EXPLANATORY STATEMENT
Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Amendment Determination 2020
(Instrument 2020 No. R4)
PURPOSE
The Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Amendment Determination 2020 (the Instrument) is made under subsection 52BAB(4) of the Veterans’ Entitlements Act 1986 (the Act).
The instrument amends the Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Determination 2019 (the Principal Instrument), previously made under subsection 52BAB(4) of the Act, to amend the definition of ‘Life Tables’ in section 4 of the Principal Instrument.
This amendment will ensure that the latest Australian Life Tables published by the Australian Government Actuary are used when determining the surrender value and death benefit value of a person’s asset-tested income stream (lifetime) under the Principal Instrument.
Under subsection 52BAB(4) of the Act, the Repatriation Commission (the Commission) has the power to determine, by way of legislative instrument, alternative methods to calculate the value of an asset-tested income stream (lifetime) for persons to whom section 52BAB of the Act applies.
The Principal Instrument provides methods for calculating the current or future surrender value and death benefit values for asset-tested income streams (lifetime) products. It ensures that for the purposes of the Act, the means test rules for income streams appropriately assess products with high surrender values or high death benefits, reflecting their greater value and potential to be used for self-support. The Principal Instrument uses a person’s ‘life expectancy period’ when determining the surrender and death benefit values for asset-tested income streams (lifetime) products.
Background
A person’s life expectancy is currently determined using the Australian Life Tables 2010‑12. From 1 January 2020, the Australian Life Tables 2015‑17 replace the Australian Life Tables 2010‑12 as the relevant Life Tables for the purposes of the Principal Instrument.
This instrument does not impact the rules established by the Principal Instrument, or the methods for calculating the current or future surrender value and death benefit values provided by that instrument. This instrument also does not affect calculations undertaken prior to 1 January 2020.
In addition to the power to make this instrument under subsection 52BAB(4) of the Act, subsection 33(3) of the Acts Interpretation Act 1901 provides that where an Act confers a power to make, grant or issue any instrument of a legislative or administrative character (including rules, regulations or by-laws), the power shall be construed as including a power exercisable in the like manner and subject to the like conditions (if any) to repeal, rescind, revoke, amend or vary any such instrument.
Consultation
The Department of Social Services was consulted during the preparation of this instrument, in relation to the update to the Life Tables and its impact on this instrument. They advised that Services Australia was also consulted during the preparation of their instrument.
Public consultation was not undertaken due to the minor technical nature of the amendment.
Retrospectivity
The determination will be taken to have commenced on 1 January 2020 in line with the commencement of the Social Security (Value of Asset-tested Income Streams (Lifetime)) Amendment Determination 2019 (No. 2) and will operate from that date.
The retrospective commencement is designed to ensure that recipients of income support payable under that Act will not be disadvantaged by the application of the redundant Life Tables.
The retrospective operation of the instrument will not infringe section 12 of the Legislation Act 2003 because the retrospective operation would not disadvantage any person or impose a liability on a person other than the Commonwealth.
Regulation Impact Statement
The instrument does not require a Regulatory Impact Statement. The instrument is not regulatory in nature, will not impact on business activity and will have no, or minimal, compliance costs or competition impact (OBPR ID: 25875 is applicable).
Explanation of the provisions
Section 1
This section provides that the title of the instrument is the Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Amendment Determination 2020.
Section 2
This section provides that the instrument commences on 1 January 2020.
Section 3
This section provides that the instrument is made under subsection 52BAB(4) of the Veterans’ Entitlements Act 1986.
Section 4
This section specifies that the Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Determination 2019 is amended as set out in Schedule 1.
Schedule 1 – Amendments
Item 1
This item repeals the definition of the Life Tables in section 4, and substitutes it with a new definition that the relevant Life Tables will be:
(a) the Australian Life Tables 2010-12 if a person’s assessment day is before 1 January 2020; or
(b) the Australian Life Tables 2015-17 if a person’s assessment day is on or after 1 January 2020.
As the surrender value and death benefit value of an asset-tested income stream (lifetime) is calculated on a person’s assessment day, the Australian Life Tables 2010‑12 will no longer apply to any calculations from 1 January 2020 onwards.
This will ensure that the Principal Instrument operates fairly, by applying the most recent, and therefore most accurate, information about projected life expectancy, in order to calculate the value of these income streams.
The Australian Life Tables 2015‑17 are published by the Australian Government Actuary and are available free of charge in the publications section of the Australian Government Actuary website, at the following address:
http://www.aga.gov.au/publications/life_table_2015-17
The Australian Life Tables 2010-12 are published by the Australian Government Actuary and are available free of charge in the publications section of the Australian Government Actuary website, at the following address:
http://www.aga.gov.au/publications/life_table_2010-12
Paragraph 14(1)(b) of the Legislation Act 2003 permits the incorporation of a document in a legislative instrument, by reference as the document is in force or existing at the time the legislative instrument commences. The Australian Life Tables 2015-17 and the Australian Life Tables 2010-12 are incorporated as in force on the day the instrument commences.
Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011
Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Amendment Determination 2020
The instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the legislative instrument
This instrument amends the Veterans’ Entitlements (Value of Asset-tested Income Streams (Lifetime)) Determination 2019 (the Principal Instrument). The instrument repeals the definition of “Life Tables” in the Principal Instrument and substitutes a new definition that refers to the Australian Life Tables 2015-17 as the relevant Life Tables for calculating the value of an asset-tested income stream (lifetime) from 1 January 2020.
Under subsection 52BAB(4) of the Veterans’ Entitlements Act 1986 (the Act), the Repatriation Commission has the power to determine, by way of legislative instrument, alternative methods to calculate the value of an asset-tested income stream (lifetime) for persons to whom section 52BAB of the Act applies.
The Principal Instrument provides methods for calculating the current or future surrender value and death benefit values for asset-tested income streams (lifetime) products. It ensures that for the purposes of the Act, the means test rules for income streams appropriately assess products with high surrender values or high death benefits, reflecting their greater value and potential to be used for self-support.
The Principal Instrument uses a person’s ‘life expectancy period’ (see section 4 of the Principal Instrument) when determining the surrender and death benefit values for asset-tested income streams (lifetime) products. A person’s life expectancy is currently determined using the Australian Life Tables 2010-12. This instrument specifies that the relevant Life Tables for calculations from 1 January 2020 onwards are the Australian Life Tables 2015‑17.
Human rights implications
As with the Principal Instrument, this instrument engages the right to social security under Article 9 of the International Covenant on Economic, Social and Cultural Rights. The right to social security requires that a system be established under domestic law, and that public authorities must take responsibility for the effective administration of the system. The social security scheme must provide a minimum essential level of benefits in the form of income support to all individuals and families that will enable them to acquire at least essential health care, basic shelter and housing, water and sanitation, foodstuffs and the most basic forms of education.
The instrument is compatible with Australia’s obligations in relation to the right to social security. The instrument does not unreasonably restrict a person’s eligibility to receive income support or reduce the benefits to which a person may be entitled.
The instrument supports fair and equitable means test outcomes for lifetime income stream products assessed as asset-tested income streams (lifetime). The amendment ensures that the value of an asset-tested income stream product (lifetime), as calculated using the methods in the Principal Instrument, is calculated using current reference values in the Life Tables most recently published by the Australian Government Actuary. This will ensure that the Principal Instrument operates fairly, by applying the most recent, and therefore most accurate, information about projected life expectancy, in order to calculate the value of these income streams.
If the Principal Instrument were not in place, products with high surrender values or high death benefits would not have these characteristics assessed under the social security assets test. Those who have access to greater capital for self-support through high surrender values or high death benefits would not have this recognised under the means test assets test. This would be unfair and inequitable when compared to the treatment of other lifetime income streams with restrictions on access to capital, and with the treatment of other assets held by income support recipients.
By making sure surrender values and death benefit values of asset-tested income stream products (lifetime) are fairly assessed under the means test, the system for providing income support appropriately recognises individuals’ capacity for self-support when determining their rate of income support, and remains sustainable for future generations.
For these reasons, the instrument is compatible with the right to social security.
Conclusion
The instrument is compatible with human rights.
Repatriation Commission
Rule-Maker