DATE OF ISSUE: 24 June 1993
EXEMPTIONS TO THE DEEMING PROVISIONS FOR FAILED FINANCIAL INSTITUTIONS AND CHURCH AND CHARITABLE ORGANISATIONS
PURPOSE
The purpose of this instruction is to introduce the Deeming Exemptions Register, listing specific financial institutions, church and charitable organisations that have been exempted from the deeming provisions.
BACKGROUND
2.Following introduction of the Deeming legislation, provisions were made under Sections 46Z and 46F of the Veterans; Entitlement Act for the Minister to exempt monies deposited with or loaned to;
a)certain failed financial institutions, usually where deposits have been frozen; and
b)church and charitable organisations for the purpose of all capital expenditure on schools, churches or welfare services.
3.Individual pensioners can also apply to have specific accounts and loans exempted from the deeming provisions. However, such applications are limited to individual circumstances and do not apply to organisations or a class of investments.
4.Individual exemptions may include;
overseas residents with overseas accounts paying low rates of interest;
Australian residents with overseas accounts where the transfer of funds to Australia is restricted;
irrecoverable loans made to failed businesses; and
monies held in accounts that have been frozen eg., by a court order.
5.State Program Managers (Benefits) have the delegation to effect these individual exemptions. Departmental Instruction No. B59/91 refers to the procedures to be followed in these cases.
6.It should be noted that any actual interest earned on money deposited or loaned is to be assessed as income, even though the deposit or loan may be exempt from the deeming provisions.
7.It was originally intended to advise Branch Offices of exempted institutions via Departmental Instructions. However, the volume of determinations made this impractical. This has prompted the introduction of a centralised register.
DEEMING EXEMPTION REGISTER
8.A Deeming Exemption Register is now available detailing failed institutions and funds operated by church and charitable organisations that have been exempted by the Minister from the deeming provisions.
9.The Register contains explanatory notes detailing its use and is specific in providing effective dates for exemptions and actual income/asset values to be applied to investments with failed financial institutions.
10.Institutions and organisations not listed in the Register should be regarded as not having exempt status.
11.When a client asks whether a deposit or loan to a particular institution or organisation is exempt, the examiner should check the Deeming Exemption Register and:
a)if the institution/organisation is listed the pension should be reassessed from the exemption date. The exemption indicator on the "FI" or "ML" screen is to be set to "Y",
b)if it is not listed, the examiner should advise the client that a request for exemption must be made by the organisation concerned (in the form of a request by letter). The examiner should consult with the Investment Policy Officer to ascertain if there are any applications pending.
12.A hard copy of the Register will be held by the Investment Policy Officer in each State and will be updated periodically by Central Office following new determinations made by the Minister or upon a policy decision to vary the actual income/asset values applied to investments with failed financial institutions.
ON LINE G.O.S.P.'s
13.It is envisaged that the Deeming Exemptions Register will be incorporated in the On Line G.O.S.P.'s with the next series of amendments. This is currently scheduled to take place towards the end of July 1993.
14.If you have any further enquiries in relation to the Deeming Exemption Register and/or its application, please contact your local Investment Policy Officer for assistance in the first instance. The Central Office contact for queries on this matter is Martin Dibb, contact 06-2896706.
PETER HAWKER
NATIONAL PROGRAM DIRECTOR
BENEFITS