What is the Scheme

The pension bonus scheme provides incentive for older Australians to remain in the workforce and defer income support pension.  If all eligibility criteria and rules are satisfied a non-taxable “one off” lump sum amount is payable.

Rationale

The pension bonus scheme is a scheme jointly developed by the Department of Veterans' Affairs (DVA) and the Department of Social Security (DSS) in response to a DSS budget initiative and Government election commitment.  DVA's involvement extends to providing the bonus to people of pension age eligible to receive:

service pension,

income support supplement; or

DSS age pension (if DVA disability pension is also in payment to the person or their partner).

Objectives

The objectives of the scheme are to:

increase labour market participation of people of pension age;

increase the level of individual savings for retirement; and

restrain growth in pension outlays.

These objectives will be met by offering a bonus to people willing to defer their pension by maintaining an attachment to the workforce through gainful employment.

The bonus will be paid as a tax free lump sum, calculated using a multiple of the annual rate of basic pension paid at grant.

Key components of the scheme

There are two components to the pension bonus scheme:

registration; and

payment.

Key aspects of the scheme are:

attained pension age

meets other eligibility criteria for DVA or DSS age pension

no prior receipt of income support pension

deferred the pension

register for the scheme

accrued between one and five bonus periods

generally, a bonus period runs for a year

to accrue bonus, must pass the work test

gainfully work 960 hours during that year

rate of bonus depends on the number of accrued bonus periods and person's annual rate of pension at the time that pension is granted.

Effective Dates

Earliest Eligibility:1 July 1998

Commencement:30 June 1998 (ie Royal Assent)

Publicity Initiative:3 August 1998

First Claims:1 July 1999

Target Group

The target group includes people who have not yet received an income support pension from DVA or Centrelink and who wish to remain in the workforce beyond pension age or who have a partner who wishes to remain in the workforce, ie:

veterans with QS of service pension age;

veterans receiving DP who do not have QS and are DSS pension age;

partners and widow/ers of veterans in the above 2 groups; and

war widow/ers of qualifying age and eligible for ISS.

It should be noted that eligibility also includes an upper age limit (70/75 rule).

Ineligible groups

The following groups are not eligible for the scheme:

Current DVA and Centrelink income support pensioners;

those unable to work; and

those who have attained the relevant upper age limit 70/75 years.

Amendments to

the VEA

The Veterans' Entitlement Act 1986 (VEA) has been amended as follows:

amendments to existing sections of the VEA and in particular Part I (definitions), Part III (service pensions) and Part IIIA (income support supplement); and

insertion of a new Part IIIAB specific to pension bonus scheme.

For a complete listing of VEA amendments, please refer to the

Legislation Table 1 and 2 in Appendix B.

Discretions

A list of the Commission Discretions contained in the legislation is attached as Appendix C.

Delegations

Instruments of Delegation have been prepared and circulated to State Offices separately.

Legislative references

Where appropriate, VEA references have been made throughout this DI and are included in italics.  Social Security Act 1991 (SSA) references have not been included as these will be available via reference material contained in OPAL.

Tax free

Changes have been made to the Income Tax Assessment Act 1997 that make the pension bonus a tax free lump-sum amount.

Eligibility for the Scheme

In order to receive a bonus, the person must:

be eligible to register for the scheme; and

comply with certain regulations associated with the scheme.

To register, a person must meet the criteria listed below.

Type of pension

A person must be eligible to receive:

age service pension; or

age income support supplement (ISS); or

a partner service pension and is pension age; or

DSS age pension.

Pension Requirements

This implies the person must:

satisfy the requirements for that pension; and

meet Australian residency requirements (see VEA/SSA).

Eligible age

To register for the pension bonus scheme, the person must be of eligible age.

For veterans with qualifying service and income support supplement recipients, eligible age is:

60 years of age for males; or

56 years of age for females.

The upper age limit for pension bonus accrual for this group is 70 years.

Eligible age for DSS age pension and partner service pension deferees is

61 years of age for females; or

65 years of age for males.

The upper age limit for pension bonus accrual for this group is 75 years.

Registration period

The person must also register with the Department not more than 13 weeks before or after becoming eligible for pension (or within 13 weeks of the commencement date of the scheme for those already eligible before 1 July 1998). The Commission has a discretion to give an exemption to people whose special circumstances have prevented them from meeting this requirement.

Work

The person must defer receipt of age income support pension and maintain an attachment to the workforce whilst they participate in the Scheme.

Prior Receipt of Pension Payment

In addition, a person must not have had prior receipt of the following pensions:

age service pension;

partner service pension;

income support supplement; or

a DSS age pension.

Types of DVA Pension

There are three different types of DVA pension that can be deferred by a member of the pension bonus scheme:

age service pension;

partner service pension; or

income support supplement.

Pension eligibility criteria

To register with the scheme, the person must meet the eligibility criteria as set out in the VEA/SSA, for the type of pension they are deferring.

They must also be residing in Australia.

Types of DSS pension

Under the scheme as administered by Centrelink or DVA, the age pension can be deferred.  Only veterans receiving disability pension and their eligible partners can join the Social Security scheme through DVA.

Introduction

There are four key differences between the DSS and DVA pension bonus schemes.  These differences have been described below.

Types of pension

DSS pensions:

age pension

DVA pensions:

age service pension;

partner service pension; and

income support supplement.

Eligibility ages

Eligibility ages for the Social Security scheme are 65 years for males and 61 years* for females.  It should be noted that these ages apply to partners and widows of veterans eligible for service pension.

Eligibility ages for veterans with qualifying service and war widow/ers are 60 years for males and 56* years for females.

*age equalisation applies.

Upper Age Limit

Pension Bonus ceases to accrue under the Social Security scheme when a person reaches 75 years.

Pension Bonus ceases to accrue under the Veterans' Affairs scheme when a veteran with qualifying service or a war widow/er eligible for ISS reaches 70 years.  That is 10 years after the relevant male pension age.  For partners, other widows and widowers the bonus ceases to accrue at age 75 years.

Age equalisation rules between males and females will gradually reduce the inequity between male and female participants.

Compensation preclusion period

The Social Security compensation preclusion rules apply to age pension whilst the Veterans' Entitlement rules do not apply to income support pensions paid on the grounds of age under the VEA.

Under the SSA, age pension is a compensation affected pension.

Changes in circumstances

Centrelink:

Under the SSA, a client has 14 days to notify the Department of a change in their circumstances affecting payments.

DVA:

Under the VEA, a client has at least 14 days and up to 21 days to advise of changes to circumstances that effect payments without penalty.

Introduction

The pension bonus scheme will not be suitable for all those who are eligible for an age income support payment.  For some, it will be more appropriate to receive pension and continue to work part time.  The pre-registration process has been designed to assist people to make an informed choice whether to:

defer pension and join the scheme; or

receive pension.

VEA Information package

An information package has been developed to distribute to claimants under the VEA when enquiring about the Scheme.  The information package, available electronically, consists of:

Registration form

Pension Bonus Fact Sheet

Relevant Pension Ready Reckoners

Bonus Estimator Fact Sheet

Work Record Form

Contact List Fact Sheet

Centrelink

Information package

The Centrelink Package consists of:

A comprehensive booklet; and

A registration form.

This package is also available from DVA State Offices.  Please note, to register for the Social Security pension bonus scheme through DVA the person must be a veteran (or their partner) receiving a DVA disability pension.

When the initial State Office supply of the Centrelink booklets and forms run out, States can order new stocks direct from Centrelink.

Centrelink Forms Unit

MANAGER

Forms Unit

Centrelink

Fax Number:      02 6244 7999

Phone Number:  02 6244 6359

Discussion of eligibility criteria

The eligibility criteria for the two schemes are as follows:

eligibility for service pension, partner service pension or income support supplement; or

eligibility for DSS age pension through DVA;

pension bonus eligible age;

qualifying service where appropriate;

proof of identity; and

Australian residency (see VEA/SSA).

Eligible age

To register for the pension bonus scheme, the person must be of eligible age.

For veterans with qualifying service and war widow/ers, (eligible for ISS) eligible age is:

60 years of age for males

56 years of age for females

For others, eligible age is:

65 years of age for males

61 years of age for females

Qualifying service

A person deferring age service pension must have qualifying service.  For a person deferring partner service pension, their partner, or in the case of widow/ers their former partner, must have qualifying service.

The VEA has been amended so that if a veteran (with QS) is a member of the scheme and deferring pension, their partner can still claim and receive partner service pension. This special rule is required as partner service pension eligibility is generally linked to the eligibility of the person's veteran partner.  Other pensions are paid to a person in their own right and are not dependent on another persons pension status.

Proof of identity

Proof of identity must be provided before a person is registered for the scheme.

Australian residency

A person must meet the residency requirements set out in the VEA to qualify for the scheme.

Income and assets tests

As part of the registration process, the person should try to ascertain the:

rate of pension they would receive if they chose to cease work and receive pension immediately; and

pension bonus that they will receive when they make claim.

Please note that the bonus lump sum amount that will be payable is based on the rate of income support pension that is payable (excluding rent assistance, remote area allowance and pharmaceutical allowance) when finally claimed.

The relevant pension ready reckoner and pension bonus estimator available as fact sheets should be used to estimate the amount of bonus payable and therefore whether the scheme is suitable for the applicant's situation.

In the event that DVA officers provide assistance to a person considering whether to register for the scheme or not, the income and assets information provided should not be used for any purpose at any time in the future.

Assessment of financial eligibility

To assess a person's financial eligibility for the scheme, the following criteria are used:

current level of income and assets;

planned years of deferment;

estimated current rate of pension;

estimated amount of bonus using the Bonus Estimator;

do they want to keep working?; and

would they be better off receiving pension now?

Information/

Assistance

If applicants require more complex information, they should be referred to a VAFIS officer or their financial planner.

Introduction

There are three components to the scheme:

Registration;

Membership; and

Claiming Pension Bonus.

Registration

The registration section of the DI (see page 14) covers the policy relating to the registration component of the scheme.  It includes examples of registration by:

single or widowed persons;

couples;

working partners; and

non-working partners

Membership

The membership part of the DI (see page 17) covers the requirements that must be met by a member of the scheme.  These include:

general requirements;

work test requirements;

types of membership; and

cancellation of membership.

Claiming Pension Bonus

In order to claim a pension bonus (see page 28) the person must:

have registered for the scheme;

have met the scheme's requirements (such as the work test); and

claimed a pension.

Introduction

In order to accrue bonus years and claim a bonus after a minimum of one and up to a maximum of five years, formal registration for the scheme is a mandatory requirement.

Eligibility criteria

To register for the scheme at DVA, the following eligibility criteria must be met:

eligible to defer DVA income support pension;

have reached pension bonus eligible age;

have not yet received a DVA or DSS income support pension;

defer pension and register with the scheme;

meet the requirements of the work test; and

accrue a minimum of one year's bonus and up to a maximum of five years' bonus.

Eligibility and Payability

For a person to register as a member of the pension bonus scheme, they must be eligible to receive an income support pension, however, at the time of registration, that pension does not have to be payable.  Indeed, no assessment of pension payability is required because it is assumed that the person is registering before their retirement.

Registration period 1

If on or after 1 July 1998, a person reaches eligible age for an income support pension that they plan to defer, the person has a period of 13 weeks before and 13 weeks after reaching eligible age, to register for the Scheme.  (See sub-section 45TH(i).)

Registration period 2

If before 1 July 1998, a person reached eligible age for an income support pension that they plan to defer, the person has a period beginning on the commencement of the legislation and ending 13 weeks after 1 July 1998, that is 30 September 1998, to register for the scheme.  (See section 45TH(ii).)

Please also note that this is the only time that people who are beyond eligibility age can register for the scheme en masse.  However, there is a Commission discretion to allow people who missed their registration period due to extenuating circumstances to register.

Please note, upper age limits apply, therefore, a person deferring service pension/ISS cannot register unless they turn 69 before 1 July 1998 and a person deferring the other two types of pension paid by DVA, cannot register unless they turn 74 before 1 July 1998.  This allows time to accrue the minimum 1 years of bonus before they become post 70/75 members of the scheme.

Couple

When both members of a couple decide to defer pension and register for the scheme, they must each register when they reach pension bonus eligible age.

Non-working partner

For a couple to register for the scheme, only one member of the couple needs to be working.  The non-working member of the couple will use their partner's work test to pass their component of the work test.  However, they must both meet all other eligibility criteria for the scheme.

The non-working partner cannot accrue bonus periods until the working partner has registered for the scheme.  The non-working partner's membership of the scheme will be non-accruing until their spouse registers for the scheme.  (See sections 45TS(b) and 45TC(i) and (ii).)

The accruing, non-working partner can claim bonus at any time after the initial 12 months.  If the working partner claims pension and bonus, the non-working partner has two choices: claim pension and bonus, or accrue more bonus by starting work and continuing with the scheme.  The working partner's work will be treated as the non-working partner's work, using Commission discretion (45TO refers), so that the non-working partner can start work and accrue more bonus periods.

Dual

Membership

A member of the pension bonus scheme can be concurrently registered with both DVA and Centrelink.  However, they can only claim a bonus and pension from one or other agency.

Transfer

A member of the pension bonus scheme with Centrelink may, if eligible, transfer their registration to DVA.  DVA rules would then apply and only the bonus periods that they had accrued at Centrelink whilst of eligible age for the DVA scheme would be transferred.  The Centrelink evidentiary certificates (see P19, the membership section) would be accepted as proof of work completed.  A DVA member may also transfer their registration from DVA to Centrelink.

For example:  Mr Jones registers with DVA at the age of 60, defers pension and passes the work test.  At the age of 65, he decides to register with Centrelink when he reaches eligible age under the rules of the Centrelink Scheme.  In this example, he would not be able to transfer any of the years already accrued at DVA, because they were accrued before he was eligible at Centrelink.  Of course, he can choose to register concurrently with both Departments.

Introduction

Once a person has met the eligibility requirements for the scheme and registered as a member, there are a number of things they must do in order to accrue a bonus.  The term accrue has been used, because it is possible for a member to accrue a bonus, but not receive a bonus amount because:

at the time of their claim they have no pension payability; or

they die before claiming.

Change in circumstances

A member must notify the Department of:

any assets of more than $10,000* given away in a designated year;

any receipt of an excluded payment; and

any receipt of pension such as carer's payment.

*Special rules apply in the case of people who have registered under the pension bonus scheme and accrued at least one bonus period and then give away their farm under the Retirement Assistance for Farmers scheme.

Change of Address notifications

A member should notify the Department of change of address.

Work requirements

In order to accrue a bonus, a member must meet the minimum work requirements for each bonus year.  They must gainfully work a minimum of 960 hours for each bonus year.  This can be broken down in two ways:

20 hours of work per week for 48 weeks (includes 4 weeks leave); or

18.46 hours of work per week for 52 weeks.

Two thirds of the hours worked for each bonus year must be worked in Australia.  (See section 45TS.)

Definition of gainful work

Gainful work is defined as work for financial gain or reward.  Management of family financial investments or domestic duties in relation to a person's place of residence does not count as gainful work.  (See sections 45TV, 45TY and 45TZ.)

Work test

The work test must be passed for each bonus period.  If a member fails a work test for any bonus period, they have 13 weeks in which to claim a bonus for the periods already accrued.  If they fail to do so, they will not receive a bonus.  If they fail the work test in the first year, they will not receive a bonus payment.

Deferment years

Members must work whole years, except for their final year which can be a part year.

For example, Mr Smith can work two full years and half a year for the final bonus period.  The calculation of bonus is then pro rated accordingly (see the Claiming section of the DI for more information).  Mr Smith cannot work a full year, then half a year, then a full year.  In this example, Mr Smith will have failed the work test in the second year and if he claims at the end of the third year, he will not receive a bonus because he did not lodge a claim within 13 weeks of failing the work test.

If a member passes the work test for more than five bonus periods only the most recent five years will be used to calculate the amount of bonus payable.

Evidentiary certificates

Members do not have to approach the Department and complete a work test at the end of each deferment year.  They can continue on the scheme and monitor their performance for each year and approach the Department when they are ready to claim pension and bonus.  However, in doing so, they run the risk of unwittingly failing the work test and not being eligible to receive a pension bonus.

Members can request the Department to issue them with an evidentiary certificate stating that they have passed the work test for a given number of bonus periods.  It is highly recommended that they do so.  (See section 45U.)

Work record

The work record must contain the following information:

nature of the gainful work;

dates on which gainful work was carried out;

the total number of hours gainfully worked;

the total number of hours gainfully worked in Australia;

the name or names of employers concerned (where appropriate); and

such other particulars as the Secretary requires.

An example of a recognised work record is available and can be issued to members when they register for the scheme (see electronic income support form D0640-pension bonus scheme 52 week work record.).

(See sub-section 45UA(3).)

Passing the work test

In order to pass the work test, a member must meet the following requirements:

produce a group certificate in respect of any gainful work carried out in the period; or

produce an income tax return that relates to any gainful work carried out in the period; and

they must be able to provide the Department with a recognised work record.

(See sub-sections 45UA(1) and (2).)

Introduction

There are five types of membership of the pension bonus scheme:

Accruing;

Non-accruing general;

Post 70/75;

Discretionary; and

Cancelled.

Definition

While a person is meeting the work test and deferring pension they have accruing membership.

Generally, when a person registers for the scheme, they will be registering as an accruing member.  This means that either they or their partner are currently working and are recognised as members of the scheme.

Non-accruing membership

Non-accruing membership occurs when:

a disposal preclusion period has been triggered; or

the member is in receipt of a carer's payment; or

the member has a continuous period of sick leave of at least 4 weeks and not more than 26 weeks; and they continue to be a member of the scheme but their bonus accrual is frozen for a specified time.

Continuity

The continuity of accruing membership is not broken by a period of non-accruing membership, as long as these periods are consecutive.  This means that if a member is working, triggers a non-accruing period and then returns to work at the end of that non-accruing period, the non-accruing period, in effect, did not exist.  (See section 45TP.)

A person can claim the pension bonus when they are in a non-accruing period.  (See sub-section 45UL(6).)

Non-accruing period

During this period, the member will not be able to accrue any bonus periods.  When their preclusion period ends, the member will become an accruing member again if they return to the workforce and continue with the Scheme.

Non-accruing members can claim a pension bonus in this period.  (See sub-section 45UL(6).)

Disposal preclusion periods

If a person or their partner disposes of an asset worth in excess of $10,000 in a designated year, they are subject to a disposal preclusion period.  This period begins on the day the disposition took place and ends five years from that date.  During this period, they are non-accruing members of the Scheme.

(See sections 45TN and 45UT.)

Carer preclusion periods

If a person receives:

a carer payment; or

carer service pension; or

income support supplement payable to a carer under subclause 8(3) of Schedule 5 of the VEA,

the member is in a carer preclusion period throughout the period for which they receive the payment.  During this period they are non-accruing members of the Scheme.

(See sub-section 45TN (2) and section 45UU.)

Post 70/75

Once a veteran (with QS) or a war widow/er has reached 70 years of age (75 for others), they can no longer accrue bonus years.  They can continue working and deferring pension.  For each subsequent year, they must pass the work test.  Only the periods they have accrued before reaching 70/75 will be used in calculating bonus.

Post 70 membership

If a person is deferring an age service pension (for veterans with QS) or income support supplement, their membership becomes post 70 on the day they turn 70 years of age.

(See section 45TQ.)

Post 75 membership

If a person is deferring a partner service pension, their membership becomes post 75 on the day they turn 75 years of age.  (See section 45TQ.)  The 75 year upper limit also applies to DSS age pension.

Other

There are several other categories where Commission has discretion to allow a member to become a non-accruing member of the scheme.  These include but are not limited to:

a participant in the Community Development Employment Program;

a member who is in gaol;

a non-working member whose eligible, working partner intends to register for the scheme when they reach eligible pension bonus age;

a member on sick leave for a continuous period of at least 4 weeks and not more than 26 weeks.

(See section 45TO.)

Cancelled membership

Membership of the Scheme is cancelled when:

the claim for bonus is determined; or

the member starts to receive a DSS pension or a DVA income support pension (an excluded payment); or

the member does not make a proper claim for bonus when they claim a designated pension; or

the member requests the Commission in writing to cancel their membership.  (See section 45TK.)

Retirement  Assistance for Farmers

If a person registered under the pension bonus scheme then applies for assistance under the retirement assistance for farmers scheme (RAFS) they can give their farm away.  Under these rules the gifting of the farm is disregarded under asset disposal rules.  For detailed information on RAFS please refer to departmental instruction C30/98.

To take advantage of both schemes a person needs to:

register as a member of the pension bonus scheme;

accrue at least one bonus period before divesting their farm; and

then claim pension and bonus immediately.

In this situation, the act of giving their farm away has been covered by the RAFS legislation and the person will not be penalised in calculating the amount of bonus.  However, a person cannot accrue any bonus after giving the farm away and should claim pension and bonus immediately.

Purpose

This section of the Departmental Instruction outlines the procedures to be used in:

registering applicants for the pension bonus scheme;

assessing membership status for the scheme; and

a brief description of procedures for calculating bonus is also given.

Registration

To register a person for the pension bonus scheme you:

process their application;

determine qualifying service where appropriate;

ensure that all requirements of the scheme have been met;

enter their details on the system (see below); and

send the appropriate acceptance or rejection letter.

Scheme Membership Registration

The registration system is currently being developed and will be ready for use in October 1998.  Membership details will be entered in the registration system component of the pension bonus scheme when it is available.  A further instruction will be issued, detailing the procedures for the registration system.

Interim system procedure

Under the interim system, officers will record the applicants details on the Claims Management System (CMS).  Refer Attachment E for interim system procedures.

The determined registration forms will need to be kept secure until they can be entered on the pension bonus system.

Standard letters

Upon completion of the registration process, a standard letter will be sent to an applicant informing them whether their application has been accepted or rejected.  Where an application has been rejected, the reasons for the rejection will be clearly stated.  A list of these letters is contained in Appendix D.

Review

Under Section 57 of the VEA, an applicant for the pension bonus scheme who has had their application rejected, can request a review.

Introduction

Claims for pension bonus cannot be made before 1 July 1999.

Submitting a claim

To claim a bonus payment, a member of the scheme must submit a claim in writing, on a form approved by Commission, attached to a claim for a designated pension.  A claim for pension must be submitted at the same time because the rate of pension granted is used to calculate the amount of bonus.

Only one bonus payment can be claimed from either DVA or Centrelink.

Criteria for bonus payment

In order to receive a bonus payment, a member must:

have accrued at least one bonus period; and

receive a rate of pension.

They must also claim within 13 weeks of ceasing work.

Bonus payability

Calculation of the bonus depends on a rate of pension being payable.  If the rate of pension to be paid is zero, then the bonus payment will also be zero.

Factors affecting bonus calculation

The following factors will affect the bonus calculation:

part final year;

change in marital status; and

change in type of pension being deferred.

Pro rata

The above factors are pro rated accordingly to reflect the amount of bonus payable at any given point in the deferment period.

Basic bonus formula

(annual rate of pension)  x (9.4%)  x  (No. of years)  x  (No. of years).

You will note that the number of years deferred is squared.  This results in an exponential equation, meaning the longer a person defers pension and stays on the scheme, the more bonus they will receive.

Withdrawal of claim

A claimant for pension bonus can withdraw their claim, orally or in writing.  This claim is then taken not to have been made.  (See section 45UM..)

Rate of pension

In order to calculate the amount of pension bonus to be paid, the rate of pension payable must be determined first.  The rate of bonus is based on the amount of pension payable when the person actually claims pension.

Formula

The basic formula used to calculate a person's amount of pension bonus payable is as follows:

(annual pension rate)  x  (9.4%)  x  (No. of years)  x  (No. of years in the overall qualifying period)

Pension multiple

The central part of the equation (0.094) x (no of years in the overall qualifying period), is described as the pension multiple.

Overall qualifying period

The overall qualifying period begins at the start of the first qualifying bonus period and ends at the end of the last qualifying bonus period.  A qualifying bonus period is each of a person's accrued bonus periods.  Where a person has more than five qualifying bonus periods, each of the five most recent bonus periods are qualifying bonus periods.

Any period of non-accruing membership is taken not to form a part of the person's overall qualifying period.

See section 45UD

Impacts

There are three considerations when calculating the amount of Pension bonus:

Pro rata final year

Changes in marital status

Change in type of pension being deferred

Further DI

A further DI will be issued next year to cover the calculation of bonus payments and claim procedures.  The first claims and payments will be made in July 1999.

Bereavement

A bereaved partner will have an additional 13 weeks in which to lodge a claim for pension bonus resulting in a total of 26 weeks to lodge a claim.  They will be declared a non-accruing member for an additional 13 weeks.

(Section 45TO refers.)

Claim granted before death

If a claim for pension and bonus has been granted before death and the person dies before the pension and bonus have been paid, then the bonus is payable to the legal personal representative of the person.

Death before claiming

If the person dies before submitting a claim for pension bonus, then there is no amount of bonus payable to the deceased's estate.

Death after claiming

If a person dies after submitting a claim for pension and bonus, their claim will be processed as follows:

the Commission determines the claim as if the person had not died; and

any bonus payable is paid to the legal personal representative of the person.

(See section 45UR.)

Contact Officers

State Office contact officers for this initiative are set out in the table below.  These officers should be your first point of contact if you are seeking policy clarification if the information is not contained in this instruction or the relevant fact sheets.

State

Name

Telephone No

NSW

Lyn Firth

(02) 9213 7379

VIC

Roma Ahuja

(03) 9284 6515

QLD

Geraldine Howard

(07) 3223 8802

SA

Sue Barlow

(08) 8290 0419

WA

Sandy Vidot

(08) 9366 8362

TAS

Tammy Kennedy

(03) 6221 6621

Introduction

This section contains a list of terms and their basic definitions.  The section references for these terms have been included in italics.

Accruing member

A member of the Scheme has accruing membership once they have registered and are meeting the requirements of the work test.  (See section 45TM.)

Bonus Period

A bonus period is the full year period of the person's accruing membership of the Scheme.  The first bonus period must be a full year.  The person's final bonus period may be a part year.  (See section 45TR.)

Carer payment

Means carer payment under the Social Security Act 1991.

Carer preclusion period

When a member of the Scheme receives a Carer payment, they are in a carer preclusion period and their membership of the Scheme is

non-accruing.  (See section 45UU.)

Designated pension

Designated pension under the VEA means:

(a) age service pension; or

(b) partner service pension; or

income support supplement.

Designated pension under the SSA means age pension

Disposal preclusion period

When a person disposes of more than $10,000 in a designated year, they are in a disposal preclusion period and their membership of the scheme is non-accruing.  (See section 45UT.)

Evidentiary certificate

The Commission can issue a written statement upon request of a member of the scheme, stating that they were an accruing member, they gainfully worked at least the specified hours and that no more than a third of the hours worked were outside Australia.  These certificates can be issued for full and part years.  The certificates can also be issued to say that a person's partner worked the specified number of hours.  (See section 45U.)

Excluded payment

If a person is in receipt of an excluded payment (eg age income support pensions from DVA or Centrelink), they are no longer able to accrue bonus periods.

Full year period

Full year period means a continuous period of 365 days.

Gainful work

Gainful work is work for financial gain or reward as an employee, self employed person or otherwise.  (see section 45TV)

The Commission has a discretion to treat an activity as gainful work  (see section 45TW).

Non-accruing member

A person becomes a non-accruing member when they are in a disposal or compensation preclusion period.  This means that for that period of time, they are still members of the scheme but they cannot accrue a bonus period.  Once the person become an accruing member again, they resume their accrual of bonus periods.  (See section 45TN.)

Non-accrual period

A non-accrual period is the period for which a person is a non-accruing member.

Part year period

Part year period means a continuous period of less than 365 days.

Post 70/75 member

When a veteran with qualifying service or a war widow eligible to receive income support supplement reaches 70 years of age they become a Post 70 member of the Scheme.  For other members, the age is 75 years.  Once a person becomes a Post 70/75 member they can no longer accrue any more bonus periods, however, they can continue to work and defer pension as long as they continue to pass the work test.  (See section 45TQ.)

Preclusion events

Preclusion events are events that trigger a non-accrual period for a member.  These include disposal of assets and carer preclusion periods.  (See Division 11-Preclusion periods.)

Qualifying age

Qualifying age applies only to war widows eligible for ISS.  It

has the meaning given by subsection 45A(2)

Special date of eligibility

Special date of eligibility for age service pension is the first day on which a person becomes eligible for an age service pension.

Special date of eligibility for partner service pension is the first day occurring on or after the person reaches pension age (the pension age day) or on which the person is eligible for a partner service pension.

Special date of eligibility for income support supplement is the day (the threshold day) the person:

reaches qualifying age; or

the day on which the person was eligible for income support supplement if this is after the person has reached qualifying age.

  (see section 45TB)

Work test

A person passes the work test for a full year period if they or their partner work at least 960 hours (640 hours to be worked in Australia) during that full year period.  Partners cannot work the hours between them. (see section 45TS)

A person passes the work test for a part year period if the hours worked by themselves or their partner are at least the pro-rated number of hours for that period.  Two thirds of the hours must be worked in Australia.  (see section 45TT)

There is a Commission discretion to treat work outside Australia as being work completed in Australia  (see section 45TU)

Section 5

Insert in the appropriate alphabetical position (determined on a letter-by-letter basis):

pension bonus   5Q(1)

After subsection 5L(3B)

Insert:

(3C)  To avoid doubt, a person's entitlement to be paid a pension bonus is taken not to be an asset of the person for the purposes of this Act.

(3D)  Subsection (3C) is to be disregarded in determining whether any other entitlement is an asset for the purposes of this Act.

Subsection 5Q(1)

Insert:

pension bonus means pension bonus under Part IIIAB.

At the end of section 36F

Add:

(2) The approved form may require the claimant to disclose whether the claimant is registered as a member of:

(a) the pension bonus scheme (see Part IIIAB); or

(b) the corresponding scheme under Part 2.2A of the Social Security Act.

At the end of subsection 38(1)

Add:

; or (f) is a person:
(i) who is a member of a couple; and

(ii) whose partner is a veteran who is registered as a member of the pension bonus scheme (see Part IIIAB); or

(g) is a person:

(i) who is the non-illness separated spouse of a veteran; and

(ii) whose non-illness separated spouse is registered as a member of the pension bonus scheme (see Part IIIAB); or

(h) is a person:

(i) who is the widow or widower of a veteran; and

(ii) whose partner or non-illness separated spouse, immediately before his or her death, was registered as a member of the pension bonus scheme (see Part IIIAB), was receiving and age service pension or an invalidity service pension, or would have been receiving such a pension if not for the operation of one or more disqualifying provisions; and

(iii) who, immediately before the veteran's death, was registered as a member of the pension bonus scheme (see Part IIIAB) or of the corresponding scheme under Part 2.2A of the Social Security Act or was receiving a partner service pension or a social security pension; or

(i) is a person:

(i) who is the widow or widower of a veteran; and

(ii)who had, before the veteran's death, made a claim for a partner service pension, which had not been determined at the date of the death; and

(iii) whose partner or spouse was, immediately before his or her death, registered as a member of the pension bonus scheme (see Part IIIAB).

Subsection 38(2A)

After “(1)(b)”, insert “or (g)”.

Subsection 38(2A) (note 2)

After “(1)(a)”, insert “or (f)”.

Subsection 38(2B)

Omit “or (d)”, substitute “, (d), (h) or (i)”.

Subsection 38(3)

Omit “or (e)”, (wherever occurring), substitute “, (e), (h) or (i)”.

Subsection 38 (3A)

Omit “or (e)”, substitute “, (e), (h) or (i)”.

At the end of Section 38F

Add:

(2) The approved form may require the claimant to disclose whether the claimant is registered as a member of:

(a) the pension bonus scheme (see Part IIIAB); or

(b) the corresponding scheme under Part 2.2A of the Social Security Act.

At the end of section 45K

Add:

(2) The approved form may require the claimant to disclose whether the claimant is registered as a member of:

(a) the pension bonus scheme (see Part IIIAB); or

(b) the corresponding scheme under Part 2.2A of the Social Security Act.

After Part IIIA

Insert:

Part IIIAB-Pension bonus

At the end of section 57

Add:

(3) A person who is dissatisfied with a decision of the Commission under Part IIAB (pension bonus) may request the Commission to review the decisions.  However, this rule does not apply to a decision of the Commission under:

(a) section 45TE (approval of form); or

(b) section 45TG (approval of places and persons); or

(c) section 45TO (declaration of non-accruing membership); or

(d) paragraph 45UK(1)(b) (approval of form).

At the end of section 58J

Add:

(2) The Commission must, in accordance with section 218 of the Income Tax Assessment Act, for the purposes of enabling the collection of tax that is, or may become, payable by a recipient of a pension bonus:

(a) make a deduction from the bonus payable to the recipient; and

(b) pay the amount deducted to the Commissioner of Taxation.

After paragraph 119(1)(b)

Insert:

(ba) a review, under Division 16 of Part IIIB, of a decision of the Commission under Part IIIAB (pension bonus); or

Subsection 119(2) (at the end paragraphs (a) and (b) of the definition of application)

Add “or”.

Subsection 119(2) (at the end of the definition of application)

Add:

; or (e) an application under Part IIIAB for registration as a member of the pension bonus scheme.

Subsection 119(2) (at the end of the definition of claim)

Add:

; or (e) a claim for a pension bonus under Part IIIAB.

At the end of Section 210A

Add:

(3) If a written statement signed by a person referred to in subsection (1) is to the effect that, on a specified day, a specified person received a specified amount by way of pension bonus under this Act, the statement is prim facie evidence of the matters in the statement.

Division 1

Introduction

45T

Simplified Outline

45TA

Definitions

45TB

Special Date of Eligibility for a designated pension

Division 2

Qualification for a pension bonus

45TC

Qualification for a pension bonus

Division 3

Registration as a member of the pension bonus scheme

Subdivision A

Membership of the pension bonus scheme

45TD

Application for registration

45TE

Form of application

45TF

Relevant Information

45TG

Lodgment of application

45 — TH

Timing of application and registration

45TI

Registration

45TJ

Duration of membership

45TK

Cancellation of membership

45TL

Application for registration is not to be treated as a claim

Subdivision B

Classification of membership of the pension bonus scheme

45TM

Accruing membership

45TN

Non-accruing membership- preclusion periods

45TO

Non-accruing membership- Commission's discretion

45TP

Continuity of accruing membership is not broken by a period of non-accruing membership

45TQ

Post-70/75 membership

Division 4

Accrual of bonus periods

45TR

Accrual of bonus periods

Division 5

Passing the work test

Subdivision A

The work test

45TS

Work test-full year period

45TT

Work test-part year period

45TU

Commission's discretion to treat gainful work outside Australia as gainful work in Australia

Subdivision B

Gainful work

45TV

Gainful work-basic rule

45TW

Commission's discretion to treat activity as gainful work

45TX

Irregular, infrequent and minor absences from a workplace count as gainful work

45TY

Management of family financial investments does not count as gainful work

45TZ

Domestic duties in relation to a person's place of residence do not count as gainful work

45U

Evidentiary certificate

Subdivision C

Record-keeping requirements

45UA

Record-keeping requirements

Division 6

Amount of pension bonus

45UB

How to calculate the amount of pension bonus

45UC

Qualifying bonus periods

45UD

Overall qualifying period

45UE

Pension multiple

45UF

Annual pension rate

45UG

Amount of pension bonus

45UH

Annual notional single pension rate

45UI

Annual notional partnered pension rate

Division 7

Claim for pension bonus

45UJ

Need for a claim

45UK

Proper claim

45UL

Lodgment period for a claim

45UM

Withdrawal of claim

Division 8

Determination of claim

45UN

Secretary to investigate claim and submit it to Commission

45UO

Commission to determine claim

45UP

Grant of claim

Division 9

Payment of pension bonus

45UQ

Payment of pension bonus

45UR

Payment of bonus after death

Division 10

Protection of Bonus

45US

Pension bonus to be absolutely inalienable

Division 11

Preclusion periods

45UT

Disposal preclusion period

45UU

Carer preclusion period

45TF

Relevant information

(2) The Secretary may, by written notice given to the applicant, require the applicant to give the Secretary, within a specified period, further relevant information.  The Commission may refuse to register the applicant until the applicant gives the Secretary the information.

(3) A period specified for the purposes of subsection (2) must run for at least 14 days after the notice was given.

45TH

Timing of application and registration

(3) The Commission may extend the period within which a person must lodge an application.  If registration occurs as a result of an application lodged during an extended period, the registration takes effect:

(a) on the date on which the application is lodged; or

(b) if the Commission decides that it should take effect on another date - on that other date.

(4) The Commission must not make a decision to extend the period within which a person must lodge an application unless, if it were assumed that the person had been a member of the pension bonus scheme throughout the pre-application period:

(a) the person would have been a non-accruing member for all of the pre-application period; or

(b) both:

(i) the person would have been an accruing member for some or all of the pre-application period; and

(ii) the person would have passed the work test for each test period that is applicable to the person.

(7) For the purposes of subsection (4), the Commission is taken to have waived compliance with the applicable record-keeping requirements in relation to each test period.

45TI Registration

(1) If an application is made in accordance with this Subdivision, the Commission must register the applicant as a member of the pension bonus scheme.

(2) This section has effect subject to subsection 45TF(2).

45TO Non-accruing membership - Commission's discretion

(1) The Commission may, by written notice published in the Gazette, declare that, for the purposes of this Part, a specified kind of member of the pension bonus scheme is a non-accruing member throughout a period ascertained in accordance with the declaration.  The period must not begin before the publication of the notice.

(2) The kinds of members that may be specified under subsection (1) include (but are not limited to):

(a) a member who is a participant in the Community Development Employment Program; and

(b) a member who is in gaol; and

(c) a member who is not a participant in the workforce, but whose partner:

(i) is a participant in the workforce; and

(ii) is not a registered member of the pension bonus scheme or of the corresponding scheme under Part 2.2A of the Social Security Act; and

(iii) intends to become a registered member of the pension bonus scheme or of the corresponding scheme under Part 2.2A of the Social Security Act; and

(d) a member who is on sick leave for a continuous period of at least 4 weeks and not more than 26 weeks.

(3) A declaration under this section has effect accordingly.

45TS Work test - full year period

For the purposes of this Part, a person passes the work test for a full-year period of the person's accruing membership of the pension bonus scheme if:

and either:

(d) the person satisfies the Commission that the applicable record-keeping requirements (see section 45UA) have been complied with in relation to that period; or

(e) the Commission decides to waive compliance with the applicable record-keeping requirements in relation to that period.

45TT Work test - part-year period

(1) For the purposes of this Part, a person passes the work test for a part-year period of the person's accruing membership of the pension bonus scheme if:

and either:

(d) the person satisfies the Commission that the applicable record-keeping requirements (see section 45UA) have been complied with in relation to that period; or

(e) the Commission decides to waive compliance with the applicable record-keeping requirements in relation to that period.

45TU Commission's discretion to treat gainful work outside Australia as gainful work in Australia

(1) If a person satisfies the Commission that:

(a) the person, or the person's partner,  has carried on gainful work outside Australia; and

(b) because of special circumstances, the gainful work should be treated as gainful work carried on in Australia;

the Commission may determine that this Part has effect as if the gainful work were carried on in Australia.

(2) The determination has effect accordingly.

45TW Commission's discretion to treat activity as gainful work

(1) If a person satisfies the Commission that:

(a) the person, or the person's partner, has engaged in a particular activity; and

(b) the activity involves a substantial degree of personal exertion on the part of the person or the person's partner, as the case may be; and

(c) the activity does not consist of voluntary work for a charitable, welfare or community organisation; and

(d) because of special circumstances, the activity should be treated as gainful work;

the Commission may determine that this Part has effect as if the activity were gainful work.

(2) The determination has effect accordingly.

45TY Management of family financial investments does not count as gainful work

(1) Unless the Commission otherwise determines,  work undertaken by a person is taken not to be gainful work for the purposes of this Part to the extent to which the work consists of the management or administration of one or more financial investments in which any of the following has a legal or equitable interest:

(a) a member of the person's family group (see subsection (2));

(b) a company that is a family company in relation to the person (see subsection (2));

(c) the trustee  or trustees of a trust that is a family trust in relation to the person (see subsection (2)).

45TZ Domestic duties in relation to a person's place of residence do not count as gainful work

(1) Unless the Commission otherwise determines , work undertaken by a person is taken not to be gainful work for the purposes of this Part if the work consists of carrying out:

(a) domestic tasks; or

(b) household maintenance tasks; or

(c) gardening tasks; or

(d) similar tasks;

in relation to:

(e) the person's place of residence; or

(f) if the person has 2 or more places of residence- any of those places of residence.

(2) For the purposes of this section, a place of residence includes:

(a) if the place is a dwelling house - any land or building that is adjacent to the dwelling-house and that is used primarily for private or domestic purposes in association with that dwelling-house; or

(b) if the place is a flat or home unit - a garage or storeroom that is used for private or domestic purposes in association with the flat or home unit.

45UK Proper claim

(3) If:

(a) a person makes a proper claim for a designated pension; and

(b) the claim is in accordance with a form that does not require the claimant to disclose whether the claimant is a registered member of:

(i) the pension bonus scheme: or

(ii) the corresponding scheme under Part 2.2A of the Social Security Act; and

(c) the person is, to the knowledge of the Secretary, registered as a member of the pension bonus scheme; and

(d) a claim by the person for pension bonus is not attached to the claim for the designated pension;

the Secretary must give the claimant a written notice inviting the claimant to lodge a claim for pension bonus:

(e) within such period after the lodgement of the claim for the designated pension as is specified in the invitation; and

(f) at such place as is specified in the invitation.

45UL Lodgment period for claim

(3) If a person's last bonus period is a part-year period, the lodgment period applicable to the person's claim for pension bonus is:

(a) the period of 13 weeks beginning at the end of that bonus period; or

(b) if the Commission allows a longer period - that longer period.

45UO Commission to determine claim

(1) The Commission must, in accordance with this Act, determine a claim for pension bonus.

(2) If a person claims both a pension bonus and a designated pension, the Commission must not determine the claim for pension bonus until the claim for the designated pension has been granted.

45UP Grant of claim

The Commission must determine that a claim for pension bonus is to be granted if the Commission is satisfied that the person is qualified for the pension bonus.

45UQ Payment of pension bonus

If a claim for pension bonus is granted, the bonus is payable to the person concerned on:

(a) the first pension payday after the grant; or

(b) if the Commission considers that it is not practicable to pay the bonus on that payday - the next practicable day.

45 UR Payment of bonus after death

(3) If:

(a) a person claims a pension bonus; and

(b) the person dies; and

(c) at the time of the person's death, the claim had not been determined;

then:

(d) the Commission must determine the claim after the person's death as if the person had not died; and

(e) if the claim is granted - the bonus is payable to the legal personal representative of the person.

45US Pension bonus to be absolutely inalienable

(2) The Commission may make a deduction from a pension bonus payable to a person if the person asks the Commission:

(a) to make the deduction; and

(b) to pay the amount to be deducted to the Commissioner of Taxation.

(3) The Commission may make a deduction from a pension bonus payable to a person if the person consents under paragraph 205(2)(e) to the Commission making the deduction.

15  At the end of section 58J

Add:

(2) The Commission must, in accordance with section 218 of the Income Tax Assessment Act, for the purposes of enabling the collection of tax that is, or may become, payable by a recipient of a pension bonus:

(a) make a deduction from the bonus payable to the recipient; and

(b) pay the amount deducted to the Commissioner of Taxation.

Registration

Letters to be sent out when members register for the scheme are available through standard letters.  To access the letters take the following steps:

go File New

click on the “more” tab at the top of the screen

find the folders to the Pension Bonus folder and double click

repeat the process and the letters should appear.

Membership and claiming

Standard letters for the claiming phase of the scheme will be available by 1 July 1999 when the first claims are made.

Registration form

The registration form for the scheme is available in electronic form.

Acceptance letter

A letter will be sent out to members of the scheme informing them of the successful registration and their current membership status.

Rejection letter

A letter will be sent out to applicants when their application for the scheme has been unsuccessful.  This letter will detail the reasons why their application was unsuccessful.

List of standard letters

Acknowledgment of receipt of application

receipt

QS to be determined

Acceptance

accruing member

non accruing member- working partner not registered yet

non accruing member- disposal preclusion period

non accruing member- carer preclusion period

Incomplete form

no QS form attached

Rejection

no QS

not eligible age

don't meet eligibility criteria for payment being deferred (refer to Centrelink)

not working/ don't intend to work

over 70

over 75

Other

Non-accrual membership status

When a member's membership becomes non-accruing, they should be sent a letter.

Post 70/75 membership status

A letter should be sent to inform members of the scheme when they become Post 70/75 members.

End of preclusion period

At the end of a member's preclusion period they will be sent a letter informing them that they have accruing membership.

Annual reminder

An annual reminder letter will be sent to members of the Scheme, informing them of how many bonus periods they have accrued and their current membership status.  This letter will also include a reminder of their obligations.

Bonus deferral ending in 13 weeks

A reminder letter will be sent thirteen weeks prior to the end of a member's deferral period.  This will occur when they reach 70 years of age for veterans (with QS) and war widow/ers eligible for ISS or 75 years of age for others.

Five year bonus period achieved

A letter will be sent to a member when they have accrued five bonus periods.

Interim bonus registration procedure

Prior to the final Bonus Registration System being available an interim Claims Management System (CMS) procedure will be available to manage the processing of Pension Bonus registration applications.

The CMS arrangement is a simple registration procedure with attributes to indicate the outcome of the application.  The claim will remain in "Registration" status until the Bonus Registration System allows full data collection of relevant details and the case can be "Finalised".

Case attributes

In order for the outcome of the registration application to be recorded there will be three attributes associated with the CMS registration.  These attributes will be mandatory until the bonus registration system is available.

The attributes will be:

Ineligible

Accruing

Non-accruing

CMS and application processing

The interim arrangements require that the examination of the bonus registration application is performed manually.  The CMS will be available to record the application's receipt and the outcome of the determination.

The following table details the relationship between this manual processing and the CMS.

Processing Action

CMS Action

Receive bonus application

Register receipt of application using "Pension Bonus Registration" case type

Process application for membership of pension bonus scheme.

There is no CMS action required.  (A QS determination may require an appropriate case to be registered)

Determine and record outcome

Record outcome using attributes (CM.UA) associated with the case.