C07/2001 CALCULATION OF PAYMENT OF CERTAIN PENSIONS & ALLOWANCES DP DOE

Purpose

The purpose of this Departmental Instruction is to provide legislation, policy and procedural information with regards to the 2000/2001 Budget Initiative, Calculation of Payment of Certain Pensions and Allowances, commonly known as DP Date Of Effect (DP DOE).

Start date

The changes commence on 10 July 2001.

JEANETTE RICKETTS

BRANCH HEAD

INCOME SUPPORT

Introduction

From 10 July 2001, changes to the Veterans' Entitlements Act 1986 (VEA) were introduced via the 2000/2001 Budget measure known as 'Calculation of payment of certain pensions and allowances'.

Aim of change

This initiative was proposed as a minor administrative simplification.  The aim being to align the payment of Compensation instalments with Income Support payment arrangements, thereby providing simplification and consistency across systems and administration.

Who is affected?

The changes affect DVA compensation pensions and allowances paid to disability pensioners and war widow/ers.

Payment of instalments

Under pre 10 July 2001 rules, instalments of DP were paid:

• neither in advance nor in arrears; and
• a full instalment was received fortnightly.

Eligibility for payment

To be eligible for payment of an instalment on a payday, the pensioner had to be alive and entitled to receive payment on the payday.

Commencement date

The changes commence on 10 July 2001.

Payment of instalments

Under the new rules, instalments of DP are paid:

• in arrears; and
• by instalments relating to each pension period, based on daily entitlement.

Legislative ref: ss121(1) VEA

Eligibility for payment

To be eligible for payment of an instalment on a payday the pensioner has to be either:

1. eligible for payment on the last day of the pension period (cancellations); or
2. alive and eligible for payment during the pension period (deaths).

Legislative ref: ss121(3) & (4) VEA

Payments affected

The payments affected by the changes are:

• disability pension;
• war widow/er's pension; and
• most compensation allowances (see below).

Payments not affected

The payments not affected by the changes are:

• Victoria Cross Allowance;
• Temporary Incapacity Allowance;
• Loss of Earnings Allowance; and
• VCES payments.

Legislative ref: s121 VEA

Application

The rules regarding daily rates and instalments apply to:

• commencements (grants); and
• variations (increases, reductions and suspensions).

Pension instalment

The pension instalment paid on the fortnightly payday, is made up of a maximum of 14 daily amounts.

Daily rate

The daily rate is calculated by dividing the fortnightly rate of pension by 14.

Legislative ref: ss121(6) VEA.

Example: calculating daily rate

• A pensioner is granted 50% DP.
• Assume 50% DP is a fortnightly rate of $134.35.
• The daily rate is $134.35 ÷ 14 = $9.5964

Example: calculating pension instalment

• 50% DP is granted with effect from 23 September 2001
• The pension period this falls in runs from 18 September to 1 October
• The pensioner is entitled to receive 9 days payment in the pension period, from 23 September to 1 October inclusive
• The daily rate is $9.5964
• The instalment is 9 days @ $9.5964

• The instalment payable in respect of payday 4 October is $86.37 (rounded to the nearest cent)

Example: Dep DP to WWP

• TPI Veteran dies on 20 September
• Widow was on Dependent DP of $8.42
• Widow eligible for War Widow's Pension from 21 September
• The instalment in respect of payday 4 October is (($8.42/14) × 3 days) + (($427/14) × 11 days) = $337.30

• No DP instalment is payable for the veteran in respect of payday 4 October

Introduction

The concept of a pension period used in the calculation of income support instalments, is introduced for compensation payments.

Definition

A pension period is a period of 2 weeks that starts 2 days before a pension payday (i.e. Tuesday) and ends 2 days before the next payday (i.e. close of business Monday).

Legislative ref: ss5Q(1) VEA

Relating a pension period to an instalment of pension

The amount paid as an instalment of pension depends on the number of days during the pension period that the pensioner is entitled to receive payment.  In other words, on a payday, the instalment paid is made up of the daily rate payable on each day in the relevant pension period.

Legislative ref: ss121(2) VEA

Diagram: A pension period is illustrated in the diagram below.

Example: fortnightly instalment for DP increase

• 50% DP is increased to 80% with effect from 23 September 2001
• The pension period this falls in runs from 18 September to 1 October
• The pension payday that relates to the pension period is 4 October

• The pensioner is entitled to receive 5 days at the 50% rate (18 Sep – 22 Sep) and 9 days at the 80% rate (23 Sep – 1 Oct) on payday 4 October.
• The daily rate for 50% is $134.35 ÷ 14 = $9.5964
• The daily rate for 80% is $214.96 ÷ 14 = $15.3542
• Fortnightly instalment = (5 days × $9.5964) + (9 days × $15.3542)
• ($47.982 + $138.1878) = $186.17 (rounded to the nearest cent) payable in respect of payday 4 October

Note: the example is intended only to show that the daily rate may vary within a pay period and does not address any arrears that may be payable.

Diagram: the daily rates payable in the pension period 18 September to 1 October are shown in the diagram below to illustrate that a pension instalment can be made up of different daily rates.

Paid in arrears

Pension is said to be paid in arrears because the pension instalment is payable on the next payday after the end of the pension period to which the instalment relates.

Legislative ref: ss121(5) VEA

Procedure: suspensions & reductions

For administrative simplicity, where possible it is recommended that suspensions and reductions be effected from Day 1 of a pension period.  The effect of this is similar to the now obsolete practice of reducing/suspending from the 'current reduction date'.

Introduction

In principle the rules, relating to payment of an instalment on cancellation or death, are not changing.  The only difference is that eligibility for payment is linked to a pension period, rather than a payday.

Old rules

Under pre 10 July 2001 rules, the pensioner had to be entitled to receive payment on the payday, to receive the fortnightly instalment of pension.

New rules

Under the new rules for:

• Cancellations: the pensioner has to be eligible for payment on the last day of a pension period, to receive the instalment of pension.  In other words, if a person is not eligible for payment on the last day of the pension period, then nothing is payable to the person in relation to that pension period.
• Deaths: similarly, if a person dies during a pension period, no instalment is payable in relation to that pension period.

Legislative ref: ss121(3) & (4) VEA

Purpose

The following information is a legislative reference for significant changes.

Act

The Veterans' Affairs Legislation Amendment (Budget Measures) Act 2000, No. 157, 2000 received Royal Assent on 21 December 2000.  Schedule 5 is the applicable Schedule in the Act.

Link: http://scale — p — lus.law.gov.au/html/comact/10/6271/top.htm

Pension period

The definition of pension period in subsection 5Q(1) is aligned with the IS-DOE definition.  Pension period is defined as a period of 2 weeks that starts 2 days before a pension payday (i.e. Tuesday) and ends 2 days before the next payday (i.e. c.o.b. Monday).

Effective date of new grant

Section 5S is repealed.  This basically allows DP pension and allowances to be granted effective from a day other than a payday.

Determination of claims & apps for increase

New subsection 19(5F) says that a determination takes effect from the date on which the determination is made, or from such later or earlier date as specified in the determination.

Attendant Allowance

Under old rules, ss98(4) states that where a veteran is cared for at public expense in a hospital or other institution, Attendant Allowance is not payable from the 1 — st pension payday after the veteran enters care, ending on the day they cease being cared for.

In principle there is no change to this rule.  However, ss 98(4) has been amended to make Attendant Allowance not payable from the 1 — st day of the 1 — st pension period after the veteran enters care.  In effect, this makes the allowance not payable from the pension payday relating to that pension period.

Commence-ment of allowances

Where application for:

• clothing allowance;
• attendant allowance; or
• recreation transport allowance,

is made more than 3 months after a determination is made that an injury or disease was war caused, changes to paragraph 114(2)(b) allow for these allowances to be paid from the date the veteran's application is received, instead of from the 1 — st payday after the application is received.

VVRS

Changes are made to some of the provisions relating to the Veterans' Vocational Rehabilitation Scheme (Part VIA).  The changes basically convert pension reduction amounts to daily rates.

Pension instalments

Section 121 is repealed and substituted.  For the purpose of this provision, pension does not include Victoria Cross Allowance, Temporary Incapacity Allowance, Loss of Earnings Allowance, Service Pension or Income Support Supplement (note, a policy decision also excludes VCES).  Pension does include DP, WWP, and other DP allowances not mentioned above.  The changes are outlined in the table below and compared to the 'old' rules:

New

Old

Pension becomes payable in arrears

Pension is paid neither in advance nor in arrears, but on the payday, if the person is eligible on that payday

Pension instalments relate to a pension period

An instalment is paid on the payday that falls after the pension period

The daily rate of pension is calculated by dividing the fortnightly pension rate by 14

An instalment of pension is made up of only the days that a person was eligible in a pension period; with 2 exceptions below:

If not eligible on the last day of a pension period, no instalment is paid in relation to that pension period

On death, no instalment is paid in relation to the pension period in which the person dies

Transitional provisions

Transitional provisions are contained in Schedule 5 of the Bill, starting at Clause 33.

More info: More details are provided in the following section.

What are they

Transitional provisions are a set of rules that enable the changeover from the current payday based system to the pension period based system.  They tell you which set of rules to apply based on the date a change occurs.

Last payday based pmt

The last pay-day based pension payment under old rules will be paid on 12 July 2001.

1st pension period

The 1 — st pension period is 10-23 July 2001.

1st period based pay day

The 1 — st pension period based pension payment will be made on payday 26 July 2001.

Commenceme-nt

The following table explains whether a grant of pension is payday or period based if it occurs during the transitional period.  Note, if a person has no change to their rate of pension during July 2001, the usual instalment will be received on paydays 12 & 26 July.

If a pension becomes payable to a person...

Payment is...

On or before 9 July 2001

Pay day based.  Full instalment on the next payday, up to & including p/d 12/07/01

On or after 10 July 2001

Period based.  Instalment calculated on actual number of days entitled during the pension period.

Commence-ment examples

• Example 1: DP is granted 9 July 2001.  A full instalment of DP is payable in respect of payday 12 July.
• Example 2: DP is granted 10 July 2001.  No instalment of DP is payable in respect of payday 12 July.  A full instalment of DP is payable in respect of payday 26 July.

• Example 3: DP is granted 14 July 2001.  No instalment of DP is payable in respect of payday 12 July.  A 10 day instalment of DP is payable in respect of payday 26 July.

Variation, suspension, cancellation

The following table explains whether a variation, suspension or cancellation is pay-day or pension-period based if it occurs during the transitional period.

If the variation, suspension or cancellation takes effect...

Then the payment is...

On or before 9 July 2001

Payday based- full instalment varied, suspended or cancelled on the next payday up to & including p/d 12/07/01

On or after 10 July 2001

Period based- variations and suspensions take effect from actual date of change; for cancellations pensioner must be eligible for whole pension period or nothing payable on next payday.

Variation... examples

• Example 1: DP is cancelled 9 July 2001.  No instalment of DP is payable in respect of payday 12 July.
• Example 2: DP is cancelled 10 July 2001.  A full instalment of DP is payable in respect of payday 12 July.  No instalment of DP is payable in respect of payday 26 July.

Variations... taking effect on 12 July

Note that where a cancellation, suspension or variation would have taken effect on payday 12 July 2001, the transitional rules provide for it to take effect on 10 July instead.  This provides administrative simplicity in the payment of instalments during the transitional period.

Example: TTI is to be reduced to 100% with effect payday 12 July.  Instead the reduction will take effect 10 July.  Therefore, the instalment of DP paid in respect of payday 12 July is a full instalment paid at the TTI rate.  The instalment of DP paid in respect of payday 26 July is a full 14 day instalment paid at the reduced 100% rate.