C16/1996 BEREAVEMENT SIMPLIFICATION - AMENDMENT OF VETERANS' ENTITLEMENT ACT 1986 IN RELATION TO PAYMENTS IN RESPECT OF DEATH

DATE OF ISSUE:  27 FEBRUARY 1996

BEREAVEMENT SIMPLIFICATION - AMENDMENT OF VETERANS' ENTITLEMENT ACT 1986 IN RELATION TO PAYMENTS IN RESPECT OF DEATH

INTRODUCTION

The purpose of this Departmental Instruction (DI) is to provide information on simplified bereavement legislation and to provide details of some minor policy changes arising from the simplification process.

BACKGROUND

2.Bereavement payment was created by the Social Security and Veterans' Affairs Legislation Amendment Act 1989.  In the second reading speech the Minister for Social Security stated, "that it was designed to preserve for 14 weeks the entitlement of the partner or child who has died in the form of a payment to the surviving partner or parent."  This would allow a period of readjustment for the bereaved before having to establish a new structure of income support.  In addition there would be a minimum amount of stressful contact from the Department during the survivor's bereavement.

3.Legislation Section were responsible for drafting instructions for the two 1995-96 Budget initiatives, "Ignore Ceiling Rate Rules During Bereavement Period For Surviving Service Pensioner Partners" and "Disregard War Widow/er Pension As Income In The Calculation Of Bereavement Payment".  In addition there was a need to amend the Income Tax Assessment Act 1936 (ITAA) in relation to several 1994-95 Budget initiatives.

4.The existing legislation was considered to be complex and repetitive and Legislation Section saw an opportunity to simplify the legislation.  Included with the amendments for the Budget initiatives was an exercise in simplification.

RATIONALE

5.The rationale for re-writing the bereavement legislation is simplification.  The existing legislation contains some 43 pages, much of which is repetition.  The re-written legislation is now contained in Part IIIB which covers service pension and income support supplement (ISS) and therefore repetition within the four service pension types and ISS subdivisions is no longer necessary.

6.The ITAA states that bereavement payments are non taxable payments.  The current legislation in the ITAA which sets out what is a bereavement payment is extremely complex, because the Veterans' Entitlements Act 1986 (VEA) does not always identify the whole of a bereavement payment.  Simplification of the legislation within the VEA has a flow on effect which also simplifies the ITAA legislation.

IMPLEMENTATION

7.The effective date for the bereavement simplification is 1 January 1996 with 4 January 1996 being the first effective payday.

RELATED BUDGET INITIATIVES

8.There are two related 1995-96 Budget initiatives being implemented 1 January 1996.  These relate to the calculation of bereavement payments for war widows receiving income support payments.  A separate DI has been prepared by Policy Development (PD).  Refer DI B71/95.

LEGISLATION

Amendments

9.Section 5 is the index of definitions.  This section has been amended to refer staff to Part IIIB, Division 12A for the new definition of a bereavement period.

10.The Section 5 definition of 'pension' has been amended to ensure that it includes ISS only in Parts III, IIIB and IIIC.

Repeal

11.The existing bereavement provisions contained in Parts III, and IIIA under the various Divisions have been repealed.  A single set of provisions is now contained in Part IIIB.  The bereavement provisions of Part IIIB relate to service pension and ISS.

12.Section 5P which previously contained a number of bereavement definitions has been repealed.

Part IIIB

13.The major amendments to the VEA were introduced in the Veterans' Affairs

Legislation Amendment (1995-96 Budget Measures) Bill No.2 1995, Schedule Eight which received Royal Assent on 11 December 1995.

14.The simplified bereavement legislation is contained in Part IIIB of the VEA.  Part IIIB covers service pension and ISS.  A new Division 12A has been inserted which deals with payments after bereavement.  The relevant legislation is contained in sections 53H to 53W.

POLICY CHANGES

Eligibility For Bereavement Payment Following Death Of A Partner

15.At present a survivor who will receive more pension after the death than the couple received before death, is not eligible for a bereavement payment.  Under the ITAA however an amount equivalent to the bereavement payment that would have been paid is still a non taxable payment.

16.The new legislation allows for a bereavement payment to be calculated.  This will ensure the survivor receives the benefit of having a component of their pension as a non taxable component.

Example

A married couple were receiving $40 per fnt each ($80 combined).  The husband was working and his earnings reduced the amount of pension payable.  The husband dies and his earnings cease, the wife has no other source of income.  The wife's payment increases to the maximum standard rate.  The ITAA states that $40.00 of the $335.90 (for seven paydays) is a bereavement payment and is therefore non taxable.

Death Of Child

17.The existing provisions relating to a bereavement payment upon the death of a dependent child limit the payment to the specific additions for the child and do not include any increase that might result from the extra income free areas related to the child.

18.The amended legislation allows for the existing level of pension payments to continue for seven paydays before making any adjustment.  This will be beneficial to reduced rate pensioners where they may be benefiting from the extra allowable free area for the child/ren.  Pensioners on maximum rate pension will see no benefit.

Example

EXISTING LEGISLATION

A married couple with one child under 13.  They have income of $500 per fnt which is reducing their pension.  They receive $471.20 per fnt combined.

Max Rate Calculation $560.40 combined max $  67.20 additional for child $627.20 rate payable	Affecting Income Calculation $500.00 income per ftn minus $188.00 allowable ($164 + $24) $312.00 $156.00 divided by 50c in $1
Reduced Rate Calculation $627.20 max rate minus $156.00 affecting income $471.20 rate payable

The child dies.  A lump sum of $470.40 ($67.20 x 7 paydays) is payable.  Their new rate is $392.40 per fnt.

Max Rate Calculation $560.40 combined max	Affecting Income Calculation $500.00 income per ftn minus $164.00 allowable $336.00 $168.00 divided by 50c in $1
Reduced Rate Calculation $560.40 max rate minus $168.00 affecting income $392.40 rate payable

NEW LEGISLATION

A married couple with one child under 13.  They have income of $500 per fnt which is reducing their pension.  They receive $471.20 per fnt combined.  The child dies.  A lump sum of $551.60 is payable.  This presents $67.20 x 7 paydays and $11.60 x 7 paydays.  The $11.60 is the difference between their old rate $471.20 and their new rate $392.40, ($78.80) minus the $67.20 they were receiving for the child.  Their new rate is $392.40 per fnt.

Election Not To Receive Payment

19.The current legislation allows for an eligible pensioner to elect not to receive a bereavement payment.  Historically this provision has never been utilised, nor does there appear to be sufficient reason for a pensioner to elect not to receive a bereavement payment.  These provisions have been repealed as they merely add complexity to the bereavement provisions.

Effect Of Death Of Person Entitled To Receive Bereavement Payment

20.These provisions deal with the death of a surviving partner during the bereavement period following the death of their partner.

21.Under the current legislation, where both members of a couple die within 14 weeks of each other and the second death occurs before the bereavement payment (in respect of the first death), is made then the bereavement payment becomes payable to such a person as the Commission thinks fit.

22.The re-written legislation takes away the lump sum payment covering the period after the second death.  This will leave existing provisions dealing with the death of a 'single' person to apply.  The new provisions make one additional instalment payable.  In these circumstances the additional instalment would at least be at the combined rate.  Existing policy will be maintained for the period between the two deaths.

23.Note, where action is taken on the first death and the lump sum is paid in respect of the first death and notification of the second death occurs within the bereavement period, there is no change.  That is, no part of the lump sum is recoverable and one more instalment is payable (in respect of the survivors death), to such a person as the Commission sees fit.

Bereavement Payment For ISS Recipients

24.Contained within the simplified legislation measures are changes to the amount of bereavement payment to an ISS survivor.

25.Under the current bereavement legislation applying to members of a couple where the surviving member is a war widow/er, the ceiling rate rules do not apply during the bereavement period.

26.Under the re-written legislation where the survivor is a war widow/er, the ceiling rate rules will apply.  In cases where both members of a couple are war widow/ers, the ceiling rate will apply in respect of the survivor and the ceiling rate will be taken away in respect of the deceased.

PROCEDURES

27.For the majority of cases existing procedures in calculating a bereavement payment will remain.  However, due to some of the minor policy changes, calculations for some manual bereavement payments will vary.  These include where a child dies (refer to paragraphs 17 et seq for further information) and some ISS cases (refer to paragraphs 24 et seq for further information).

SYSTEMS

Death Processing System

28.The existing Death Processing System (DPS) will not be amended as a result of the re-write.  The simplified bereavement legislation sets out a basic set of principles for calculating a bereavement payment.  The re-writing of existing legislation has not changed the way in which bereavement payments are calculated or when they can be paid.

29.Due to changes to ISS as outlined in paragraphs 24 et seq, formerly automated ISS cases where the war widow/er has remarried will need to be carried out manually.  When calculating the cases manually ensure that the automatic advice is suppressed.

Manual Calculations

30.When doing manual calculations, the process which occurs within DPS should be followed.  In other words the process necessary to calculate a bereavement payment manually, should be the same as the automatic process.  The re-writing of the legislation will not change these arrangements.

31.For ISS manual cases staff should no longer refer to DI B40/95.  The manual bereavement calculations and proforma contained in the DI B40/95 no longer apply.

TAX DATA BASE

32.There will be no changes to the Tax Data Base (TDB) as a result of the re-write exercise.

ADVICES

33.There will be no changes to pensioner advices.  Existing advices will continue to be used.  As there are no changes in the calculation of a bereavement payment and the system will continue to provide the mechanism for paying a bereavement payment, the advices which are produced from the system should still be used.

34.As with current manual calculations, the manual advices should continue to be utilised.

GOSP AMENDMENTS

35.Amendments to the relevant chapters of the General Service Order Pension will be included in a future release of the General.

ENQUIRIES

36.The contact person for this instruction is Kathleen O'Kane, Senior Policy Adviser, Policy Administration & Advice.  If you have any enquires regarding this instruction you should contact Kathleen on (06) 289 6440.

BILL MAXWELL

DIVISION HEAD

COMPENSATION DIVISION

       February 1996