B54/1993 IMPLEMENTATION OF NEW SHARE ASSESSMENT RULES
DATE OF ISSUE: 28 SEPTEMBER 1993
IMPLEMENTATION OF NEW SHARE ASSESSMENT RULES
(incorporating September 1993 changes)
TABLE OF CONTENTS
Introduction...............................................................................................3
Background..............................................................................................3
New Rules................................................................................................3
Calculation of a Rate of Return.....................................................4
50% ceiling on Rates of Return....................................................5
Offsetting Negative Rates of Return.............................................5
Deduction of "reasonable costs"..................................................5
Products listed for less than 12 months........................................6
Listing Date...................................................................................7
Exempt Stock Markets..................................................................7
Overseas Shares...........................................................................7
Legislation.................................................................................................7
'Saved' Rules..........................................................................................9
Who Will Be Affected................................................................................9
Data Collection.........................................................................................9
Target Group.................................................................................9
CMS Cases...................................................................................10
Shareholder Listings.....................................................................10
Shares Review Form...............................................................................10
Processing Timetable..............................................................................10
New PIPS Data Collection Screens & Shares Performance System.........11
Processing Share Review Forms...............................................................11
Responsibility Based Processing............................................................. 12
Automatic Transfer of Cases Not Data Collected.................................... 13
Overpayments.......................................................................................... 13
Gifting....................................................................................................... 13
Cases Not Sent a Share Review Form.................................................... 13
Non-return of Forms................................................................................. 13
Provision and Ongoing Update of Data.................................................... 14
Advice to Pensioners............................................................................... 14
Statistics.................................................................................................. 15
Implementation / Future Developments.................................................. 15
Attachment A — Share Glossary
Attachment B — Examples of Contract Notes
Attachment C — Legislation
Attachment D — Share Review Form and Covering Letter
Attachment E — Processing Timetable
Attachment F — Outline of New PIPS Screens and Shares Performance System
Attachment G — Extract from General Orders Service Pension - Gifting Attachment H DVA Handout
This Departmental Instruction is changed compared to the drafts issued to Branch Offices and now reflects the changes announced on 1 September 1993. For detailed instructions regarding processing of Share Review forms, refer to the earlier draft cleared by NPD (Benefits) and issued to Investment Policy Officers on 27 August 1993.
INTRODUCTION
The purpose of this instruction is to provide details of:
-the new policies to be implemented from 30 September 1993 regarding the assessment of shares acquired on or after 19 August 1992;
-the data collection strategy and timetable; and
-instructions for processing the data collection forms.
BACKGROUND
2.In late 1991 to early 1992 a review of the treatment of various investments under the pension income and assets tests was conducted. This involved the Departments of Finance, Social Security and Veterans' Affairs, in consultation with many pensioner groups and finance industry representatives.
3.This culminated in a report which recommended various options for consideration by the Government. The endorsed changes were announced as part of a reform package included in the 1992 Budget.
4.The changes are to commence from 20 September 1993 and will therefore affect Social Security Age Pensioners from their pension payday of 23 September 1993 and Service Pension assessments from payday 30 September 1993.
5.In response to Community concerns the Government has decided that the new rules regarding shares will only apply to shares acquired on or after 19 August 1992.
NEW RULES
To assist staff in understanding much of the terminology surrounding shares, a glossary can be found at Attachment A.
6.The changes to the treatment of shares acquired on or after 19 August 1992 involve:
-Calculating a rate of return to determine income earned;
-50% ceiling on the rate of return;
-Offsetting negative rates of return;
-Assessment of securities listed for less than 12 months;
-Deduction of costs such as brokerage and stamp duty;
-Exempt stock markets;
-Overseas shares.
Calculation of a Rate of Return.
7.The assessment of income from shares and other securities listed on the Australian Stock Exchange* is to be done by calculating an annual rate of return based on a share's performance over the previous 12 months.
* refers also to the stock exchanges of Bendigo, Ballarat and Newcastle, as well as "Exempt Stock Markets" (detailed later).
8.The performance will take into account changes in the capital value of shares as well as any dividends, bonuses and rights to shares declared in the previous 12 months. The rate of return formula is almost identical to that used for managed investments:
change in share price over 12 months plus dividends and bonuses x100
share price 12 months ago 1
NB/ When the term "12 months" is used, it actually refers to prices declared 26 fortnights ago.
9.This annual rate of return will be automatically calculated and displayed on the new Shares Performance System. Examiners are not required to calculate this rate manually.
10.The assessable income will then be obtained by applying this percentage rate of return figure to the current market value of shares held. The same share prices will also be used to determine the current asset value of a person's share portfolio.
Example:
Share price 12 months ago$1.20
Current share price$1.65
Increase in share price$0.45
Dividends$0.10
Rate of return:[($0.45 + $0.10) / $1.20] x 100 = 45.83%
Income when rate of return is applied to shares:
$1.65 per share x 45.83% = assessable income of $0.03 per share pf.
11.Although DVA legislation refers to shares listed only on a stock exchange in Australia, it is proposed to amend the Veterans' Entitlements Act (VEA) in the 1993 Budget sittings to allow the new rules to apply to shares and other securities listed on overseas stock exchanges. This will align the VEA with the Social Security Act (SSA).
50% Ceiling on Rates of Return.
12.Where a rate of return is calculated at more than 50% per annum, a ceiling of 50% will be applied. This will be automatically overridden on the shares database, therefore examiners should use the rate of return displayed.
Offsetting Negative Rates of Return.
13.Negative rates of return calculated for shares acquired on or after
19 August 1992 (and managed investments) will be allowed as an offset against any ongoing income (due to positive rates of return) from other post 18/08/92 shares and from ongoing managed investment income.
Example:
Company — No.Price — Rate of return — Income
ABC shares — 1000$2.00- 23%- $17.69 pf
XYZ shares 800$1.25 19% $ 7.30 pf
TOTAL- $10.39 pf
If no other managed investments or 'post-92' shares were held, the total income from these shares would be assessed as zero.
If the pensioner also had managed investments in his assessment, the remaining negative $10.39 could be used to offset any ongoing positive income from managed investments.
Deduction of "reasonable costs"
14.Brokerage fees and stamp duty associated with the acquisition and disposal of shares aquired on or after 19 August 1992 are considered reasonable costs and are therefore allowed to be deducted from any ongoing income from these shares and managed investments for a period of 12 months from the date the charges were incurred. (Refer to the glossary at Attachment A for definitions of italicised terms).
15.If a pensioner sells all his shares and there is still a fee amount in the assessment, these fees can be offset against managed investment income, if applicable.
16.If there are no managed investments either, the fee will remain on the system for the full 12 months in case the pensioner invests in either shares or managed investments during the 12 month period in which the fee is allowed as an offset.
Example:
Total fees from various share transactions -$11.90 pf
Total income of shares acquired on or after19 Aug 92 $ 8.20 pf
Total managed investment income $9.15 pf
(less MI fees)
_______
Total assessable income $5.45 pf
17.Attachment B shows examples of typical contract notes for the purchase and sale of shares through a broker.
Products listed for less than 12 months
18.Where a share or other security has been listed on a stock exchange for a period of less than 12 months, then the rate of return is calculated by the following formula:
change in share price since listing date + dividends and bonuses x 100
share price at listing date — 1
NB/ Refer to paragraphs 23 - 25 for explanation of "listing date".
19.This is exactly the same as for the current managed investment formula where a product has only been available for a period of less than
12 months.
20.The next step in determining the rate of return for managed investments involves extrapolating this figure produced by the formula to calculate an annual rate of return.
Example:
If a managed investment became available 3 months ago and the above formula produced a rate of return of 10% for that period, the annual rate of return for a twelve month period would be achieved by multiplying the above 3 month figure by 4, ie. 10% x 4 = 40% annual rate of return.
21.However, it has been decided that extrapolation will NOT be done for shares that have been listed for less than 12 months. Therefore, using the above example and applying it to shares, the annual rate of return would be 10%.
22.Steps are being taken to apply the same policy to managed investments and staff will be advised as soon as this is finalised.
Listing Date
23.The legislation applies the new rules to shares "listed on a stock exchange..." therefore the last sale price on the first day the company is listed on the Australian Stock Exchange will be used as the starting price when calculating a rate of return for shares and other listed securities less than 12 months old.
24.For consistency, the same policy will soon be applied to those managed investments, such as property trusts, which are listed on a stock exchange.
Exempt Stock Markets
25."Exempt stock markets", such as those operated by building societies, may be run by a broker or company and are not listed on the Australian Stock Exchange. Companies or brokers may apply to the Australian Securities Commission to operate an "exempt stock market". One advantage of this is that it allows companies who wish to trade their shares to do so without having to pay substantial listing costs to the Australian Stock Exchange.
26.As these shares can earn dividends, produce capital growth and can be traded on an exempt stock market, income from exempt stock market shares acquired on or after 19 August 1992 will be assessed, from 30 September 1993, under the new rules relating to shares listed on the Australian Stock Exchange.
27.Known examples of companies using an exempt stock market to trade its shares include the Wide Bay Capricorn Building Society, The Rockhampton Building Society (The Rock) and the Mackay Permanent Building Society.
Overseas Shares
28.VEA legislation which comes into effect on payday 30 September 1993 applies the new rules to "shares and other securities listed on a stock exchange in Australia". Budget legislation will remove the reference to "...in Australia" and thereby also apply the new rules to shares and other securities listed on stock exchanges overseas. In the meantime, overseas shares will continue to be assessed under the current rules, where only dividends and bonus shares in lieu of a dividend are assessed as income.
LEGISLATION
29.The legislation covering the changes to the assessment of shares announced in the 1992 Budget received Royal Assent on 24 December 1992. The changes are contained in the current reprint of the VEA (Issue No. 11, January 1993) and have a commencement date of 20 September 1993. (VEA extracts are at Attachment C).
30.Section 5J of the VEA has been amended by replacing the previous definition of "investment product" with:
"investment product", in relation to a managed investment or listed security, means all the investments or securities that are:
(a)in or with the same body corporate or in the same trust fund; and
(b)subject to substantially the same terms and conditions as that managed investment or that listed security...".
31.The definition of "listed security" has also been added to section 5J:
"listed security" means:
(a)a share in a company; or
(b)another security;
listed on a stock exchange in Australia..." (will be amended in 93 Budget).
32.Subdivision AA of Division 8 of Part 3 of the VEA is now headed "Managed investments and listed securities". Section 46AA had been extended as follows:
" (2)This subdivision applies to an investment in the form of a listed security.
(3)This subdivision does not apply to bonds and debentures."
33.Legislation recently passed in the Senate and House of Representatives, but which has not yet received Royal Assent, replaced the above subdivision 2 of Section 46AA with:
" (2) This Subdivision applies to a person's investment in the form of a listed security if the person acquired the investment on or after 19 August 1992."
34.The following Subdivisions cover the rules relating to the ongoing assessment of income from managed investments and listed securities acquired on or after 19 August 1992:
S.46AB and S.46AC detail the calculation of positive and negative rates of return and offsetting between these negative and positive returns.
S.46AD and S.46AE define and explain the use of the previous 12 months' performance in calculating an annual rate of return. S.46AE will need to be amended as extrapolation will not be used in cases where a share has been listed for less than 12 months.
S.46AF authorises that reasonable costs involved in the acquisition and disposal of shares may be offset against ongoing share and managed investment income.
S.46AG restates that actual returns on ongoing managed investments and shares are not considered income.
'SAVED' RULES
35.All shares and other listed securities acquired prior to 19 August 1992 will be assessed under the existing rules for shares and are not affected by the above legislation. The current rules are outlined in the GOSP and are not the subject of this instruction.
36.The only change being made to the administration of the current rules is that staff will no longer be required to calculate dividend income manually. "Cents per share dividend" figures will be held on the new Share Performance System and applied automatically to pensioner assessments once data collection is completed for that pensioner. (Refer to paragraph 48 onwards).
WHO WILL BE AFFECTED
37.All service pensioners with shares currently recorded on PIPS will be reassessed under existing rules for payday 30 September 1993. As at August 1993 when the extract for the setting up of CMS cases was done, there were 21,832 assessments with shares Australia-wide. (See table below for numbers in each state).
STATEMAX RATEREDUCED RATETOTAL
NSW — 3283 — 3139 — 6422
VIC — 2480 — 2717 — 5197
QLD — 2276 — 2151 — 4427
SA — 1202 — 1273 — 2475
WA — 1376 — 1193 — 2569
TAS — 360 — 382 — 742
_____
NATIONAL — 21832
DATA COLLECTION
Target Group
38.All service pensioners who have shares identified in their pension assessment (the numbers have been supplied above) were sent a Shares Review form during the week of 16 August 1993 to update records of their shareholdings and to allow pensioners to include the brokerage and stamp duty they have incurred in the past 12 months.
39.Following the decision to apply the new rules only to shares acquired on or after 19 August 1992, further details regarding the date of receiving such shares will now be required from pensioners before the new rules can be applied. A separate strategy will be prepared and Branch Offices will be kept informed.
CMS Cases
40.All pensioners who were sent a data collection form will be identified under the CMS network with one of two dates:
17 August 1993 for all pensioners currently on maximum rate pension; or
18 August 1993 for all pensioners currently on reduced rate pension.
41.No attributes have been set under these DRI cases, so identification and statistical information requests must be extracted by including the appropriate date sent/issued field (Registration Status) for CMS Statistical Reports.
42.All cases will be in Form Sent (FS) status and a case registered for each assessment.
43.The use of the two registration dates to identify maximum and reduced rate cases should assist Branches in sorting and prioritising the workload resulting from this exercise.
Shareholder Listings
44.In addition, a hard copy listing will be provided of all pensioners sent a Shares Review form, detailing their shareholdings as shown on the PIPS Shares screen. This list will be in alphabetical order and will show only two assessments per page. This list was requested as it may be useful to attach the details to the incoming Share Review forms for examiners to quickly compare existing share details with those declared on the Shares Review form.
45.Another feature to assist in prioritising work quickly, is the inclusion of an asterisk in the address block of the Shares Review form. The asterisk highlights maximum rate cases only.
SHARES REVIEW FORM
46.Attachment D is a copy of the actual Shares Review form and covering letter to be sent to pensioners by the mailing house. The form is hopefully self-explanatory to pensioners, especially with the examples included below each question.
47.Multiple copies of these forms have been sent to each Branch Office to use with new claims, or where another form is requested by a pensioner. As the new rules are now to affect only shares and other listed securities acquired on or after 19 August 1992, details of dates of acquisition are also to be obtained.
PROCESSING TIMETABLE
48.A flowchart outlining key dates and events is at Attachment E.
NEW PIPS DATA COLLECTION SCREENS & SHARES PERFORMANCE SYSTEM
49.Attachment F outlines the new screens and how to navigate around these. The IPOs have already attended a training course held in Central Office on 20 - 21 July and training of all staff involved in the processing and recording of shares details on the PIPS screens has also been completed. Any amendments have been notified to Branch Office through regular bulletins and faxes and details of further screen changes will be advised.
PROCESSING SHARES REVIEW FORMS
50.The various shares and other securities detailed on the Shares Review forms will need to be data collected onto the appropriate screens and processed for the payday of 30 September 1993 (pay period 33), or first available payday thereafter.
51.The following is a list of probable company and security types that may be encountered and explanation of which screens should be used for recording these:
Ordinary Shares — These are the most common listed securities and
(Fully or Partly-Paid)should be data collected onto the PIPS Share
Preference Shares — screen (PP.SH). This is done by selecting the
Convertible Notes — particular security from the Shares Performance
Exempt Stock Market — System (SPS) using the Share Search screen
Securities(PP.SS) and placing "A" in the ACTion field next to the
chosen security.
Options — The rate of return for these securities will be
Futures — calculated manually by DSS. For this reason, they
Overseas Securities — will not initially be found on the SPS but they will
need to be recorded on the current Other Assets
screen (PP.OA) under the category code of "OS"
for overseas shares and "SH" for all others. Any
shares recorded on the PP.OA screen will continue
to be assessed under current pre-19 August 1992
rules.
Private Company Shares — As these are not listed on a stock exchange, they
Unlisted Shares — will have to be recorded on the Other Assets
screen (PP.OA) under the category code of SH.
52.Other security types that may be declared on the Shares Review form and which will be held on the Shares Performance System include:
Vendor Ordinary
Employee Ordinary
Cumulative Preference
Cumulative Redeemable Preference
Cumulative Redeemable Convertible Preference
Cumulative Convertible Preference
Convertible Preference
Convertible Redeemable Preference
Redeemable Preference
Part Preference
Redeemable Part Preference
Cumulative Part Preference
Cumulative Redeemable Part Preference
Cumulative Redeemable Convertible Part Preference
Employee Preference
Cumulative Part Employee Preference
53.It is required that examiners keep a record of any options and futures listed on the Shares Review forms they handle. Rather than keep a manual record, it would be easier to simply do a screen dump of the PP.OA screen for any cases where options or futures are recorded. These should be centrally stored and forwarded to Central Office on a fortnightly basis. This information will assist us in developing appropriate policies relating to the future assessment of these types of securities.
54.For any urgent cases processed after 13 September 1993 (for payday 30 September), daily advices produced would have to be held, in line with normal processing arrangements, until after the release of the quarterly advice for payday 30 September 1993. It is preferred that any cases being processed after 13 September be for payday 14 October 1993.
55.Upon submission of cases that involved using the Shares Performance System to add listed securities to the PP.SH screen, the old shares details held on PP.PS will automatically be deleted. This information can only be retrieved if Submission is cancelled and the case is returned to Investigation Status. A hard copy of the old information held on PP.PS should therefore be attached to the Shares Review form for reference purposes.
RESPONSIBILITY BASED PROCESSING
56.During the IPO training course, the level of delegation required for the data collection cases was raised. It was felt that cases being submitted for data collection only could be determined by officers below the ASO5 level, but as arrangements in relation to other cases would vary between Branch Offices, depending on operational requirements, this should be a matter for Income Support Managers to decide.
AUTOMATIC TRANSFER OF CASES NOT DATA COLLECTED
57.As the current shares screen (PP.PS) will become obsolete from 30 September, all data still not processed through the data collection exercise and transferred to the new PP.SH screen was automatically moved to the PP.OS (Other Shares) screen.
OVERPAYMENTS
58.All Share Review forms received are to be processed before the cut-off for payday 30 September 1993, when a uniform 'cents per share dividend' for each share will be set. Any cases not updated for payday 30 September 1993 will remain assessed using the old share details until the review form is actually processed. These should be processed for the next payday. However, where pension rate reduces solely due to the application of the new cents per share dividend, no overpayment has occurred.
59.Should a pension reduction occur due to large variations in shareholdings or changes in other circumstances, then normal "possible overpayment" investigation may be required.
GIFTING
60.In line with current legislation and policy, pensioners may gift assets to the value of $10,000 without any adverse affect on their pension. If shares valued above the $10,000 gifting limit are disposed of without adequate consideration, the income that would be assessed on the excess gifted amount would be calculated based on the cents per share dividend applied. (Refer to Attachment G for GOSP guidelines regarding gifting).
CASES NOT SENT A SHARE REVIEW FORM
61.Some pensioners with shares in their assessment would not have received a review form due to "address unknown" or having overseas addresses. A listing of these has been provided to the IPO in each state to be followed up according to normal Branch Office procedures.
NON-RETURN OF FORMS
62.If all Share Review forms are not returned by the implementation date, the options include sending reminders, or data collecting existing details of shareholdings onto the new shares screen. (Daily Advices would need to reflect the fact that this has been done, even though the data collection form was not returned). An appropriate strategy will need to be decided based upon the numbers of outstanding forms and the accuracy of current share data held on the PP.PS screen.
PROVISION AND ONGOING UPDATE OF DATA
63.A Melbourne-based company, Information Express, will be the data providers for all cents per share dividends and also for all rates of return and associated calculations applying to shares acquired on or after 19 August 1992. They will provide data to DSS, who will then add any manual overrides to rates of return and pass this on to DVA. The DVA database managers, based in the Sydney Branch Office, will also have the ability to amend any information to be stored on the Shares Performance System.
64.Data used will be extracted from the Australian Stock Exchange (ASX) at close of trading every second Wednesday. This will be provided by the Friday of that week to DSS, who will adjust it accordingly and pass it on to DVA by the next Tuesday for update of the Shares Performance System on the Wednesday/Thursday.
65.Although the Shares Performance System will be updated every fortnight, the new rates of return will only be applied to pension assessments at each quarterly global update. The reason for updating the Shares Performance System every fortnight is to enable any new grants or pension reassessments processed in between the quarterly updates to use the most recent figures available.
66.Staff should note that Information Express "own" the rate of return figures through copyright and therefore the practice of providing some financial advisers, etc. with a complete set of managed investment rates of return will not be appropriate for shares. All requests for bulk details of share performance data should be referred to Investment Policy Officers in the first instance. Further details will be provided to IPOs and those staff likely to be approached for such information, in relation to handling such requests.
ADVICE TO PENSIONERS
67.Staff may receive enquiries regarding how to complete the Share Review form and also about the effect of the new rules on an individual's pension rate. It should be understood that even if data collection has been completed on a case, the pension rate on the trial screen may be based on inaccurate cents per share dividend figures and will therefore be incorrect for payday 30 September. The pensioner should not be advised of this rate.
68.A "Question and Answer" guide has already been issued to Branch Offices to assist in dealing with pensioner enquiries. This may still be used in relation to the new rules, but will be amended to reflect the pre and post August 1992 rules.
69.The covering letter attached to the Share Review form advises pensioners to contact either their DVA Branch Office, or their local Social Security Financial Information Service (FIS) officer if they have any questions. Where a pensioner requires a detailed explanation of how the changes will affect their circumstances and discussion on possible options, a referral to FIS would be appropriate.
70. The FIS handout being used in some Branch Offices is now out of date. A current version adapted for DVA use is at Attachment H.
STATISTICS
71.The following statistics should be kept throughout the data collection period. The details relating to pensioner enquiries will assist us to more accurately factor this aspect into our project costings in future and will be included in the project evaluation. It will also be a useful guide for Branch Offices in allocating resources for any similar exercises.
72.Statistics required:
Enquiries
-telephone/counter;
-number per day;
-average length of time answering enquiry;
-total time spent per day answering enquiries;
-type of enquiry (protest, effect on pension rate, methodology, etc).
Cases referred to normal processing area
-number of cases per day;
-type of case (pension increase with arrears, possible overpayment, PIR outstanding, etc)
IMPLEMENTATION / FUTURE DEVELOPMENTS
73.As highlighted throughout this instruction, certain policies and legislation relating to the assessment of shares are still being finalised. IPOs should be the first point of contact when seeking clarification on issues, as they are liaising directly with Central Office. Further instructions will be issued regarding any developments and to provide specific information regarding actual implementation for 30 September 1993 and policies relating to the application of the 'saved' and new rules.
NATIONAL PROGRAM DIRECTOR
BENEFITS
ATTACHMENT
SHARES
How is income calculated for shares acquired on or after 19 August 1992?
The income test for shares and other securities listed on a stock exchange in Australia and acquired after on or after 19 August 1992 will change from:
30 September 1993 for service pensioners; and
23 September 1993 for Social Security pensioners.
Income from these shares will be assessed on how much they have increased in value plus the amount of dividends paid during the previous 12 months.
Losses on shares (or managed investments) can be deducted from ongoing income from other shares and managed investments.
Brokerage fees and stamp duty paid when buying and selling shares can be deducted from share and managed investment income for 12 months from the sale or purchase date.
NOTE: The changes relate only to shares and other securities listed on the stock exchanges in Australia acquired on or after 19 August 1992. If you hold shares acquired on or before this date, have shares in a private company, or an unlisted public company, these changes will not affect you.
How will the Department of Veterans' Affairs calculate how much income is being earned by my shares?
Income from shares is calculated as follows:
Step 1
Add the increase in value of the share (over the last 12 months) to the dividend paid and make this a percentage of the price 12 months ago. This is called the percentage rate of return.
Example:
On 30 September 1993, the last sale price of Company A's shares was $1.10 per share.
The price 12 months ago was $1.00 per share.
During the last 12 months, a 5c dividend per share was paid.
Increase in value:$1.10 - $1.00
= 10c
Dividend:= 5c
(10c + 5c)= 15c
15c as a percentage of $1.00
= 15%
(ie.15 x 100)
100
Step 2
Assessable income from shares is calculated by multiplying the percentage rate of return by the last sale price for each type of share being assessed. That is:
Income = No. of shares x last sale price x rate of return
Example:
Let's say you hold 1,000 shares in Company A at 30 September 1993. The last sale price is $1.10 and the rate of return as calculated above is 15%. The income from these shares is determind as follows:
1,000 shares x $1.10 x 15%
= $165 per annum
=$6.35 per fortnight.
Why don't the rules use the actual amount of my gains or losse over the past year to assess my income?
The income test calculates your rate of pension according to financial resources currently available to you. It does not take into account past dollar gains or losses from shares.
Accordingly, the rules establish your current rate of income from the shares you own, which you can use for your own financial support at a given point in time. This is done by measuring the current growth in the value of your shares.
If I make a loss on one parcel of shares, will I be able to offset this against income from my other shares?
Yes, Veterans' Affairs works out how much income all your shares
and managed investments have returned. This amount can be positive or negative depending on how well each investment has performed. Negative amounts (ie. losses) can be deducted from the total amount of income from the shares you acquired on or after 19 August 1992 and from your ongoing managed investment income. The following example explains how this works.
Example:
Say you hold 1,000 shares in Company B and 500 shares in Company C. (All these shares acquired on or after 19 August 1992).
The shares in Company B are worth $1.55 each and the rate of return was calculated as +15%.
The shares in Company C are worth $0.90 each and the rate of return was calculated as -22%.
Income would be assessed as follows:
Income from shares in Company B
1,000 x $1.55 x 15%
= +$8.94 per fortnight.
Income from shares in Company C
500 x $0.90 x -22%
= -$3.81 per fortnight.
Assessable income equals
$8.94 - $3.81 = $5.10 per fn.
What happens if I bought my shares at a high price, have made a gain over the past 12 months, but still haven't recouped my losses since purchase?
To ensure that the rules apply to all pensioners in the same way, the price of your shares at the date they were first purchased will not be taken into account. If the purchase prices of each parcel of shares held by individual pensioners was considered, people with the same current financial resources would be paid different amounts of pension.
Using the purchase price would disadvantage many pensioners, as most would have earned a gain, rather than a loss from the time they purchased their shares.
It is fair that pensioners with the same current share holdings and other financial resources receive the same amount of pension. To ensure this occurs, Veterans' Affairs will only be looking at share performance over the previous 12 months.
How often will Veterans' Affairs reassess my income from shares?
Veterans' Affairs will automatically reassess share income every three months (January, March, July and September). You will also be able to advise of changes of circumstances, or seek a review between these times if you wish to have your pension reassessed.
Will Veterans' Affairs allow me any deductions from my share income?
Yes, your brokerage fees and stamp duty can be deducted from your share income for 12 months from the time they are incurred. They can only be offset against income from shares and managed investments.
They can only be offset against income from the shares you acquire on or after 19 August 1992 and from your ongoing managed investment income.
When you are charged brokerage fees and stamp duty, you should contact Veterans' Affairs so that the amount you have paid can be deducted from your share and managed investment income. There is no limit to the number of brokerage fees and stamp duty you can claim.
For More Information
If you would like more information about shares, staff at your local Veterans' Affairs office are willing to assist you.
In addition, the Department of Social Security has a free Financial Information Service (FIS).
FIS Officers can explain, in detail, the new rules and how they are likely to affect your payments, as well as helping you identify the options available to you.
A FIS Officer in your area can be contacted by phoning Social Security Teleservice on 13 2300.
This call can be made from anywhere in Australia for the cost of a local call.
Source URL: https://clik.dva.gov.au/compensation-and-support-reference-library/departmental-instructions/1993/b541993-implementation-new-share-assessment-rules