C37/1998 1997/98 BUDGET INITIATIVE: LINK TREATMENT BENEFIT ELIGIBILITY TO REDUCTION LIMIT

Purpose of instruction

• The purpose of this instruction is to provide information on the changes to legislation and policy that will result from the implementation of this 1997/98 Budget Initiative.

Changes

This initiative simplifies the rules for determining eligibility for treatment benefits at Departmental expense.  The Service Pension cut-off points for both income and assets will be linked to an Income/Assets Reduction Limit (IARL) that relates to the same rate of pension.

Effective date

This change commences from 20 September 1998 (effective payday 24/09/98).

Vets affected

This change only affects a small number of asset tested veteran service pensioners.

Legislative reference

The changes are contained in the Veterans Affairs Legislation Amendment (Budget and Compensation Measures) Act 1997 (No. 157, 1997).  See the notes section of the VEA available through the General or

WWW Ref: http://scaleplus.law.gov.au/html/comact/browse/TO…

Authorised by

R J HAY

BRANCH HEAD

INCOME SUPPORT

Eligibility

Under the old rules, a veteran service pensioner must meet one of four criteria to be eligible for treatment at Departmental expense.  The criteria are:

1. blind veteran service pensioner; or
2. veteran service pensioner whose pension is neither income reduced nor assets reduced; or
3. veteran service pensioner whose pension is income reduced, must satisfy the treatment benefits ordinary income test; or
4. veteran service pensioner whose pension is assets reduced, must satisfy the treatment benefits assets test.

Special income & assets tests

Under the old rules, eligibility for treatment for veteran service pensioners subject to criteria 1 and 2 is fairly straightforward.  These two criteria remain unchanged.  However, eligibility for treatment at Departmental expense for veteran service pensioners subject to criteria 3 and 4 above, is dependent on special income and assets tests, as shown in the table below.

Name of Test

Legislative Reference

Treatment Benefits Ordinary Income Test

section 53F VEA (Repealed)

Treatment Benefits Assets Test

section 53G VEA (Repealed)

Problem with the special tests

The problem with using the special income and assets tests is that the treatment eligibility under the two tests occurs at different pension rates.  In certain cases a veteran can receive a small increase in pension but lose treatment eligibility by moving from being income tested to assets tested.

Solution

This initiative will address this anomaly, by directly linking eligibility for treatment to the pension calculation process, instead of through the stand-alone Treatment Benefits Income and Assets Tests.

Introduction of an IARL

This initiative aims to simplify current rules by linking eligibility for treatment benefits to an Income/Assets Reduction Limit (IARL).

Removal of special tests

The Treatment Benefits Ordinary Income Test (section 53F VEA) and the Treatment Benefits Assets Test (section 53G VEA) are repealed, and replaced with an IARL (see legislative reference below).

New approach to eligibility

The new approach to determining eligibility for treatment benefits means that where a veteran receives a reduced rate of service pension, the veteran is eligible for treatment until such time as their ‘reduction-for-ordinary-income', or their ‘reduction-for-assets', exceeds the new IARL.

Legislative Ref: new section 53E VEA.

Reduction for what?

The reduction-for-ordinary-income and the reduction-for-assets is calculated during the overall rate calculation process, at Steps 5 and 7 respectively.  The overall rate calculation process is shown at Attachment A (this is not a new concept).

Legislative Ref: Point SCH6-A1 VEA (method statement 1).

IARL

The IARL applicable to a veteran service pensioner is worked out according to the:

• veteran's family situation (i.e. not a member of a couple or partnered); and
• number of dependent children the veteran has.  This is relevant for the purposes of the additional IARL.

The IARL is shown in the table below.

Legislative Ref: new Table 53E VEA.

Family situation

Basic IARL

per fortnight $

Additional IARL

per fortnight $

not a member of a couple

74

14

partnered (each)

64

7

Indexation & Other Implications

The IARL will be indexed twice a year on 20 March and 20 September.  The change to an IARL for treatment will be virtually invisible to affected veterans and State Office personnel.

Income tested

The table below shows the ordinary-income amount at which a veteran service pensioner loses treatment eligibility, based on the IARL applicable to their family situation and the number of dependent children.

# OF KIDS

SINGLE

PARTNERED

IFA

100

176

0

248.05

432.05

1

300.05

484.05

2

352.05

536.05

3

404.05

588.05

4

456.05

640.05

5

508.05

692.05

6

560.05

744.05

7

612.05

796.05

8

664.05

848.05

9

716.05

900.05

10

768.05

952.05

Assets tested

The table below shows the assets amount at which a veteran service pensioner loses treatment eligibility, based on the IARL applicable to their family situation and the number of dependent children.

# OF KIDS

SINGLE

Home owner

SINGLE

Non-HO

PARTNERED Home owner

PARTNERED Non-HO

AVL

125750

215750

178500

268500

0

150500

240500

221250

311250

1

155250

245250

226000

316000

2

160000

250000

230750

320750

3

164500

254500

235250

325250

4

169250

259250

240000

330000

5

174000

264000

244750

334750

6

178500

268500

249250

339250

7

183250

273250

254000

344000

8

188000

278000

258750

348750

9

192500

282500

263250

353250

10

197250

287250

268000

358000

Introduction

Period of grace rules will continue to apply to income tested pensioners, but with some changes to the old rules.  They will continue to not apply to assets tested pensioners.

Old Rules

Under pre-20 September 1998 rules, the period of grace provisions allowed a veteran service pensioner to retain eligibility for treatment benefits for up to 13 weeks after their income exceeded the Treatment Benefits Ordinary Income limits by no more than 25%.

New Rules

Under the new rules, the period of grace provisions continue to allow an income tested veteran service pensioner to retain eligibility for treatment benefits for up to 13 weeks after their income exceeds the IARL, subject to the following rules:

If the person's income...

Then eligibility for treatment...

exceeds the IARL by no more than 50%

continues for the full 13 weeks (and is then lost)

exceeds the IARL by no more than 50%, and reduces below the IARL within the 13 week period

continues uninterrupted (and period-of-grace provisions cease to apply)

exceeds the IARL by more than 50% at any time

ceases immediately

Differences

The difference in percentage between the old period of grace and the new, reflects the change from an income amount to a pension reduction amount.  It reflects the fact that income support pensions are reduced by 50 cents per fortnight for every $1 of income in excess of the ordinary income free area.

Exclusions

Exclusions to the pre 20 September 1998 period of grace rules continue to apply under the new rules.  Exclusions apply in situations where:

• there is an increase in assets resulting in a pension that is paid under the income test, becoming paid under the assets test;
• there is an increase in assets in a pension that is paid under the assets test;
• there is a decrease in assets resulting in a pension that is paid under the assets test, becoming paid under the income test.

Method Statement 1

The table below sets out the pension rate calculation process contained in Schedule 6-A1

Step

Action

1

Work out the person's maximum basic rate using MODULE B

2

Work out the amount per year (if any) by way of rent assistance using MODULE C

3

Work out the amount per year (if any) of pharmaceutical allowance using MODULE D

4

Add up the amounts obtained in Steps 1, 2 and 3: the result is called the maximum payment rate

5

Apply the ordinary/adjusted income test using MODULE E to work out the reduction for ordinary/adjusted income

6

Take the reduction for ordinary/adjusted income away from the maximum payment rate: the result is called the income reduced rate

7

Apply the assets test using MODULE F to work out the reduction for assets

8

Take the reduction for assets away from the maximum payment rate: the result is called the assets reduced rate

9

Compare the income reduced rate and the assets reduced rate: the lower of the 2 rates, or the income reduced rate if the rates are equal, is the provisional payment rate

10

Work out the amount per year (if any) payable by way of remote area allowance using MODULE G

11

Add any amount obtained in Step 10 to the person's provisional payment rate (see Step 9). The result is the person's rate of service pension