Redemptions before 24 December 1992

Redemptions before 24 December 1992

The formula in s 30(2) for calculating the amount of the lump sum payable under s 30(1) was inserted by the Commonwealth Employees' Rehabilitation and Compensation Amendment Act 1992, replacing an earlier formula which utilised a “specified rate” of 3%.  The amended basis of calculation applies only to determinations made after the commencement of the Act on 24 December 1992.  The Explanatory Memorandum to the Bill gave the following explanation for the new formula:

The discount procedure was intended to reduce the lump sum so that it would represent the “Nett Present Value” to the employee of receiving a lump sum and having access to those funds and the interest that would accrue, rather than a relatively small weekly benefit.  Such discounting is a common actuarial procedure in the calculation of redemption amounts.

The current formula in section 30 contains an error, the result of which is merely to discount the lump sum by 3%, rather than to discount it so that it represents the Nett Present Value of the redemption amount.  Clause 11 remedies that error by omitting the current formula and substituting a new formula: