EXPLANATORY STATEMENT
Veterans’ Entitlements Income (Exempt Lump Sum –Superannuation Co-contribution) Determination
2006 NO. R7
Subsection 5H(12) 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 once it is stated to be an exempt lump sum by a determination under paragraph 5H(12)(c) of the Veterans’ Entitlements Act 1986 (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.
In December 2003 Treasury requested an exemption from the income test of ‘lump sum’ payments to be made under the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 and the Superannuation (Government Co-contribution for Low Income Earners) (Consequential Amendments) Act 2003, the ‘Co-contribution Acts’.
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.
The Co-contribution Acts provide for the payment of a Government superannuation co-contribution to qualifying low-income earners who make eligible personal superannuation contributions from 1 July 2003. To qualify a person must have an income of $40,000 or less, be making eligible personal superannuation contributions and have employer-supported superannuation.
The Australian Taxation Office will usually make payments into a superannuation account. In some situations, when the person has reached preservation age or is permanently disabled, a co-contribution can be paid directly to the person or their legal personal representative. In this case, Treasury has advised that a co-contribution will be exempt from income tax.
Consultation
This determination reflects the Exempt Lump Sum Determination No. 1 of 2004 made by the Department of Family and Community Services in March 2004 at the request of Treasury.
Given the beneficial nature of the determination, in that it exempts superannuation co-contribution amounts from the VEA income test, public consultation was not seen to be necessary.