C44/1996 1995/1996 BUDGET INITIATIVE: EXTENDED DEEMING

Introduction

In 1994, the Government commissioned the independent consultants, Ageing Agendas, to conduct the Strategic Review of the Pensions' Income and Assets Tests.  Ageing Agendas held widespread consultations with pensioners and veterans, groups representing older people and the investment industry.

Results of pensioner consultations

The consultations with pensioners, veterans and pensioner organisations revealed that their concerns were about the:

• complexity of the rules for assessing income from financial investments;

• frequent changes they caused to pension payments; and

• effect that these rules had on incentives to earn more from investments.

Pensioners with investments, such as shares and managed investments, found the rules particularly complex and stated that their pension payments changed far too often.  Pensioners wanted a simpler and fairer system.

For more information: The findings and recommendations are contained in the final report written by Ageing Agendas, Targeting for Equity.

Ageing Agendas' directions

Ageing Agendas provided firm directions for policy change.  The key recommendations being for the adoption of a broader system of deeming income on assets.  This was recommended because a significant expansion of the deemed income rules would:

• maintain and improve means testing; and

• meet pensioner desires for a more simple and predictable system.

Government response

In response to the report the Government decided that from July 1996, deemed income rules would be extended to the full range of financial assets.

Advantages of deemed income rules

The advantages of the deemed income rules are:

1.Simplicity

• Numerous rules are replaced with one set of rules.

• Investment choices are made easier because investments can be chosen on their merits, instead of on their effect on pension.

2.Fairness

• Pensioners with the same level of financial assets receive a similar assessment, no matter how those assets are invested.

3.Predictability

• The extent to which payments change due to investment performance is minimised.

4.Incentives

• Incentive for self provision are increased because returns in excess of the deeming rates are not counted as income and cannot reduce pension.

• Incentive to increase total income is increased as short term fluctuations to pension payments are eliminated.

Previous rules

The table below outlines the previous income assessment rules for financial assets (pre July 1996).

Income from...

Was assessed...

• cash

• deposit accounts

• money loaned

• deprived assets

at the higher of the:

• actual rate of interest; or

• deemed rate of interest.

• managed investments

• shares

• money loaned

• depending on the date the asset was acquired or lent.

Note: The date an investment is acquired is still relevant to the calculation of income from deprived assets.

More information: More detailed information on pre July 1996 assessment of financial assets is obtained in the General Orders Service Pension (GOSP)

Changes to the rules (from July 1996)

The major difference between the previous rules for assessing income from financial assets, and the deemed income rules from July 1996, is that one set of income assessment rules apply to all financial assets.

General application of rules

Under the deemed income rules, only the deemed rates of interest are used.  This means that a pensioner can earn higher than the deemed rates of interest on their financial assets, with no affect on their pension.  Any extra income earned over the deemed rates of interest, will not be held as income in the pension assessment.

In this section

This section contains the following topics.

Topic

See Page

The Deemed Income Rules

7

Pensioners Affected by the Deemed Income Rules

9

Exemptions From the Deemed Income Rules

11

Calculating Deemed Income

13

Introduction

Prior to the extension of deemed income rules to all financial assets, there were many different and complex rules for calculating the income from financial assets.  Since July 1996, these rules have not applied and financial assets are assessed under one set of deemed income rules.

Description

The deemed income rules are used to assess income from financial assets, under the income test.

Deemed rates of interest

The rules provide for two deemed (or assumed) rates of interest to be applied to the total market value of all financial assets held by a pensioner.

The table below gives information about the deemed rates of interest.

Rate type

Set at...

Effective date

VEA reference

Below threshold rate

5%

01/07/96

46J(1)

Above threshold rate

7%

01/07/96

46J(2)

Review & variation of rates

The threshold rates have been set so they are easily achievable in safe investments.  These rates will be reviewed periodically to take into account movements in financial markets.

Variations to the rates must be made in writing by the Minister for Social Security.

Deeming thresholds

The deeming threshold is:

• $30,000 for single pensioners; and

• $50,000 for couples.

The table below shows the application of the deeming thresholds.

If the pensioner is...

Apply this rate...

To the balance of financial assets...

single

5%

up to $30,000

single

7%

over $30,000

coupled

5%

up to $50,000

coupled

7%

over $50,000

VEA Ref: ss 46H(1) and ss 46H(2)

Note: The deeming threshold is indexed every 1 July

VEA Ref: s 59A to s 59C

Exception: deposit concession money (DCM)

Deposit concession money (DCM) is an exception to the deemed income rules.

Money held as cash, or in financial institution deposit accounts, has income assessed using the actual rate of interest earned, up to a maximum of the below threshold rate.

The DCM is shown in the table below.

For a pensioner who is...

The DCM is up to...

single

$2,000

coupled

$4,000

If the DCM is less than $2,000/$4,000, then only that lesser amount can be assessed at the actual rates of interest.

The DCM must be deducted from the deeming threshold (or the total financial assets, if the total is less than the deeming threshold), before the deemed rates of interest are applied.

Note: the concession does not apply to managed investments, shares, loans, bullion or deprived assets.

Introduction

The deemed income rules are only relevant to pensions or benefits that are income tested.

Pensions affected?

The table below shows which DVA pensions or benefits the deemed income rules should be applied to.

If the pensioner receives...

Then the deemed income rules...

service pension

must be applied to that pension assessment

income support supplement

must be applied to that pension assessment

disability pension

are not relevant to payment of that pension

war widow (er)'s pension

are not relevant to payment of that pension

Commonwealth Seniors Health Card

must be applied to the pension assessment

General affect on pensions

Most service pensioners and income support supplement recipients will be unaffected by the deemed income rules.

Some pensioners paid pension under the income test will probably receive a variation in pension due to the extension of deemed income rules to financial assets.

Note: On implementation, some assets tested service pensioners became income tested and thus, affected by the deemed income rules.

The table below shows the amount of financial assets a pensioner can have and still retain maximum rate service pension, or maximum ceiling rate income support supplement, if their only source of income is from financial assets.

Pension type

Marital status

Financial assets

Service pension

Single

up to $44,970

Service pension

Member of couple

up to $78,170

ISS (see exceptions below)

Single

up to $210,257

ISS (see exceptions below)

Member of couple

up to $324,354

Exceptions to table

There is one exception to the previous table.  If the war widow(er) has been in receipt of income support continuously since 31 October 1986, the maximum ceiling rate is the rate that was payable at that time.  This means that the amount of financial assets these war widow(er)'s can have before their maximum ceiling rate is reduced, is based on their particular ceiling rate and cannot be determined from the Financial Assets column of the table above.

CSHC holders

A small number of Commonwealth Seniors' Health Card (CSHC) holders may lose their eligibility for the card under the deemed income rules, if their financial assets are earning less than the deemed rates of interest.  Other people not previously eligible for the CSHC, because their financial assets were attracting a return higher than the deemed rates of interest, may become eligible for the CSHC under the deemed income rules.

Introduction

Under certain circumstances, financial assets may be exempted from the deemed income rules.

Legislation

The exemptions from the rules are dealt with under s 46L VEA.  This section:

• allows the Minister to disregard individual financial investments, or a specific class of financial investments, as financial assets; and

• currently has no delegated authority associated with it.  That is, only the Minister may make a determination under this section.

Minister's determination

The Minister's exemption from the deemed income rules must be in writing and takes effect on the day that it is made, or on an earlier or later day, as specified in the Minister's determination.

Exemptions made prior to extended deeming

Prior to the extension of deeming to all financial assets, s 46Z and s 46ZF VEA

provided for certain financial institution accounts and loans to be disregarded by the Minister, or his authorised delegate.  S 46Z and s 46ZF VEA were repealed from 1 July 1996.

Although these sections were repealed, an exemption made under either of these sections, that was in force immediately before the commencement of the new deemed income rules, will continue to be in force, until such time as a new determination is made.

That is, investments exempt from deeming under the old rules, will continue to be exempt from the new deemed income rules, until their situation is reviewed.

Revocation

Some products that are exempt from the old deemed income rules, may be earning rates of interest that are higher than the deemed rates of interest under the new deemed income rules.  In order to reassess these cases, the Minister must revoke the exemption first.

Income assessment

If a product is determined to be exempt from the deemed income rules, actual income is held in the assessment.  Once an investment is exempted from the deemed income rules, the Investment Database Unit (IDU) will advise the income calculation relevant to the particular investment.

Asset assessment

Exemption from the deemed income rules does not mean there is an exemption from the assets test.  The asset value of an exempt financial asset will continue to be assessed under the assets test.

Procedures for obtaining exemptions

The underlying principle for determining exemption from the deemed income rules, is that the decision must not undermine the principles of the deemed income rules.  State Offices will be advised of the correct exemption procedures once they have been approved by the Minister.

More information

Pending Ministerial approval, State Office staff should consult their State Investment Policy Officer (IPO) regarding any requests for exemption that are received.

Introduction

The information below outlines the steps involved in calculating income from financial assets, using the deemed income rules.  Examples of an actual calculation are shown alongside the steps.

Amounts used in example column of tables

The amounts used in the examples, are based on the following information.

Single pensioner: A single, income tested pensioner has a total of $38,000 in financial assets.  The breakdown of these financial assets is shown below.

• $1,000 cheque account at 0.00%

• $20,000 term deposit at 6.95%

• shares worth $15,000

• debentures worth $2,000

Married pensioner: A married, income tested pensioner couple have a total of $82,500 in financial assets.  The breakdown of these financial assets is shown below.

• $500 cheque account at 1.00%

• $3,000 savings account at 1.25%

• $18,000 term deposit at 7.95%

• managed investments worth $43,500

• loans to family worth $17,500

Procedure: DCM calculation

Use the procedure below to calculate the DCM.

VEA Ref: s 46F

Step

Action

Example (single pensioner)

Example (married pensioner)

1

Start with the amount of $2,000 (single) /$4,000 (couples).

$2,000

$4,000

2

Set off against this amount any cash on hand.

$2,000 - $0

= $2,000

$4,000 - $0

= $4,000

Procedure: DCM calculation (continued)

3

Set off against the remainder any financial institution deposit money, that earns 0% interest.

$2,000 - $1,000

= $1,000

$4,000 - $0

=$4,000

4

Set off against the remainder any financial institution deposit money that attracts interest at a rate lower than the 'below threshold rate' (5%); this money is to be set off in ascending order of interest rate (i.e. from lowest to highest).

$1,000 - $0

= $1,000

DCM = $1,000

$4,000 - $500

= $3,500

$3,500 - $3000

= $500

DCM = $3,500

Procedure: Deemed income calculation

Use the procedure below to calculate income from financial assets.

VEA Ref: s 46F

Step

Action

Example (single pensioner)

Example (married pensioner)

1

Add the person's total financial assets together (using the market value).

$38,000

$82,500

2

Calculate the deposit concession money (DCM) (using the table above).

$1,000

$3,500

3

Work out the income from the deposit concession money, using actual interest rates.

$1,000 × 0%

= $0

$500 × 1%

= $5

$3,000 × 1.25%

= $37.50

Procedure: Deemed income calculation (continued)

4

Apply the below threshold rate (5%) to the deeming threshold, ($30,000 for singles, $50,000 for couples {minus any deposit concession money})

$30,000 - $1000

= $29,000

$29,000 × 5%

= $1,450

$50,000 - $3,500

= $46,500

$46,500 × 5%

= $2,325

5

Apply the above threshold rate (7%) to any balance over the deeming threshold.

$38,000 - $30,000

= $8,000

$8,000 × 7%

= $560

$82,500 - $50,000

= $32,500

$32,500 × 7%

= $2,275

6

Add the results of steps 3, 4 & 5 together.

$0 + $1,450 + $560

= $2,010

$42.50 + $2,325 + $2,275 = $4,642.50

7

Divide the result of step 6 by 26, to give the fortnightly income from financial assets.

$2,010 ÷ 26

= $77.30

$4,642.50 ÷ 26

= $178.55

Introduction

Under the deemed income rules, the deemed rates of interest will be applied to a pensioner's financial assets.

Definition

Financial assets are defined as:

• financial investments; and

• deprived assets.

Financial assets

Financial assets are:

• available money;

• deposit money;

• managed investments;

• listed securities;

• unlisted public securities;

• loans;

• bullion; and

• deprived assets.

In this section

This section contains the following topics.

Topic

See Page

Financial Investments and Deprived Assets

17

Financial Asset Values

19

Assets Not Affected by the Deemed Income Rules

22

Financial investments

The table below describes financial investments.

Investment

Description

Available money

Cash held by or on behalf of a pensioner.

VEA Ref: ss 5H(1)

Deposit money

Money deposited in a financial institution, such as a bank, building society or credit union (includes term deposits).

VEA Ref: ss 5H(1)

Managed investment

Includes:

• insurance bonds

• friendly society bonds

• unit trusts

• approved deposit funds, deferred annuities and superannuation fund investments where the holder is over pension age

VEA Ref: ss 5J(1)

Listed securities

Shares in a public company that is listed on a stock exchange in Australia or overseas.

Example: BHP

Note: Security derivatives such as futures, options, share ratio contracts, warrants and rights issues will also be deemed.

VEA Ref: ss 5J(1)

Financial investments (continued)

Unlisted public securities

Shares in a public company or another security that is not listed on a stock exchange.

Example: Banana Growers Co-op, Murray-Goulburn Co-op

Note: Shares that are temporarily de-listed (e.g. West Australian Metal) due to restructure, liquidation etcetera, will be deemed (unless an exemption from the deemed income rules has been granted by the Minister).

VEA Ref: ss 5J(1)

Loans

Includes bonds, debentures and the outstanding balance of other loans that have not been repaid in full.  Loans may include money that has been lent to relatives or friends, to family trusts or to private companies.

Note: This includes any loans that were made prior to 22 August 1990.

VEA Ref: ss 5J(2). ss 5J(2A)

Bullion

Includes gold, silver and platinum bullion.

Deprived assets

Deprived assets are subject to the deemed income rules.

VEA Ref: ss 5J(2B)

Impact of deemed income rules on assets test

The deemed income rules do not change the assets test in any way.  "Financial assets" is an income test term only.  The market value of a financial asset is used for the purposes of calculating deemed income under the income test.

The asset values of financial assets under the assets test, will continue to be calculated in accordance with assets test rules (i.e. by using the net market value, which means, the market value minus any encumbrances).

This means that it is possible, although unlikely, to have a different:

• asset value under the assets test; and

• financial asset value for the calculation of deemed income under the income test

Example: Where a pensioner borrows money to purchase a financial asset.

Market values

Under the income test, the deemed rates of interest will be applied to the current market value of financial assets.

Before applying the deemed rates of interest, the value of a financial asset should not be reduced by:

• entry fees; or

• exit fees; or

• encumbrances;

VEA Ref: s 46 and ss 46C(2)

Calculation of the current market value of shares and managed investments is shown in the table below.

If you want to calculate the current market value of...

Then...

shares

multiply the number of shares held × their last sale price

unitised managed investments

multiply the number of units held × unit redemption value

account based managed investments

Add the current redemption value (i.e. the amount originally invested +accrued bonuses))

MIs & SHs- initial valuation

The total value of listed securities and unitised managed investments , were automatically re-valued on 1 July 1996, for existing pensioners.

For new pensioners, the initial valuation of the relevant financial assets will occur automatically, when the new claim is determined.

MIs & SHs  re-valuation

The total valuation is effective until the relevant investments are revalued.  Revaluation must occur:

• on 20 March in each calendar year after 1996 (i.e. from 20/03/97); and

• on 20 September in each calendar year after 1996 (i.e. from 20/09/97); and

• when a pensioner requests a revaluation of one or more of their listed securities or managed investments; and

• following an event that affects the relevant investments and that event is the subject of an obligation notice.

The rationale behind the above revaluation policy, is to ensure that regular reviews are set for listed securities and managed investments

VEA Ref: s 46LA

Update of financial asset values- legislative restrictions

Section 46LA VEA, in particular, paragraph 46LA (a)(iv) VEA, does not restrict the Department's ability to review financial assets.  If a s 54 VEA notice applies, we are able to update a pensioner's financial assets.  Similarly, where a pensioner notifies the Department of specific financial asset changes, the Department is not restricted to updating just the specific investment.

Note: PIPS/PC will automatically refresh all of the managed investment unit prices, listed share prices and financial institution deposit account interest rates, if the data in the current pension assessment requires updating.  These investment details will be refreshed by the 'Calculate Pension' screen on PIPS/PC.

Encumbrances- income and assets tests treatment

Under the income test, the deemed rates of interest are applied to the gross value of a financial asset (s 46 VEA refers).  The value of an asset is not reduced by any charge or encumbrance upon that asset, for the purposes of calculating income from financial assets.  That is, there is no provision to exempt encumbrances from the assessment of the value of a financial asset (for example, money borrowed to purchase the financial asset).

Under the assets test, the value of an asset is 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).  S 52C VEA refers.  There is no change to s 52C VEA as a result of the deemed income rules.

Update of account based managed investment asset values

The current market value of managed investments that are account based (i.e. non-unitised), is the current redemption value of the investment (i.e. the amount originally invested plus any accrued bonuses).

As the onus is on pensioners to advise if the market value changes, some pensioner records may have an inaccurate value recorded.

After consultation with DSS and State Offices, it was decided that it was not practical or cost effective for either DVA or DSS to specifically target and review pension cases involving account based managed investments, prior to the introduction of the deemed income rules.

Account based, managed investment processing procedures in place prior to July 1996, may be reviewed, if there is an identified need to specifically target and review assessments involving account based managed investments.  Otherwise, existing procedures should be maintained.

IFAs & AVLs

The income free areas (IFAs) and asset value limits (AVLs) under the income and assets tests will not be affected as a result of the deemed income rules.  The IFAs and AVLs will continue to be adjusted in line with the Consumer Price Index (CPI), each 1 July.

Introduction

The group of products known as "financial assets" are the only investments that will be affected by the changes to the deemed income rules.  All other products will continue to be assessed under their current income and assets tests rules.

Table

The table below lists the most common non-affected products.

Investment or asset

This includes...

Home and contents

• boats

• caravans

• household contents

• motor vehicles

• principal home

• trailers

Personal assets

• antiques

• coin and stamp collections

• paintings

Income stream products

• allocated annuities

• allocated pensions

• immediate annuities

Superannuation fund investments (pre-pension age only)

(see Note 1 below)

• approved deposit funds

• deferred annuities

• superannuation bonds

Businesses, trusts & other property

• businesses

• family trusts

• farms

• real estate

• partnerships carrying out a business

• private company shares

Life and death assets

(see Note 2 below)

• funeral bonds

• life insurance

• pre-paid funeral expenses

Note 1: when the pre-pension age holder of a superannuation fund investment reaches pension age, the investment becomes a managed investment and thus subject to the deemed income rules.

Note 2: where a funeral bond contract is breached, the bond becomes subject to the deemed income rules.

Introduction

The extended deeming initiative was introduced in two stages.  The stages are listed below.

Stage

Description

1

Royal Assent related changes

2

Changes effective July 1996

In this section

This section contains the following topics.

Topic

See Page

Stage One:  Royal Assent Related Changes

24

Stage Two:  Changes Effective July 1996

25

Effective date

Although the bulk of the deemed income rules commenced from 1 July 1996, certain legislative amendments commenced with effect from the date of Royal Assent.  The legislation received Royal Assent on 9 January 1996.

Policy changes

These amendments removed the savings provisions that allowed for the assessment of capital growth on the realisation of:

• friendly society investments made or acquired before 1 January 1988;

• certain accruing return investments made or acquired before 1 January 1988 that did not allow partial withdrawals to be made; and

• market linked investments made or acquired before 9 September 1988.

These investments are commonly known as "pre-88 saved" investments.

Removing these savings provisions from the date of Royal Assent allowed pensioners who wished to change their investments before July 1996, to do so without their pension payment being adversely affected by past capital growth.

Note: Capital growth profit will continue to be assessed on withdrawal from superannuation fund investments held by a person under pension age.

Further information

Further information may be obtained from the:

• DI C08/96, entitled "Extended Deeming: Royal Assent Changes to Saved Managed Investments", issued 24 January 1996;

• Social Security and Veterans' Affairs Legislation Amendment Act 1996; and

• corresponding Explanatory Memorandum.

Effective date

The extended deeming legislation took effect from 1 July 1996.  For pension payment purposes the effective date is pension payday 4 July 1996  (11 July 1996 for DSS).

Policy changes

These amendments provide for the above and below threshold rates to be applied to the deeming thresholds.

Other important changes relating to the calculation of income from managed investments and shares, include the removal of the:

• provisions that allowed for entry and exit fee deductions;

• provisions that allowed the offset of positive and negative rates of return; and

• need for the date an investment was acquired.

Changes to legislation

The following amendments have been made to Part IIIB VEA.

Type of amendment

Where in IIIB

Dealing with...

Omitted

• Division 1

• Division 2:

  • Subdiv A

  • Subdiv AA

• Subdiv B

• Subdiv C

• Division 3

• Division 4

• Division 5

• ordinary income concept

• investment income

  • introduction

  • managed investments and listed securities

  • accruing return investments made prior to 01/01/88

  • market linked investments made prior to 09/09/88

• income money, other available money and deposit money

• interest attributed to money on loan

• income attributed to deprived assets

Changes to legislation (continued)

Inserted

• Division 1

• Division 2

• Division 3

• Division 4

• the general meaning of ordinary income

• business income

• deemed income from financial assets

• income from retirement funds and annuities

Further information

Further information on and explanation of the legislative changes required to effect the deemed income rules, may be obtained from the:

• Social Security and Veterans' Affairs Legislation Amendment Act 1996; and

• corresponding Explanatory Memorandum.

Introduction

Administrative changes have been necessary to implement the deemed income rules.

In this section

This section contains the following topics.

Topic

See Page

Changes to Advices

28

Changes to Brochures

29

Changes to Forms

30

Miscellaneous Information

31

Other Sources of Information

33

Contact Officers

34

Introduction

The deemed income rules have resulted in changes to both daily and quarterly advices to pensioners.

June quarterly advice content

For less than maximum rate pensioners, the June 1996 quarterly advice included details of the new deemed income rules, including:

• an explanation of the changes to the income test;

• a list of the pensioner's financial assets details; and

• an information sheet explaining how the new rules work.

Affected pensioners also received an explanation of the saving of their eligibility for treatment benefits.

A FREECALL™ 1800 hotline was established to deal with pensioner queries arising from receipt of the quarterly advice.

Integrated (daily) advices content

The daily advices system was modified to incorporate the changes to the deemed income rules.  Stage two changes took effect from pension payday     4 July 1996, being the first payday after the implementation date of 1 July 1996.  These changes reflect the policy changes discussed in the "Changes Effective July 1996" section of this DI.

Standard Letters

The Standard Letters regarding managed investments and the assessment of capital growth profit from pre-pension age superannuation fund investments, that are used by Investment Policy officers and New Claims examiners are currently under review by the Breakthrough team.

Introduction

The deemed income rules have impacted on some Departmental income and assets brochures.

Revised brochures

The brochures that have been revised to accommodate the deemed income rules, are shown in the table below.  The table shows the title of the brochure and whether it is a service pension (SP), income support supplement (ISS) brochure, or whether it applies to both.

Title of Brochure

SP or ISS

Service Pension and Income Test

SP

Income Support Supplement and Income Test

ISS

Service Pension and Assets Test

SP

Income Support Supplement and Assets Test

ISS

Managed Investments

BOTH

Shares

BOTH

Service Pension An Overview

SP

Income Support Supplement an Overview

ISS

Service Pension Rates

SP

Income Support Supplement Rates

ISS

Veterans' Affairs Financial Information Service (VAFIS)

BOTH

New brochure

One new brochure was created for the new deemed income rules.  This  brochure is entitled, "Financial Assets" and is relevant to both service pensioners and income support supplement recipients.

Readability

The amendments to existing brochures have greatly reduced the level of complexity in dealing with topics such as shares and managed investments.

Availability

The new and revised brochures will be available in all State Offices as soon as possible after 1 July.

Introduction

The deemed income rules have impacted on the Departmental income and assets forms, that are used by veterans, their dependants and carers, to claim income support pensions.

Review of forms

A number of staff from both the Income Support and Veterans' Advice Network (VAN), National Office and State Offices, were consulted on the changes to forms to accommodate the deemed income rules.

Many of the changes discussed had wider implications than the deemed income rules.  Wherever possible these changes have been taken into consideration.

It is clear that there is plenty of scope to simplify forms and reduce duplication.  Further rationalisation of the income and assets forms will be considered by the Breakthrough team.

Availability

New and revised forms will be available in all State Offices as soon as practicable after 1 July.  In the interim, existing forms should continue to be used.  When the new and revised forms are available, an OnLine memorandum will be issued outlining the changes and seeking clearance from State Offices, before any final amendments are made.

Introduction

The information in this map covers details that have not been included elsewhere in this DI.

Evaluation

In accordance with Department of Finance (DoF) guidelines, the extended deeming initiative will be evaluated.  In order to aid the evaluation of the initiative,  three attributes have been added to the system to assess the extent to which financial assets have been re-arranged and the impact on program expenditure.

Entry contributions

It is possible that an entry contribution, paid to secure accommodation in a special residence, might be considered as a loan or deprived asset.  The deemed income rules would therefore apply (sub paragraph 5J(2)(b)(ii) VEA and ss 5J(2A) VEA) refer).

Use the table below to determine whether an entry contribution or part of an entry contribution should be deemed.

If an entry contribution...

And if the...

Then...

is paid as a loan or has a loan component

loan, or loan component, exceeds the normal contractual amount payable

deem the excess loan component

is paid as a donation or has a donation component

donation, or donation component, exceeds the normal contractual amount payable

deem the excess donation as a deprived asset

Investment data bases

Information held on the Department's investment data bases (i.e. financial institutions, managed investments and shares data bases) will remain largely unchanged.  Access will continue to be via the mainframe for enquiry and non-processing staff.

PIPS/PC

Pensions Information Processing System on Personal Computer (PIPS/PC) training, relating to the deemed income rules, has been conducted by State Implementation Officers (SIOs) for the PIPS/PC project, in each State Office.  Any systems related queries should be directed to the PIPS/PC contact officer in your State, in the first instance.

Publicity

The changes to the deemed income rules received wide coverage, both Departmentally (DVA and DSS) and externally.  Departmental coverage included letters to pensioners from both Ministers, Age Pension News and Vetaffairs articles, and a radio interview for the On Air With Vet Affairs program.  In addition, the Financial Information Services of both DVA and DSS have provided information on the deemed income rules to many pensioners.

Many financial institutions and pensioner organisations included articles about the deemed income rules in their newsletters, or produced pamphlets and booklets.  The financial print media gave widespread coverage, both positive and misinformed, to the initiative.

Treatment- saved eligibility

As a result of the implementation of the deemed income rules, income tested, gold card holders, who lost treatment on 4 July 1996, had their eligibility for treatment benefits saved, until 30 June 1997.  This gives affected pensioners time to assess their future health needs.

Note: For further information on saved eligibility for treatment benefits, prior to 4 July 1996, refer to the On Line memoranda mentioned at Attachment C of this DI.

Treatment- future changes to income/asset levels

Treatment benefits can be lost at any time, after being saved, if the:

• treatment income benefit limit is exceeded as a result of an increase in income from a non-financial assets source; or

• total assets increase above the set limits.

Taxation

Deemed income is only used to calculate income support pension.  Taxation rules will not be affected by the deemed income rules.

Other references

The following table shows other documents that contain further information on the deemed income rules.

Title of Document

Date

Topic

Social Security and Veterans' Affairs Legislation Amendment Act 1996

1996

Legislation

Social Security and Veterans' Affairs Legislation Amendment Bill 1995- Explanatory Memorandum

1995

Legislation

DI C08/96- Extended Deeming: Royal Assent Changes to Saved Managed Investments

24/01/96

Royal Assent changes

Memorandum- Extended Deeming: Clarification Of When To Save Treatment Eligibility

23/04/96

Treatment

On Line- Clarification Of Saving Treatment Eligibility

21/07/95

Treatment

On Line- Procedural Advice Relating To Applications For Exemption From Extended Deeming Rules

21/06/96

Exemptions

State Offices

The following table lists the extended deeming initiative contact officers in each State Office.  You should direct your queries concerning the deemed income rules, to the contact officer in your State, in the first instance.

Name & SO

E-Mail

Telephone

Lyn Firth (NSW)

N-B-BUDGET Firth, Lyn

(02) 9213 7172

Diane Gilbert (VIC)

V-B-BIO Gilbert, Diane

(03) 9284 6213

Ros Scarcella (QLD)

Q-B-P2 Scarcella, Ros

(07) 3223 8442

Rosemary Csibra (SA)

S-B-IS2

(08) 213 2651

Sukey Angeloni (WA)

W-B-ADBP Angeloni,Sukey

(09) 366 8549

Gary Penfold (TAS)

T-B-IS-MGR Penfold, ,Gary

(002) 216 705

National Office

The following table lists the extended deeming initiative project team from the Policy Development section, in the National Office Income Support Branch.  State contact officers should direct their queries to Fiona or Oona in the first instance.

Name

Position

E-mail

Telephone

Fiona Thompson

Project Officer

N-B-PDI3 Thompson, Fiona

(02) 9213 7770

Oona O'Beirne

Project Manager

N-B-PDI2 O'Beirne, Oona

(02) 9213 7771

John Fely

Director

C-C-DIR-PD Fely,John

(06) 289 6342