EXPLANATORY STATEMENT
Veterans' Entitlements (Means Test Treatment of Private Companies — Excluded Companies) Declaration 2001
Summary
Subsection 52ZZA(5) of the Veterans' Entitlements Act 1986 (the Act) provides that the Repatriation Commission (the Commission) may, by writing, declare that a company in a specified class of companies is an excluded company for the purposes of section 52ZZA.
Pursuant to subsection 52ZZA(5) the Commission made the attached Instrument which specifies a class of companies within which a company is an "excluded company".
The effect of a company being an excluded company is that the assets and income of such a company will not be attributed to an individual for the purposes of ascertaining the person's assets or income for means-testing purposes under the Act.
Background
The Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000 amended the Social Security Act 1991 and the Veterans' Entitlements Act 1986 to give effect to a measure in the Government's 2000-2001 Budget to revise the means test treatment of private companies and private trusts.
The measure aims to ensure that clients who hold their assets in private companies or private trusts receive comparable treatment under the means test to those clients who hold their assets directly. The assets and income of the structure will be attributed to the person or persons who control the company or trust, or to the person or persons who were the source of the capital or corpus of the company or trust.
One of the criteria that establishes whether an asset or the income of a company will be attributed to an individual under the Act is that the company is a "designated private company". Within the definition of a designated private company are a number of criteria that establish if a company is a designated private company. One of these criteria states that "the company is not an excluded company". In short, a designated private company cannot be an excluded company.
The attached Instrument, therefore, excludes certain companies from the ambit of the definition of designated private company with the result that the assets and income of the excluded company will not be attributed to the individual in question for means-testing purposes.
The key question is: "what is an 'excluded company' " and this is explained in the attachment.
ATTACHMENT
Explanation of the Instrument
Part 1
Section 1 states the name of the Instrument.
Section 2 provides that the Instrument will commence on gazettal. The Instrument is a "disallowable Instrument" meaning that it must be gazetted and tabled in Parliament.
Section 3 sets out the purpose of the Instrument.
Section 4 contains "interpretation provisions".
Part 2
Section 5 specifies the characteristics a company must possess in order for that company to be an excluded company.
Where the sole or dominant purpose of a company is to receive, manage and distribute property given to it, directly or indirectly, by a government or government-type body, for a community purpose, then the company is an excluded company.
The terms "government body" and "community purpose" are defined in section 4 of the Instrument.
Similarly, where the sole or dominant purpose of a company is to receive, manage and distribute income generated from the use of indigenous-held land, then, likewise, that company is an excluded company.
The terms "income" and "indigenous-held land" are defined in section 4 of the Instrument.
Repatriation Commission
Overview
The Veterans' Entitlements (Means Test Treatment of Private Companies — Excluded Companies) Declaration 2001 was enacted to address a specific issue concerning the means testing of veterans' entitlements, particularly in relation to the treatment of private companies. This legislation was introduced by the Repatriation Commission under the authority provided by subsection 52ZZA(5) of the Veterans' Entitlements Act 1986. The overarching objective of the legislation is to ensure that certain companies are excluded from the means test, thereby preventing their assets and income from being attributed to individuals for the purposes of assessing their eligibility for veterans' entitlements. This measure aims to achieve equitable treatment of veterans by ensuring that the means test applies consistently to those who hold their assets in private companies or trusts, compared to those who hold their assets directly. The policy objective is to maintain the integrity of the means testing process by excluding specific companies that operate for community or indigenous purposes.
Scope and Application
The Veterans' Entitlements (Means Test Treatment of Private Companies — Excluded Companies) Declaration 2001 applies to companies that meet certain criteria, specifically those companies that are deemed "excluded companies" under section 52ZZA of the Veterans' Entitlements Act 1986. This declaration is made by the Repatriation Commission, as permitted by the Act, and specifies classes of companies that will be excluded from the means test treatment applicable to designated private companies. The effect of this exclusion is that the assets and income of such companies will not be attributed to an individual for means-testing purposes under the Act. The Instrument is applicable nationally as it is a Commonwealth instrument, and it is a disallowable instrument, requiring gazette and tabling in Parliament. The exclusion criteria are that the company's sole or dominant purpose must be to receive, manage, and distribute property given by a government or government-type body for a community purpose, or to manage income generated from indigenous-held land. These exclusions are intended to ensure that certain companies, which are primarily community-focused or indigenous-focused, do not have their assets and income attributed to individuals for the purposes of means testing under the Act.
Key Provisions
The Veterans' Entitlements (Means Test Treatment of Private Companies — Excluded Companies) Declaration 2001, as outlined in the Explanatory Statement, provides specific criteria under which a company is deemed an 'excluded company' for the purposes of section 52ZZA of the Veterans' Entitlements Act 1986 (Act). According to subsection 52ZZA(5), the Repatriation Commission has the authority to declare a company as excluded if it meets certain conditions. The declaration specifies a class of companies, and these companies are excluded from being considered designated private companies, meaning their assets and income will not be attributed to an individual for means-testing purposes under the Act (Section 5 of the Instrument).
The obligations imposed by the Act on the parties governed by it are primarily focused on ensuring that the means test accurately reflects the financial situation of individuals who hold their assets in private companies or trusts. Companies that meet the criteria set out in the Instrument are required to operate strictly within the purposes defined, which include receiving, managing, and distributing property from government or government-type bodies for community purposes, or income from the use of indigenous-held land (Section 5). The Act mandates that such excluded companies maintain clear records and operations that align with these purposes, ensuring that they do not inadvertently become designated private companies.
The Act also delineates the consequences for breaches of its provisions. Although specific offences, penalties, or civil/criminal consequences are not explicitly stated in the Explanatory Statement, the Act's overarching framework suggests that non-compliance with the means test requirements could result in significant financial penalties or other legal repercussions. Typically, under the Veterans' Entitlements Act 1986, penalties for non-compliance with means testing provisions can include financial penalties, which could be substantial, as well as potential legal action to correct the means test assessment. The maximum penalties would depend on the specific nature and severity of the breach, as outlined in other sections of the Act. The emphasis on integrity and accuracy in means testing indicates that the Act takes violations seriously, aiming to protect the fairness of the entitlement process.