming practices. The Queensland Rural Adjustment Authority (QRAA) attempts to compensate for these impacts through either:
- enterprise assistance – to build up or develop existing farming operations, or
- exit assistance – to adjust out of primary production or relocate the enterprise.
Farmers are eligible for the Enterprise Assistance Scheme if:
- the farm acquired or obtained the use of the affected land prior to 22 May 2003,
- broadscale clearing of vegetation in the affected area would be necessary for long-term viability of the farm,
- the farm has the capacity to become financially independent of the assistance under the scheme within a reasonable period and can achieve long-term viability, and
- the person operating the farming business is responsible for contributing the majority of the person’s labour to the farming business and generates the majority of the person’s income from it.
Farmers are eligible for the Exit Assistance Scheme if:
- the farm acquired or obtained the use of the affected land prior to 22 May 2003,
- broadscale clearing of vegetation in the affected area would be necessary for long-term viability of the farm,
- The farm entity and all secured creditors are prepared to enter into an agreement to transfer the title to the affected area of land to a prescribed buyer and the farmer, after transfer of title to the prescribed buyer, agrees to take no further interest in the land.
- the person operating the farming business is responsible for contributing the majority of the person’s labour to the farming business and generates the majority of the person’s income from it.
Consultation
In the interests of consistency of approach, the Department of Families and Housing, Community Services and Indigenous Affairs (FaHCSIA) was consulted concerning the assessment of the Vegetation Management Framework Financial Assistance for Farm Businesses for all income support recipients. To date FaHCSIA has not been advised of any relevant payments received by clients, and has not taken action to determine that the payments are exempt. Additionally, FaHCSIA’s notified position is that the exemption of these payments may not achieve the intended result (the maintenance of the current rate of income support), because the date of effect provisions in the Social Security Administration Act 1999 limits backdating to 13 weeks prior to the date that a lump sum exemption determination is registered with the Federal Registrar of Legislative Instruments. However, this restriction on retrospective adjustment does not arise under the equivalent date of effect provisions within the Veterans’ Entitlements Act 1986.
A further reason necessitating that DVA departs from the usual practice of following FaHCSIA’s lead in the exemption of lump sum payments is that this payment came to DVA’s notice by way of an advising request concerning a Queensland sugar cane farmer. The veteran, who is in receipt of service pension and disability pension, has already received a grant of enterprise assistance from the QRAA totalling $84,192.12 (in four payments over a period of two months). These payments are not for income support purposes as they cannot be used for the personal needs of the farmer. They are to facilitate rural restructuring.
Assistance under the Enterprise Assistance Scheme is up to a maximum of $100,000 paid in either a lump sum or by instalments. If the assistance is paid by instalments, the first payment may be made when the assistance is approved. Later payments may be made after QRAA receives evidence of certain work being completed within certain periods as agreed between the farmer and QRAA. These are not considered to be periodic payments.
There are many previous examples of lump sum exemptions in primary industries similar to this proposal. They include:
- Farm Family Restart Scheme
- Dairy Exit Payments
- NSW Fisheries
- Sugar industry exit assistance
- Financial assistance from Victorian Department of Natural Resources and Environment
- Fisheries adjustment package
This instrument is beneficial to customers because it exempts Enterprise Assistance and Exit Assistance grants from the VEA income test. Public consultation was therefore regarded as unnecessary.
Retrospectivity
This instrument will operate from the date it is signed. However, it will be applicable to veterans who have received grants since the commencement of the Rural and Regional Adjustment Regulation 2000 – Schedule of Approved Assistance Schemes.
Overview
The Veterans' Entitlements Income (Exempt Lump Sum – Queensland Vegetation Management Framework Financial Assistance for Farm Businesses) Determination 2008 was enacted to address the issue of farmers receiving assistance under the Queensland Vegetation Management Framework, specifically Enterprise Assistance and Exit Assistance grants, and to ensure that these payments are exempt from the income test under the Veterans' Entitlements Act 1986 (VEA). The determination was made by the Australian Government, and the policy objective is to exempt these payments from being assessed as ordinary income for means-testing purposes, ensuring that the recipients' veterans' pensions or income support supplements are not adversely affected. This determination provides a consistent approach to handling these lump sum payments, which are intended to facilitate rural restructuring rather than for personal needs, by ensuring they are not included in the income assessment for the purposes of the VEA.
The introduction of this determination arose due to the need to adjust to the Vegetation Management Act 1999 in Queensland, which prevented broadscale clearing of remnant vegetation on farmland. The Queensland Rural Adjustment Authority (QRAA) offers enterprise assistance to build up or develop existing farming operations and exit assistance to adjust out of primary production or relocate the enterprise. The determination exempts these payments from the income assessment of the person's or their partner's service pension or income support supplement, ensuring that the recipients' entitlements under the VEA are maintained. The Department of Families and Housing, Community Services and Indigenous Affairs (FaHCSIA) was consulted, but no action was taken to determine that the payments are exempt, due to restrictions on retrospective adjustment under the Social Security Administration Act 1999. However, this restriction does not apply under the VEA, leading to the exemption of these payments for veterans.
Scope and Application
The Veterans’ Entitlements Income (Exempt Lump Sum – Queensland Vegetation Management Framework Financial Assistance for Farm Businesses) Determination 2008 aims to exempt certain lump sum payments made to veterans from the income assessment under the Veterans’ Entitlements Act 1986. These payments are linked to the Queensland Vegetation Management Framework, specifically the Enterprise Assistance Scheme and the Exit Assistance Scheme provided by the Queensland Rural Adjustment Authority. The exemption applies to veterans who have received these grants, ensuring that such payments do not affect their service pension or income support supplement. The determination operates from the date of its signing but is applicable retroactively to grants received since the commencement of the Rural and Regional Adjustment Regulation 2000. The purpose of this instrument is to align with the provisions of the Veterans’ Entitlements Act, which allows for backdating of exemptions, unlike the Social Security Administration Act 1999, thereby maintaining the current rate of income support for affected veterans.
Key Provisions
The key operative sections of the Veterans’ Entitlements Income (Exempt Lump Sum – Queensland Vegetation Management Framework Financial Assistance for Farm Businesses) Determination 2008 (No. R1) (the Determination) include paragraph 5H(12)(c) of the Veterans’ Entitlements Act 1986 (VEA), which is referenced in the explanatory statement and establishes the legal basis for deeming certain payments as exempt lump sums (paragraph 5H(12)(c)). Part 2 of the Schedule of the Determination specifies the amount of the grant that qualifies as an exempt lump sum for the purposes of the income test under the VEA (subsection 5H(1)). This determination ensures that certain financial assistance payments provided under the Queensland Vegetation Management Framework do not count as ordinary income for the purposes of means-testing for service pensions or income support supplements under the VEA.
The Determination imposes specific eligibility criteria for farmers to qualify for the exemption of Enterprise Assistance and Exit Assistance grants from the income assessment. For Enterprise Assistance, farmers must have acquired or obtained the use of the affected land before 22 May 2003, and broadscale clearing of vegetation in the affected area must be necessary for the long-term viability of the farm (section 2). Additionally, the farm must have the capacity to become financially independent within a reasonable period and achieve long-term viability. The person operating the farming business must also contribute the majority of their labour to the business and generate the majority of their income from it. For Exit Assistance, the criteria are similar, with the additional requirement that the farm entity and all secured creditors must be prepared to transfer the title of the affected land to a prescribed buyer, and the farmer must agree to take no further interest in the land after the transfer.
The Determination does not explicitly outline specific offences, penalties, or civil/criminal consequences for breach within its text. However, breaches of provisions under the VEA generally could lead to penalties such as fines or imprisonment depending on the severity of the breach. It is important to note that while the Determination exempts certain payments from the income test, it does not guarantee that these payments will achieve the intended result of maintaining the current rate of income support due to the limitations in the date of effect provisions under the Social Security Administration Act 1999. Despite this, the Determination ensures that veterans receiving such assistance will not be disadvantaged by the income test under the VEA.