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C17/1997 MODIFICATIONS TO LUMP SUM ADVANCE PAYMENT OF SERVICE PENSION OR INCOME SUPPORT SUPPLEMENT
DATE OF ISSUE: 12 MARCH 1997
MODIFICATIONS TO LUMP SUM ADVANCE PAYMENT OF SERVICE PENSION OR INCOME SUPPORT SUPPLEMENT
The purpose of the Departmental Instruction is to provide advice on the 1996/97 budget initiative which introduced modifications to the payment of lump sum advance of service pension (SP) or income support supplement (ISS). This instruction should be read in conjunction with Departmental Instruction C40/96.
2 — This initiative is effective 5 March, 1997, the date of Royal Assent of the Veterans' Affairs Legislation Amendment (1996-97 Budget Measures)Bill 1996.
3 — Under the lump sum pension advance scheme implemented 4 July 1996, income support pensioners can be paid an advance of their pension, up to a maximum of $500, to assist in meeting living expenses such as emergency replacement of goods, car repairs, household maintenance etc. An advance payment is repaid by a fortnightly deductions from ongoing pension payments over a period of 6 months. An advance can be paid at any time, subject to certain conditions.
4 — The maximum amount of advance payment payable to an eligible pensioner is the lesser of:
·6% of the annual payment rate; or
·the amount of the advance payment sought.
5 — War widow(ers) who also receive SP or ISS are eligible to receive an advance payment of their income support payment. For this group of war widows(ers), SP or ISS may be paid up to the 'frozen' or 'ceiling' rate. The formula used to calculate an advance under the existing scheme results in the amount of pension that can be advanced to this group of war widow(ers) being significantly less (a maximum of $187.00) than the amount that can be advanced to other income support recipients in similar financial circumstances.
6 — From 5 March 1997:
applicants will no longer have to declare the intended use of the advance payment;
lump sum advance payments will be limited to one in each 12 months; and
war widows(ers) receiving SP or ISS will be able to obtain the $500 maximum advance.
7 — Since the commencement of the scheme, virtually all declared uses have satisfied the criteria of helping to meet the person's living expenses. Removal of the purpose criteria clause will result in a simpler administrative process and also eliminate unnecessary intrusion upon the pensioner.
8 — By allowing war widow(ers) also receiving either SP or ISS access to an advance payment of $500 unnecessary administrative complexity is avoided. In the event of the repayment of the advance exceeding the amount of their income support pension, the Commonwealth can effect cost-efficient recovery of the advance from their war widow(er) pension.
9 — Amendments to the Veterans' Entitlements Act 1986 (VEA) for the advance payment provisions were introduced in the Veterans' Affairs Legislation Amendment (1996-97 Budget Measures)Act 1996. Royal Assent was received on 5 March 1997. The amendments for this initiative are contained in Part IIID of the VEA.
WHICH PENSIONS CAN BE ADVANCED?
10 — The only types of pension that can be advanced are:
·all service pensions (i.e. age, invalidity, partner, carer); and
·income support supplement.
11 — From 5 March 1997 a service pensioner or ISS recipient is eligible for an advance payment of pension if:
·a SP or ISS is payable to the person; and
·the person was receiving a SP, an ISS, a social security pension or a social security benefit continually during the three months immediately preceding the person's application for an advance payment; and
·the Commission is satisfied that the person will not suffer severe financial hardship as a result of having to repay the advance payment by deductions from ongoing payments of pension.
12 — However, from 5 March 1997, a person will not be eligible for an advance payment if:
·the person has received an advance payment of income support pension in the preceding 12 months; or
·he or she owes a debt to the Commonwealth under sections 205 or 205A of the VEA; or
·there is an advance payment of pension still outstanding.
13 — The 12 month preclusion period will only apply to those people who make an application for an advance payment of pension on or after 5 March 1997. Anyone who has received an advance on an application made before 5 March 1997 will have a different rule apply.
14 — A person who has received an advance payment as a result of an application made during the period 4 July 1996 (when advance payments were first introduced) and 4 March 1997, (the day prior to date of Royal Assent) does not have to wait 12 months from the time that they receive their pre-5 March 1997 advance. This group will not be affected by the change on the first application they make after 5 March 1997. However, a 12 month preclusion period will apply from the day they receive the advance payment on that first application after 5 March 1997.
Where a person:
·applies for a $500 advance on 14 February 1997; and
·the determination is made on 17 February (a date prior to RA)and the advance paid on either 20 February or 6 March 1997; and
·the advance is repaid before August 1997; and
·the person immediately claims another advance; then
·the February or March 1997 advance will not preclude the payment of another advance in August 1997; but
·the person will not be eligible for their third advance until August 1998.
SP/ISS WAR WIDOW(ERS)
Amount Of Advance
15 — Regardless of the rate of SP or ISS paid, the amount of the advance to war widows(ers) is $500, or a lesser amount if that is what they require.
Advance Payment Deduction
16 — The advance payment deduction is calculated by dividing the full amount of the advance payment by 13. This rate of deduction from the pension ensures the advance payment is repaid in six months. If the amount of SP or ISS received is insufficient to cover the whole of the advance payment deduction, the difference (or shortfall) may be deducted from the war widow(er) pension.
On 14 March 1997 Mrs Mac applies for a $500 advance payment of ISS. On 17 March a delegate of the Commission is satisfied that Mrs Mac meets the eligibility criteria. She is paid an advance of $500. Her repayment deduction is worked out as follows:
This amount is rounded to $38.50.
Mrs Mac's rate of ISS on 13 March, the last pension pay-day prior to the determination, was $35.00 per fortnight (and therefore less than the amount of the advance payment deduction), so the difference between the two will be deducted from her war widow's pension.
If $38.50 is deducted from Mrs Mac's fortnightly rate of ISS and war widow pension, $462 will have been deducted after 12 successive fortnights, leaving $38 final advance payment deduction from her ISS on the 13 — th fortnight.
17 — The sample standard letters, Attachments A2 and A4 provided in Departmental Instruction C40/96 are amended respectively as follows:
·Lump sum advance grant. Attachment A
·Lump sum advance final repayment. Attachment B
All pension advance standard letters will eventually be updated on the standard letter system. It is intended to automate these advices as priorities and resources allow.
18 — The following attachments are provided:
Attachment A — Amended sample standard letter
Attachment B — Amended sample standard letter
Attachment C — Questions and answers
19 — Any questions regarding this instruction should be directed to either:
·Ann Donnelly — IS Business Administration — 06 289 6439 — C-C-BA-03
·Robyn Del Casale — IS Business Administration — 08 8290 0321 — S-B-PI-1