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C22/2004 Veterans' Affairs Amendment (Direct Deductions and Other Measures) Bill 2004

Document

DATE OF ISSUE:  18 August 2004

Veterans' Affairs Amendment (Direct Deductions and Other Measures) Bill 2004

Purpose

This departmental instruction provides information about the minor and technical amendments contained in the Veterans' Affairs Amendment (Direct Deductions and Other Measures) Act 2004 [Direct Deductions Act 2004].

Scope of measures

The Direct Deductions Act 2004 includes 16 parts and amends the Veterans' Entitlements Act 1986 (VEA) on the measures outlined below:

  1. Direct deduction arrangements
  2. Victoria Cross allowance 
  3. Automatic grant of income support supplement to age pensioners and wife pensioners
  4. Calculation of disability pension arrears
  5. Partner service pension for Norfolk Island residents 
  6. Calculation of rent assistance 
  7. Reduction in pension arrears resulting from partner's receipt of service pension 
  8. Value of financial assets for purposes of deeming rules 
  9. Deemed income and actual income from accrued returns

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Scope of measures (cont'd)
  1. Means test exemption of certain superannuation assets
  2. Income and assets test treatment of ATO small superannuation accounts and private rental income
  3. Ceiling rate service pension
  4. Offences
  5. Disposal of income and assets 
  6. Compensation recovery provisions
  7. Minor and technical amendments

Link to Direct Deductions Act

The link to the Direct Deductions Act 2004 is available through the Scaleplus web site located at http://scaleplus.law.gov.au

Commencement dates

The Direct Deductions Act 2004 received Royal Assent on 29 June 2004, and is Act No. 94 of 2004.  The commencement dates are as follows:

  • Part 2 (Victoria Cross Allowance) has a commencement date of 1 July 2004.
  • Part 6 (Calculation of Rent Assistance) commences immediately after the commencement of Part 4 of Schedule 1 to the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004, which is 27 April 2004.
  • Part 11 (Income and assets test treatment of ATO small superannuation accounts) is backdated to 1 July 1995.
  • All other parts commence upon Royal Assent.

Details of changes

Details of the changes are attached.

Guidelines

All procedural and policy changes will be provided via CLIK.  Procedural and policy changes as well as standard letters are currently being updated and will be available in the near future.

Publications

Relevant fact sheets, claim forms and chapters in You and Your Pension will be amended to reflect the changes.

Continued on next page


Contacts

For further information in relation to the changes on Income Support matters, please contact Elaine Tse on 6289 6011 or Georgina Dudzinski on 6289 4895.

For further information in relation to the changes on Disability Compensation matters, please contact Vicki Ludwig on 6289 6274.

Authorised by

Jeanette RickettsCarolyn Spiers

Branch HeadBranch Head

INCOME SUPPORTVETERANS' COMPENSATION

18 August 200418 August 2004


PART 1 – Direct deductions arrangements

Background

As part of the 1995-1996 Budget, the Minister for Veterans' Affairs announced that from 1 May 1996, service pensioners (SP) and income support supplement (ISS)

[2]

The Social Security Administration Act 1999 provides for direct deduction arrangements for social security payments including age or wife pension administered by DVA

[2] (go back)
recipients living in public housing would be able to elect to have their rent deducted from their pension and forwarded directly to the State Housing Authority (SHA).

As a result, the VEA was amended in 1995 to allow income support pensioners to have payments, such as rent, deducted from their pension upon their request.  The legislation was worded in such a way that it provided a mechanism by which future direct deductions schemes could be implemented without the need for further legislative change.

Issues

The direct deductions arrangements have been limited to persons receiving service pension (SP) or income support supplement (ISS).  These income support recipients were able to request that the Repatriation Commission make deductions from instalments of SP or ISS for the purpose of making payments included in a class of payments approved by the Minister (section 58JA), or to the Commissioner of Taxation (section 58H).

These same arrangements were not available to persons receiving a disability pension (DP) or war widow/er's pension (WWP), allowances or other pecuniary benefits paid under the VEA.

Legislative changes

The definition of 'pension' in subsection 5Q(1) has been amended to include ISS, in reference to new section 122B.

Sections 58G, 58H and 58JA that related to the inalienability of income support pensions, payments to Commissioner of Taxation at pensioner's request and payments at pensioner's request have been repealed.

Section 58G was repealed because section 125 of the VEA provides for the inalienability of a pension, allowance or other pecuniary benefit paid under the VEA.  This provision provides adequate protection for SP and ISS.

The provisions that were contained in sections 58H and 58JA have been relocated in new section 122B, which provides for extended direct deduction arrangements.

Continued on next page

New and transitional provisions

New section 122B allows for the Commission to approve classes of pensions, classes of allowances under Part VI, classes of pecuniary benefits from which deductions may be made and classes of payments to which deductions may be paid.  Each approval must be in writing.

Under the transitional provisions of the Direct Deductions Act 2004, SP and ISS as well as classes of payments approved under 58JA just before the commencement of the new Act are taken to be approved under section 122B.

A new instrument is currently being drafted to incorporate the additional payment types.   The transitional provisions will be revoked when the new instrument comes into effect.  All classes of pensions and payments will be included in the one instrument.

Requests that were in force under 58H or 58JA are taken to have been made under section 122B and will remain so, unless the pensioner withdraws the request.

System changes

The extension of the direct deduction arrangements to a range of DVA payments is associated with the systems project, Housing Authority and Rental Deductions.  This refers to the payment of State and Territory government housing rental payments to respective SHAs on behalf of the recipients of DVA payments.

A training workshop was conducted in April 2004 for State Contact Officer/Trainers on the Direct Deduction System (DDS).  DDS is a sub-system that replaces the functionality provided by “portions” and enhances the control of disbursements currently being made from a client's DVA payments.  The DDS manual is available via the following link:

http://sharepoint/programsandprojects/systemguides/view/dds/Pages/DDS%20Online%20Help.aspx

Procedural changes

Information regarding the latest developments in relation to the provision of DDS for deductions to SHAs was provided in the Stateline 045638E, issued on 10 August 2004.

Commission approval

To seek Commission approval on further “classes” in relation to direct deductions, please forward the details by e-mail to NAT Policy Advisings Income Support with the subject line “Direct deductions - additional payment types/destinations”.

PART 2 – Victoria Cross allowance

Background

The Victoria Cross allowance is an allowance paid to those veterans who have been awarded that decoration.

Issues

Under current legislation the Victoria Cross allowance is a non-indexed allowance of $2,808 per year paid annually in advance.

Legislative amendments

Subsection 103(4) was amended, providing for a 15% increase in Victoria Cross allowance to $3,230 per year.  This amendment also subjects the allowance to an annual indexation in line with movements in consumer price index.  Minor reforms were also imposed on the provisions for decoration allowance.

Impact on income support payments

None.  The system has been updated to allow for the higher rate to be paid.

Further details

For further information in relation to the changes, please contact Veterans' Compensation Branch.

PART 3 – Automatic grant of income support supplement (ISS) to war widow/ers on cancellation of age and wife pension

Background

With effect from 1 July 1997, veterans receiving DP under Parts II or IV of the VEA and age pension (AP) under Part 2.2 of the Social Security Act 1991 (SSA) have the choice of having their AP administered by either Centrelink or DVA.  Eligible partners of these veterans may also choose to have their age or wife pension paid under Part 2.4 of the SSA administered by either Centrelink or DVA.

Continued on next page


Issues

Section 45N of the VEA, which was inserted as part of the Veterans' Affairs (1994-95 Budget Measures) Legislation Amendment Act 1994, deals with categories of war widow/ers who are not required to lodge a formal claim for ISS unless requested by the Repatriation Commission.

Prior to this amendment, eligible age and wife pensioners whose pensions are administered by DVA were not covered under subsection 45N(1).  It meant that upon the death of their veteran partner, ISS was not granted automatically with the war widow/er's pension and a formal claim had to be lodged under section 45I.

Legislative changes

New paragraphs 45N(1)(ba) and 45N(1)(bb) extend automatic grant of ISS to eligible age and wife pensioners whose payments are administered by DVA, upon the death of their veteran partner.  This will mirror the current provision for a surviving partner service pensioner where the veteran had been receiving/entitled to a special rate pension, EDA, SDA item 1-6, or the veteran had been a former Australian prisoner of war.

These amendments apply to persons granted a war widow/er's pension after the commencement of this Part.

System changes

None.  The system already makes automatic grants of ISS to eligible age/wife pensioners.

Procedural changes

An ISS claim form will not be required for age/wife pensioners at DVA whose WWP is granted after the commencement of this Part.

Existing post bereavement period income and assets review procedures should continue to be undertaken.


PART 4 – Calculation of disability pension (DP) arrears

Background

Section 27A provides for the calculation of arrears of pension following a retrospective grant or increase of DP and deals with adjustments for pension received by the partner.  Subsection 27A(1) specifically defines the arrears period as the period between the operative date and the decision date, that is, between the dates when the new rate of DP becomes payable and the date the decision to grant or increase DP was made.

Issues

It is actually the date that the payment is processed that determines the end of the arrears period, which may not be the date of the decision. The decision date may not be the end of the arrears period because of payment cycles and processing arrangements.

Legislative changes

The amendments to the definition of arrears period in section 27A provide that the end of the arrears period is immediately before the first pension period in which the pension payment is paid, or is paid at the increased rate.

System changes

There was no requirement for system changes regarding this initiative.

Procedural changes

None.  This is a technical amendment that reflects the current operation in calculating arrears.

PART 5 - Partner Service Pension for Norfolk Island residents

Background

Partner service pension (PSP) is paid under Division 5 of Part III of the VEA and sections 38 to 38N deal with eligibility for and payability of this pension.

The eligibility criteria for PSP contained in paragraphs 38(1)(aa) and (e) are linked to the qualification criteria for the AP under the SSA.  The intention of these provisions was to provide eligibility for an AP equivalent under the VEA to people who were sufficiently older than their non-pensioner veteran partner.

Continued on next page


Issues

An unintended anomaly has arisen in that Norfolk Island residents may be ineligible for PSP under paragraphs 38(1)(aa) and (e).

In subsection 5Q(1) VEA the definition of Australia includes external territories such as Norfolk Island for the purposes of Part III of the VEA.  However, residence on Norfolk Island is not regarded as residence in Australia for the purposes of social security law.

This social security law restriction means that age pension is not available to those who only have Norfolk Island residency.  As PSP eligibility refers to qualifications for age pension under social security law, Norfolk Island residents claiming PSP do not satisfy the relevant residency requirements under the VEA.

Legislative changes

Subparagraphs 38(1)(aa)(iii), 38(1)(e)(ii) have been amended to deem residence of Norfolk Island to be residence of Australia for the purposes of PSP eligibility.  A provision has also been included to ensure that, even if residence in Norfolk Island occurred before the commencement of this Part, it will be deemed to qualify a person to receive a social security AP for the purposes of paragraphs 38(1)(aa) and (e).

System changes

There was no requirement for system changes regarding this initiative.

Procedural changes

Whilst no cases have been identified to date, these changes should be borne in mind when considering PSP claims.


PART 6 - Calculation of rent assistance (RA)

Background

Module C of Schedule 6 of the VEA provides for the eligibility for and calculation of rent assistance (RA).  RA is an amount added to SP or ISS to help cover the cost of rent.  When calculating the amount of RA payable to a service pensioner, DP paid under Parts II or IV of the VEA is counted as income and may reduce the amount of RA payable.

The wording in Module C required a technical amendment to correctly reflect the impact of DP on RA calculations.

Issues

Points SCH6-C7 and SCH6-C12 of Module C provide that if a person or the person's partner receives DP, the amount of RA may be reduced.  It is understood that the nature of joint means testing means DP should be included in the assessment of RA, whether the DP is paid to the person or to the person's partner.  However, SCH6-C14 provides only for the circumstances where both members of a couple are in receipt of DP.

It was therefore not clear how the Method statement in point SCH6-C13 is applied to the partner of a veteran, where only the veteran is in receipt of DP.

Legislative changes

New point SCH6-C14 provides that, if a person is a member of a couple, the person's disability pension income for the purposes of Module C is worked out in the following way:

  • where each member of the couple receives either or both a DP and permanent impairment compensation

    [3]

    Permanent impairment compensation is a payment under the Military Rehabilitation and Compensation Act 2004 which is treated in a similar manner as DP for the purposes of assessing RA.

    [3] (go back)
    , then the annual rates of DP and permanent impairment compensation are added together and the resultant amount divided by two;

  • where only one member of the couple receives both DP and permanent impairment compensation, then the member's annual rates of DP and permanent impairment compensation are added together and the resultant amount divided by two;

  • where only one member of the couple is receiving only DP or only permanent impairment compensation, then the annual amount of DP or permanent impairment compensation is divided by two.

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Example

Married couple pays rent of $320.00 per fortnight. Veteran is in receipt of 90% DP.  Spouse is not in receipt of any DP or permanent impairment compensation.

Applying the relevant RA threshold gives a maximum RA rate of $45.10 each.

The formula for the DP income test for each married pensioner is:

DP Income Excess = (DP income - Rent Assistance Free Area) ? 2 x 0.4

DP Income Excess

=

($263.07

- $216.00)

? 2  x  0.4

=

$9.41 per fortnight each

To ascertain the actual rate of rent assistance payable,

Maximum rent assistance   $45.10

minus excess DP income - $ 9.41

Rent Assistance Payable=$35.69 per fortnight each

System changes

None.  This was a technical amendment to ensure the Schedule correctly reflects the intent of joint means testing.

Procedural changes

None.


PART 7 - Reduction in pension arrears resulting from partner's receipt of service pension

Background

Rent assistance (RA) is calculated and added to the person's rate of SP as per Module C, Part 2 of Schedule 6 of the VEA.  DP is counted as income for the person and the person's partner for the purposes of calculating the rate of RA.  New grants of, or increases in, DP can be paid retrospectively for up to three months before the date of the claim.

When a retrospective grant or increase is made to the rate of DP, it can create an overpayment of RA.  That is, an amount of RA is overpaid if it would not have been payable during the period, had the new or increased rate of DP been in payment.

Issues

Section 27A provides for any calculation of arrears of DP to be reduced by any overpaid social security pension or benefit or ISS paid to the partner of the veteran receiving the arrears payment.  There is currently no provision to recover an amount of RA overpaid to a partner of a veteran, where the partner is receiving SP.

Legislative changes

New subparagraph 27A(1)(c)(ia) will extend the calculation provisions to a partner service pensioner.  Thus, arrears of DP may be reduced by any overpaid RA paid to the partner of the veteran receiving the arrears payment.

The changes made by Part 7 apply only where the decision to grant or increase the rate of DP referred to in paragraph 27A(1)(a) is made after the commencement date.

System changes

There were no system changes regarding this initiative.  When a retrospective grant or increase is made to the rate of DP, the system re-calculates the rate of RA payable.  Any overpaid RA for the veteran is offset against the DP arrears.

Section 27A does not technically create a debt but allows for the adjustment to be made in calculating the DP arrears.  For the purpose of recording the adjustment required, any overpaid RA for a SP partner is raised as a debt in DMRS.

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Procedural changes

The amount of the partner's RA adjustment should be deducted from the veteran's DP arrears before the balance is released to the veteran.  It should be noted that where the partner's RA adjustment exceeds the available arrears, no arrears are payable to the veteran and no money is recoverable from the partner.  In either event, the arrears deducted are to be directed to the shared destination 'DVA overpayment recovery'.

Delegates need to arrange for any RA debts recorded in DMRS against the partner service pensioner to be offset immediately with the "Debt Deleted (CR)" transaction.  It should be noted that a debt can only be deleted within 7 days of it being raised, so care should be taken to make sure the DMRS record is deleted in this time frame.

If for any reason the RA debt cannot be deleted, transaction "Other Type not listed (CR)" should be used and a comment entered in the transaction comment field to the effect that it is a RA debt that should not have been raised.

Under no circumstances should the transaction "RA Debt due to DP (CR)" be used because this is used in the "Financial Report - Age Analysis" as a waiver transaction.  This transaction has been specified for disabling in DMRS but this has not been done as yet.

The advice to the veteran should include information about the adjustments made to recover RA for both the veteran and the partner.

PART 8 - Value of financial assets for the purposes of the deeming rules

Background

Section 52C Effect of charge or encumbrance on value of assets allows the value of an asset to be reduced by a charge or encumbrance upon that asset, providing it is not an excluded security, such as collateral security or security provided for the benefit of a third party.  This provision exists under Part IIIB Division II – General Provisions relating to the Assets Test.

Deemed income is calculated based on the full value of the financial asset.  There is no provision to discount the value of encumbrances, such as money borrowed to purchase the financial asset.

Continued on next page

Issues

A recent decision of the Administrative Appeals Tribunal (AAT) held that in working out a person's deemed income from financial assets that the value of the person's financial investments is to be reduced by the value of any encumbrance secured against those investments.  The AAT held that the provisions of section 52C were applicable in determining the value of a financial asset for the purposes of the deeming provisions.

Legislative changes

The amendment made to section 52C will explicitly exclude the application of the provision to the deeming provisions in Division 3.  The amendment will remove any ambiguity that may exist in the legislation.

That is, where the value of a financial asset is reduced by an encumbrance for the purpose of the assets test, the full value of that asset is used to determine deemed income.

System changes

None.

Procedural changes

None.

PART 9 - Deemed income and actual income from accrued returns

Background

Subsection 46(K) provides that any return actually received by a person on a financial asset is to be disregarded as ordinary income if the asset is subject to the deeming rules.

The intention of this provision is to ensure that income is not

"double-counted" by having both a deemed rate and an actual return taken into account for income testing purposes.  Effectively, this provision also allows for the receipt of investment returns in excess of the applicable deeming rate to be excluded from the ordinary income test.

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Issues

The possible effect of the subsection is that any return on a financial asset that has accrued but has not been paid may not be excluded from the income test.

The reference to the actual receipt of the return has the potential effect of double-counting the income from a financial asset for the purposes of the income test.  A person with a financial asset that is accruing income in the form of interest may have deemed income included in the income test under sections 46D or 46E and may also be regarded as receiving ordinary income while the interest is accruing prior to it being paid.

Legislative changes

Subsections 46K(1) and (2) have been amended by omitting the reference to income a person actually "receives" and substituting a reference to income a person actually "earns, derives or receives".  These amendments provide that any return on a financial investment that is earned, derived or received is not to be regarded as the ordinary income of a person if income has been deemed to have been received from that investment.

System changes

None.

Procedural changes

None.

PART 10 - Means Test Exemption of certain superannuation assets

Background

The amount held by a person in a superannuation investment is not subject to the income and assets tests until a person reaches "pension age" as defined under the VEA.  A superannuation investment is then assessed as a financial asset, which is subject to deeming and therefore is included under both the income test and the assets test.  This is to ensure that people who are of pension age do not access income support payments while delaying receipt of their superannuation entitlements.

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Issues

A person may not be able to access their superannuation investment due to either contractual reasons (relating to contracts entered into before 20 August 1996), or because s/he is unable to satisfy one of the "conditions of release" required under Schedule 1 of the Superannuation Industry (Supervision) Regulations 1994.  An example is a female age pensioner under the age of 65 who continues to work for more than 10 hours per week.

Under the VEA, a person in this circumstance would have the superannuation investment included in their income support assessment even though they have no access to the asset.

Centrelink has the same superannuation assessment rules as DVA.  However, under social security law, the Minister for Family and Community Services (FaCS) has the discretion to exempt a superannuation investment.  In cases such as that outlined above, this discretion may be exercised upon request.

Legislative changes

These amendments will align the VEA with the SSA, by providing in new section 52AA, a general discretion similar to that provided in section 1118B of the SSA to exclude superannuation investments from the application of the assets test.

The Minister may specify an individual superannuation investment to be disregarded under new subparagraph 52AA(2)(a), or a class of superannuation investments to be disregarded, under new subparagraph 52AA(2)(b).

There are exceptions that relate to the disposal of assets provisions in sections 52FA, 52G, 52GA, 52H, 52ZA and 52ZCA.

Centralised Processing - IDU

Income Support Managers and the Investment Database Unit (IDU) were consulted regarding delegations and processing arrangement.  To ensure consistent outcomes on this specialised subject, the IDU has agreed to investigate such requests and refer them to the Branch Head Income Support for determination.

A submission is being prepared to seek Ministerial approval of the delegations approach and the exemption guidelines that describe the criteria and situations in which the Ministerial exemption should be exercised.

Continued on next page


Procedural changes

Income Support Service Officers should be aware of the possibility of superannuation investment exemptions and provide the information to claimants.

An exemption will only be determined upon request. Once exemption is granted, the onus will be on the pensioner to notify the Department if they cease to be eligible for the exemption.  The exemption will continue to apply until a change of circumstance affects the pensioner's exemption status.

Further information on the referral of exemption requests to IDU and the recording of the exempt assets will be provided once Ministerial approval is received.

PART 11 -Income and assets test treatment of ATO small superannuation accounts and private rental income

Background

ATO Small Superannuation accounts

Schedule 3, Part 1 of the Veterans' Affairs Legislation Amendment (Further Budget 2000 and Other Measures) Act 2002 contained amendments consequential to the enactment of the Small Superannuation Accounts Act 1995.  The amendments were intended to ensure that ATO small superannuation accounts would receive the same income and assets treatment under the VEA as superannuation funds, deferred annuities and approved deposit funds.

Permissible reductions in private rental income

The VEA has no specific provisions to govern the assessment of private rental income.  While section 46C does refer to permissible reductions of business income with regard to deductions that are allowable under the Income Tax Assessment Acts, there is a difficulty in characterising rental income from private investments in rental properties as business income.

Until now rental income has been treated as business income under section 46C. A set percentage had been applied as a deduction in those cases where the rental property schedule from a person's tax return was not available.

Continued on next page


Issues

ATO Small Superannuation accounts

The 2002 amendments did not include an amendment to the paragraph 5H(8)(i) listing of superannuation and similar funds that are exempt from the income test.  An amendment to the paragraph 52(1)(f) listing of superannuation and similar funds that are exempt from the assets test was also overlooked in the drafting of amendments to the VEA.

Permissible reductions in private rental income

The SSA equivalent, section 1075 was amended to clarify the situation as one of the measures included in the Family and Community Services (Simplification and Other Measures) Act 2001.  The amendments to the VEA to implement the measures contained in that bill were included in the Veterans' Affairs Legislation Amendment (Further Budget 2000 and Other Measures) Act 2002.  However, that Act did not include the amendments to clarify the treatment of allowable deductions relating to a private rental property.

Legislative changes

The amendments align the relative provisions of the VEA applying to the treatment of ATO small superannuation accounts with those that apply under the SSA.

Paragraph 5H(8)(i) has been amended to include a reference to any return on a person's investment in an "ATO small superannuation account" being an excluded amount of income for the purposes of the VEA.

A reference to the term "ATO small superannuation account" being defined in subsection 5J(1) has been included in Note 2 to paragraph 5H(8)(i).

Paragraph 52(1)(f) has also been amended to include a reference to a person's investment in "an ATO small superannuation account" being disregarded in the calculation of the value of a person's assets.

Permissible reductions in private rental income

Section 46C has been amended to provide that where a person's ordinary income includes rental income that is not business income, the person's ordinary income from that property is to be reduced by losses and outgoings that relate to the property.

Continued on next page


System changes

None.

Procedural changes

ATO Small Superannuation accounts

None.  This is a technical correction to an oversight in the drafting.

Permissible reductions in private rental income

None.  The legislative amendment now supports the policy that has been applied in the assessment of private rental income.

PART 12 - Ceiling rate service pension

Background

A person on a war widow/er's pension may receive income support payments under the VEA through either the payment of ISS under Part IIIA, or through the payment of SP, if the widow/er is also a veteran in their own right.  The rate of ISS or SP paid to a war widow/er is restricted by a ceiling rate in accordance with points SCH6-A4 - SCH6-A5A.

Under the VEA, where the person's war widow/er pension is compensation reduced, an adjustment may be made to the ceiling rate of ISS payable to a war widow/er in accordance with points SCH6-A6 - SCH6-A9.

Issues

The ability to adjust the ceiling rate does not currently apply where the war widow/er is a veteran with qualifying service in his or her own right and is therefore in receipt of ceiling rate SP.

This means that a war widow/er who is also a veteran with qualifying service may be treated less favourably than a war widow/er who is not a veteran.

Legislative changes

Point SCH6-A6 of the VEA has been amended by inserting the words "or service pension" after the word "supplement".  The changes will mean that war widow/ers receiving ceiling rate SP will also have that rate increased by the amount of the compensation reduction in the war widow/er's pension.

Continued on next page


System changes

None.  When an examiner processes a case where the war widow/er's pension is limited by a compensation adjustment, a manual calculation must be performed to determine what income support ceiling rate should be applied.

Procedural changes

Whilst no cases have been identified to date, these changes should be borne in mind when assessing the rate of SP payable to a war widow/er.

Where a limitation is applied to the war widow/er's pension, the procedures to calculate and record the SP ceiling rate is the same as ISS ceiling rate.  Refer to DI C28/2003 for details.

PART 13 - Offences

Background

Section 208 of the VEA provides for what constitutes an offence under the VEA.  The provisions currently only apply to circumstances where a pension, allowance or other pecuniary benefit or an instalment of a pension, allowance or other pecuniary benefit is not payable.

Issues

The current provision does not cater for the situation where part of a pension, allowance or other pecuniary benefit, or part of an instalment of a pension, allowance or other pecuniary benefit is not payable.

The equivalent provision in the Social Security Administration Act 1999 extends the coverage of offences to include obtaining a payment where a payment is only payable in part.

Legislative changes

Paragraph 208(1)(b) of the VEA has been repealed and substituted with a new paragraph.  The new paragraph provides that it is an offence to obtain a payment or an instalment of a pension, allowance or other pecuniary benefit under the VEA including where the payment or instalment is only payable in part.

System changes

None.

Continued on next page

Procedural changes

None.

PART 14 -Disposal of income and assets

Background

Deprivation provisions are intended to limit the potential for a person to avoid the income and assets tests.  For pension assessment purposes, treatment of income and asset disposals are addressed in sections 48-48E and sections 52E-52J respectively.

Since the introduction of extended deeming, disposed assets exceeding the allowable limit are now considered financial assets and are subject to deeming.  Thus, the asset disposal is assessed under both the income test and the assets test, regardless of whether the disposed asset was income producing or capable of producing income.

Issues

The current provisions allow both a deemed rate and the actual disposed income from the disposed asset to be counted for pension assessments.  This double counting is not the policy intention, and policy is not being applied in this way.

Legislative changes

Section 48D has been repealed to ensure that the VEA does not retain the potential for the double counting of income from "deprived assets".

Notes to some of the related sections have been amended to remove references to section 48D.

System changes

None.

Procedural changes

None.


Part 15 - Compensation recovery provisions

Background

Periodic payments of compensation

In a particular Social Security Appeals Tribunal (SSAT) case, only one periodic payment was made.  Accordingly, the legislation at the time did not apply, as this one payment did not satisfy the legislative requirement that it be “a series of periodic payments”.  Changes have since been made to social security legislation to cover situations where only one “periodic payment” was made.

Extend the application of the recovery provisions of section 59W

Section 59W of the VEA provides that where a person's compensation affected pension (CAP) has not been reduced under section 59T, and the person receives that CAP and retrospective periodic compensation payments for the same period, an amount can be recovered from the person.

Issues

Periodic payments of compensation

Part IIIC of the VEA refers to “a series of periodic payments” but does not make provision for situations where payment of compensation may be a single periodic compensation payment.

Extend the application of the recovery provisions of section 59W

Section 59W as it currently stands covers the situation where a person receives a CAP and subsequently starts to receive periodic compensation payments. (Because no reduction has yet been made to the CAP.)

The provision does not allow for recovery of overpayment where a compensation recipient's CAP has already been reduced under section 59T and the compensation payment is then retrospectively increased.

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Legislative changes

Periodic payments of compensation

The amendments remove references to the receipt of "a series" of periodic compensation payments in Note 2 to the definition of "ordinary income" in subsection 5H(1), subsections 5NB(2) and 59M(4), paragraph 59W(1)(a).   The relevant provisions refer only to the receipt of periodic compensation payments.

The definitions of "periodic payments period" in subsections 5NB(1) and 30D(10) have been repealed and a new definition substituted, similar to that inserted into subsection 17(1) of the SSA, omitting the reference to "a series" of periodic compensation payments.

Extend the application of the recovery provisions of section 59W

Section 59W has been amended to align the VEA with the provisions of the SSA that apply in the circumstances where both periodic compensation payments and payments of a CAP have been received.  It omits a reference to payments of CAP not being reduced "under" section 59T and substitutes a reference to the payments not having been reduced "to nil as a result of the operation of" section 59T.

System changes

None.

Procedural changes

Whilst no cases have been identified to date, these changes should be borne in mind when applying the compensation recovery provisions.

Part 16 - Minor and technical amendments

Background

Part 16 contains a number of minor and technical amendments to the VEA

Legislative changes - liquid assets

The definition of liquid assets in subsection 5JA(7) paragraph (a) has been amended with the words "within the meaning of the Corporations Act 2001" to provide clarification for the definition of a "public company".

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Legislative changes –
Special residence definition

The reference in subsection 5MC(4) to  "couple's assets deeming provisions” have been replaced by the words "provisions in point SCH6-F2".  The amendments also remove redundant references to dependent children in subsection 5MC(5).

These are technical corrections to the subsection.

Legislative changes –
compensation recovery definitions

References to the date "9 February 1988" in subparagraphs 5NB(7)(a)(ii) and (b)(iii) have been omitted.  These dates related to compensation settlements made since 9 February 1988 and are no longer relevant.

These dates were included in the equivalent social security provisions until they were repealed by the Family And Community Services Legislation Amendment Bill 2000.

Legislative changes –
Provisional commencement day

Subsections 36B(2) and 37B(2) have been amended by omitting all the words and paragraphs after paragraph (d) and substituting "then the veteran's provisional commencement day is the day on which the initial claim was lodged".   Subsection 38B(2) has been amended in a similar manner.

These provisions should have been amended when the concept of a "provisional commencement day" was introduced in the Veterans' Affairs Legislation Amendment Act, No. 78 of 1994.

Legislative changes –
Rate of ISS

Subsection 45S(2) and reference to the subsection have been repealed.  Subsection 45S(2) became redundant when SCH6-B2 was repealed by the Veterans' Affairs Legislation Amendment (2002 Budget Measures) Act 2002.

Legislative changes –
Disposal of assets prior to 1 March 1991

Subsections 52FA(2), 52G(2), 52GA(2) and 52H(2) relate to the disposal of assets prior to 1 March 1991.  Under the disposal of asset provisions, the value of disposed assets that exceed the allowable limits are held in a person's pension assessment for five years from the date of disposal.

The pre-1 March 1991 subsections are now redundant and have been repealed.   Consequential amendments have been made in relation to the repeal of the obsolete provisions.

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Legislative changes –
Rate increase determination

Paragraph 56C(2)(a) has been repealed and replaced with a new paragraph.   The effect of new paragraph 56C(2)(a) means that where either SP or ISS has not been, or is not being, paid to a person because the rate of the pension was

  • determined to be nil; or
  • reduced to nil under section 56 or 56A,

then the Commission may determine that the rate is to be increased.

Previously the provision did not enable the increase of SP or ISS that has been reduced to nil by an automatic provision. There is also a technical correction to insert the word "supplement" after the word "pension" in subparagraph 56C(2)(b).

Legislative changes –
Cancellation determination

Subsection 56EC(1) has been repealed and replaced with a new subsection.   The effect of new subsection 56EC(1) means that where either a SP or ISS is not payable to a person because the rate of pension or supplement:

  • has been determined to be nil; or
  • has been reduced to nil under section 56 or 56A,

then the Commission may determine that the pension or supplement is to be cancelled.

Previously the provision did not enable the cancellation of SP or ISS that has been reduced to nil by an automatic provision.

Legislative changes –
Compensation lump sums

Paragraph 59N(e) has been repealed and replaced with a new paragraph, which ensures that the provisions of section 59N apply to a person if the person received any instalments of lump sum compensation.

The VEA provision in its previous condition was incomplete.  The amendment aligns the provision with the SSA equivalent, section 1164, to provide a clearer interpretation and application of the legislation.

System changes

There was no requirement for system changes regarding these minor and technical amendments.

Procedural changes

There are no specific procedural changes associated with the amendments in this Part.