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B14/1992 THE ASSESSMENT OF ITALIAN PENSION INCOME
DATE OF ISSUE: 17 March 1992
the assessment of italian pension income
1.The purpose of this instruction is to :
-confirm that it has always been a requirement, by this Department, to treat any pension received from Italy as "income" under Veterans Affairs Legislation for the purposes of assessing the rate of Service Pension payable; and
-point out that the Italian Pension (paid under the Italian National Pension Scheme (INPS)) is treated differently under the Social Security Act to the Veterans' Entitlements Act.
2.The clarification is necessary following :
(i)advice letters, issued by the Italian government to pensioners who receive INPS in Australia, which itemise the two components of pension comprising of a contribution* amount and a supplement* amount; and
(ii)the release of a staff instruction, issued by DSS, which details how to assess the INPS pension. The DSS instruction was issued as a result of changes, made by the Italian government, to the supplement component of the INPS pension which is exempted by the DSS under the Australia - Italy Social Security Reciprocal Agreement.
* these payments are defined elsewhere in this instruction
3.Although the recipients of the INPS are not affected under DVA legislation and the release of the DSS instruction has no impact on DVA's methods or rules for assessing income, it is necessary to affirm that there is no change.
4.It is also recognised that the impact of issuing this DVA instruction will be minimal as the last statistical information showed that there were a total of
29 Italian pensioners, which includes veterans, spouses and defactos, who receive Service Pensions from this department.
The INPS Pension
5.The INPS pension is comprised of two components:
.a contribution amount which is a payment made by Italy as a result of contributions made by the pensioner during employment in Italy (similar to superannuation-type payments); and
.a supplementary amount which is a welfare payment (ie. not funded from contributions). This payment is made by Italy to pensioners whose contribution pensions are below the minimum pension guaranteed under Italian law.
the vea 1986
6.Under the VEA, an amount of income earned, derived or received includes under subsection 5H(2) :
"(b) an income amount earned, derived or received from any source (whether within or outside Australia)."
the social security act 1947
7.The definitions of income, under both the VEA and the Social Security Act are the same, however, subsection 8(zc) of the DSS excludes :
"payments received by the person as is, in accordance with an agreement between the Commonwealth and a foreign country, applied in reduction of the amount of pension, benefit or allowance that would otherwise be payable to the person under this Act..."
8.The "agreement between the Commonwealth and a foreign country" refers to agreements between countries which have a similar or like pensions ie. the agreement is designed to operate on, and complement, the social security systems of each country. Article 17 of this agreement relates to the agreement between the Italian government's social security system and the Department of Social Security in Australia.
previous advice from central office
9.Previous instructions from Central Office (B20/89 refers) stated that the supplement was excluded from the definition of income with effect from 1 September 1988. This instruction was incorrect as the Australia-Italy Reciprocal Agreement was confined to DSS and Italy.
The reciprocal agreement does not include DVA therefore the INPS pension has never been exempted under our Act.
10.If you require any further clarification in relation to this topic, please do not hesitate to contact the Policy Administration and Advice Section on (062) 2896442.
National program director