Purpose

This departmental instruction provides information relevant to the minor and technical amendments contained in the Veterans' Affairs Legislation Amendment Act (No. 2) 2002 (VALA No. 2 2002).

VALA No. 2 2002 contains the following measures:

1. Double counting of periodic compensation payments
2. Lump sum compensation payments received before and after 20 March 1997
3. Definition of “rent” for the purpose of entry contributions to retirement villages
4. Criteria for telephone allowance to allow payment of telephone allowance to persons with a mobile service
5. Access to rent assistance for persons receiving Family Tax Benefit (FTB) payments without a rent component
6. Extensions to eligibility for the Pension Loan Scheme (PLS)
7. Eligibility for Commonwealth Seniors Health Card (CSHC)
8. Definition of “non-illness separated spouse”

The link to VALA No 2 2002 should be shortly added to the Scaleplus web site situated at http://scaleplus.law.gov.au/

Commencement Date

All proposals with the exception of measure number 2 commence upon Royal Assent. VALA No.2 2002 received Royal Assent on 6 September 2002.

Measure number 2 (lump sum compensation payments received before and after 20 March 1997) commenced on 20 September 2001.

Details of changes

Details of the changes are attached.

Contact

For further information in relation to the above mentioned changes please contact Ian Williams on (02) 6289 6382.

Background

Prior to the VALA No.2 2002 changes, double counting of periodic compensation payments occurred with a small group of disability pensioners who:

• are not affected by the Part IIIC compensation recovery provisions who are of “pension age” or older; and
• have their Disability Pension (DP) reduced under Parts II or IV of the Veterans' Entitlements Act 1986 VEA) because they are in receipt of periodic compensation in respect of the same injury or disease for which they receive DP.

Issue

The double counting occurred because the periodic compensation payments receive were assessed as ordinary income due to the broad definition of “income” in subsection 5H(1) of the VEA.

The same problem does not arise with persons who are under the pension age to whom Part IIIC of the VEA applies.  This is because under Part IIIC, the “double counting” of compensation payments which have already been counted for the purpose of reducing a Part II or IV pension is prevented by the operation of subsections 5NB(5) and (6).

Legislative changes

The amendment prevents the “double counting” of compensation that has already been counted to limit the person's disability pension.  The amendment involves the addition of a further exclusion to the list of excluded income types in subsection 5H(8).  New paragraph 5H(8)(ea) applies to:

“any payment of compensation (other than a payment referred to in paragraph (e)) to the extent that the payment is taken into account:

1. under Division 5A of Part II; or
2. under section 74;

to reduce a disability pension payable to the person under Part 2 or Part 4, as the case requires”

This means that any amount of compensation to the extent that it has already been counted to limit the person's DP will not be regarded as income.

Any additional amount of compensation over and above the amount that has been used to limit the person's disability pension will continue to be assessed as ordinary income.

Systems Changes

There are no systems changes involved as it is estimated that there are less than a dozen cases, which fall in this category.

Procedural Changes

In order to assist in the identification of potentially affected cases, National Office will refer the data acquired from the Ad Hoc Inquiry System (AIS) which includes the file numbers of cases that potentially fall into this category separately to State Managers, Income Support.

The cases that are affected should be recorded in PIPS in the following manner:

1. Disability Pension screen - record the full fortnightly amount of the compensation in the 'PTIV N/I Amt' field with an 'Adj. Type' of 'PTIV'.
2. Other Direct Income screen (in the Direct Income folder) - record the balance of compensation over and above the DP amount.

The amount recorded as Other Direct Income should be recalculated when DP is increased at each March and September SI.  Therefore, these cases should be reviewed at each SI and marked for review accordingly.

Fact Sheets

The following Fact Sheets have been updated to reflect the changes:

• IS101 Income and Assets – Compensation
• IS102 Income and Assets – Compensation and your Social Security Age Pension

CLIK

CLIK has been updated to reflect the changes.

Background

Amendments were made by the Veterans' Affairs Legislation Amendment (1996-97 Budget Measures) Act 1997 to the compensation recovery provisions of Part IIIC.  This measure provided for lump sum compensation payments received on or after 20 March 1997.  Under these 1997 changes, from 20 March 1997, the pension payments of the partner of the person receiving the lump sum compensation were not subject to the compensation recovery provisions.

The 1997 amendments to Part IIIC included consequential amendments to the provisions that determine the debts arising from the overpayment of an affected pension during the lump sum preclusion period.  The amendments distinguish between lump sums received before 20 March 1997 and those received on or after that date.

Issue

A need to make consequential amendments to the provisions relating to the direct recovery of debts from compensation payers and insurers to distinguish between lump sums received before 20 March 1997 and those received on or after that date was necessary.

Legislative changes

The amendments make amendments to sections 59ZA and 59ZG to reflect the 20 March 1997 changes to the lump sum compensation payment rules as they applied to partners of compensation recipients.  These provisions now differentiate between payments made before and after 20 March 1997.

Start date

For legal reasons, due to recent amendments of the relevant provisions, the commencement of this proposal is effective immediately after the commencement of items 25 – 33 of Schedule 1 to the Veterans' Affairs Legislation Amendment (Further Budget 2000 and Other Measures) Act 2002).  These amendments commenced on 20 September 2001.

System Changes

No systems changes were necessary.

Procedural Changes

The only procedural change relates to the issuing of notices under section 59ZA and 59ZG.  Delegates should note the amendments where issuing a notice under either of these sections particularly in cases involving a lump sum payment made before 20 March 1997.

Standard letters

Relevant standard letters will be reviewed in light of these changes.

CLIK

CLIK has been updated to reflect the changes.

Background

A “special resident” entering a retirement village is required to pay an entry contribution to the village owner for the right to occupy a unit within the village.  An entry contribution is the “total amount paid, or agreed to be paid, for the resident's current right to live in the village”

In the mid 1990s, a case arose in the Social Security context that indicated that entry contribution amounts were being manipulated so as to bring them under the threshold necessary to gain access to rent assistance.  In the case in question; Department of Social Security v. Knight, the Federal Court held that an amount of $15,000 which was part of the person's entry contribution and to be paid on a monthly basis over 10 years was rent.

In 1997, the definition of “rent” contained in section 13 of the Social Security Act 1991 (the SSA) was amended by the addition of subsections 13(3AA) and 13(3AB)

Subsection 13(3AB) was added to the SSA to clarify that if the whole or part of an entry contribution is or will or may become repayable to the person, any amount by which the amount so repayable is reduced is not rent in relation to the person. This provision reflected the decision of the Federal Court in Secretary, Department of Social Security v. Montgomery which had held that notional annual deductions from the refundable portion of an entry contribution were not rent.

Issue

The amount of entry contribution may be manipulated by calling components of it as rent.  In these circumstances, the overall entry contribution paid by the resident is thereby minimised and the person becomes eligible for rent assistance.

Legislative changes

The legislative amendments involve the addition of new subsections 5N(3AA) and 5N(3AB) to the definition of “rent” contained in section 5N of the VEA.  The amendments mirror the 1997 amendments to the SSA definition of rent and are made for the same reasons. The new subsections provide as follows:

“(3AA) To avoid doubt, an amount that is paid or becomes payable by a person is not rent in relation to the person (either at the time when it is paid or becomes payable or at any later time) if the amount is or forms part of, a special resident's entry contribution in relation to the person in respect of a retirement village under section 52M, whether the amount is paid or payable (whether wholly or partly) in a lump sum, by instalments or otherwise.

(3AB) If the whole or any part of an amount that is not rent in relation to a person as mentioned in subsection (3AA) is, or will or may become, repayable to the person, any amount by which the amount so repayable is reduced is not rent in relation to the person (either at the time when the reduction occurs or at any later time).”

System changes

There are no system changes associated with this initiative.

Procedural changes

There are no changes to current procedures in relation to this measure.

CLIK

CLIK has been amended to include discussion about the relevant changes.

Background

One of the requirements for eligibility for telephone allowance (TA) is that a person has to be a “telephone subscriber” as defined in subsection 118Q(4).

Prior to the changes, the definition of “telephone subscriber” required the person to have “a telephone service connected to a home of the person in Australia”.

Issue

The purpose of these amendments is to avoid any doubt with respect to the payment of TA to persons who operate a mobile telephone instead of a fixed telephone.

Legislative changes

This amendment will make it clearer that TA is available to persons with a mobile service (as opposed to a fixed line telephone service).

System changes

There are no system changes associated with this change.

Procedural changes

There are no procedural changes as TA is currently paid to people with a mobile service.  Given that the present system only allows a phone number to be recorded as a 2 digit STD code and then 8 digit phone number, a mobile telephone number should be adapted to conform to this format, for example: 04 44123456.

Fact Sheets

The Fact Sheet IS13 Income Support Allowances – Telephone Allowances has been updated to reflect the changes.

CLIK

CLIK has been updated to reflect the changes.

Background

This measure is intended to ensure that access to rent assistance is not restricted under the VEA to those persons receiving Family Tax Benefit (FTB) payments without a rent component.

Currently, under Schedule 6-C3(f)(i) of the VEA, a person cannot be paid rent assistance under the VEA if either the person or their partner has a FTB child.

Issue

The problem is that a person may be receiving FTB in respect of their children without a rental component.  This is known as a FTB payment at the “base rate”(Part A).  This will occur under the A New Tax System (Family Assistance) Act 1999 in the following circumstances:

• The person or their partner is entitled to claim child maintenance in circumstances where it is considered reasonable for the person to take action to obtain the maintenance and the person, or their partner does not take the action that is considered reasonable.
• Because of the application of the maintenance income test (Schedule 1, Clause 20-24 of ANTS).
• The child is over the age of 16, undertaking full time education and receiving a Youth Allowance.

The same issue does not arise under the Social Security Act 1991 because the relevant Schedule permits the payment of rent assistance in circumstances where the person's “maximum Part A rate of family tax benefit does not include rent assistance”.

Legislative changes

The amendment is a technical amendment that will align the VEA with the SSA and is intended to ensure that persons who receive FTB without a rent component can access rent assistance under the VEA.

System changes

There was no requirement for system changes regarding this initiative.

Procedural changes

There are no procedural changes associated with this change.

Unfortunately specific cases cannot be identified given the available data on the Ad Hoc Inquiry System.

CLIK

CLIK has been updated to reflect the changes.

Background

The Pension Loans Scheme (PLS) allows a person to receive additional payments of pension.  The Scheme allows a person whose rate of pension has been reduced under the means test to receive additional payments of pension, by agreeing to a statutory charge over their assets for the extra amounts of advanced pension.  Payments under the PLS do not give rise to fringe benefits such as Pensioner Concession Cards.

In 1995, the VEA was amended with the addition of a new means tested pension called Income Support Supplement (ISS).  ISS was available only to those in receipt of a war widow's or war widower's pension.  At the time of these amendments, the eligibility criteria for the PLS was amended to take account of this new pension.

Issue

However, the 1995 amendments had the unintended consequence of limiting eligibility for the PLS as follows:

1. The majority of income support supplement recipients who are not veterans in their own right, nor the partner of a veteran, were precluded from applying. 
2. Partner service pensioners who are not veterans in their own right or the partner of a veteran were also unable to apply.

Furthermore, the consequential amendments failed to provide that persons, eligible for, or in receipt of, income support supplement, would be eligible for the PLS from “qualifying age”, rather than “pension age”, subject to the person meeting the other eligibility criteria.

The intention was to enable any person eligible for, or in receipt of ISS, who has reached qualifying age, and who meet the other criteria, to be eligible for the Scheme.

Legislative changes

The legislative changes extend eligibility to participate in the Scheme (subject to satisfying all other eligibility criteria).  The following people can now apply to participate in the Scheme:

Where the applicant is not a member of a couple:

• Persons receiving or eligible for Income Support Supplement (ISS) from “qualifying age” (previously eligibility to participate in the Scheme was limited to people on ISS who were veterans in their own right who have reached pension age).

Legislative changes, continued

• Persons receiving or eligible for Partner Service Pension (PSP) from “pension age” (previously people who were eligible for, or in receipt of PSP who were not veterans in their own right or the partner of a veteran could not apply).

Where the applicant is a member of a couple:

• If the person is a veteran – the person must have reached pension age.

• If the person is a partner of a veteran – the veteran must have reached pension age.

If the person is eligible for or receiving ISS, the person must have reached qualifying age.

System changes

There was no requirement for system changes regarding this initiative.

Procedural changes

All PLS cases are currently recorded using a “manual rates” method of assessment.  The manual rates method of assessment caters for all client and income support pension types.  Therefore there are no changes to procedures.

Fact Sheets

The IS116 Additional Financial Assistance – Pension Loan Scheme Fact Sheet has been updated to reflect the changes.

CLIK

CLIK has been amended to reflect the changes.

Forms

The D2662 Pension Loans Application form has been amended to reflect the changes.

Background

The CSHC was introduced to extend a limited range of concessions to low income non-pensioners who have reached pension age but who are not in receipt of an income support pension because their income or assets are too high.

The Federal Government provides CSHC holders with pharmaceuticals at a concessional rate and telephone allowance.  In November 2001, concessional fares were extended to CSHC holders for travel aboard Great Southern Rail lines.  Also, in the 2001 Budget, the Government committed to negotiating with the State Governments for the extension of full Pension Concession Card (PCC) concessions to CSHC holders.

Issue

Prior to these extensions, war widows or war widowers gained no additional benefit from obtaining a CSHC as they are already entitled to concessional pharmaceuticals and telephone allowance under the VEA.

The new concessions have created an incentive for war widows and war widowers to claim the CSHC.  This new demand for the CSHC has highlighted an anomaly in the eligibility criteria for the CSHC in relation to war widows and war widowers whereby they could only apply for it once they had reached the pension age.

These amendments to the VEA will enable war widows and war widowers to be eligible for CSHC from “qualifying age”.

Legislative changes

The eligibility criteria for a CSHC in section 118V of the VEA has been amended so that war widows or war widowers aged between 57 and 62 years of age can apply for the CSHC and obtain a CSHC subject to satisfying all other eligibility criteria.

System changes

There was no requirement for system changes regarding this initiative.

Procedural changes

The only change to procedures is that two new standard letters have been generated.  See under heading “Standard Letters”.

Fact Sheets

The following Fact Sheets have been updated to reflect the changes:

• IS126 Concessions and Benefits – Commonwealth Seniors Health Card
• IS160 Concessions and Benefits – Overview of Cards Available to Veterans and their Dependents
• IS152 Concessions and Benefits – Great Southern Railway Travel Concession

Standard Letters

Two new standard letters have been prepared to cover the situation where:

• A CSHC claim is rejected because the war widow or war widower has not reached qualifying age;
• Accepting a CSHC claim by a war widow or war widower.

CLIK

CLIK has been updated to reflect the changes.

Background

These amendments to the VEA amend the definition of a “non-illness separated spouse” so that it may apply to a person who is a veteran or non-veteran.

Prior to these amendments, the definition of “non-illness separated spouse” in the VEA, read as follows:

Subsection 5E(1) non-illness separated spouse means a person:

1. who is legally married to a veteran but is living separately and apart from the veteran on a permanent basis; and
2. whose separation has not resulted in a direction under subsection 5R(5); and
3. who is not receiving age or invalidity service pension.

Issue

Under this definition, the veteran cannot be the “non-illness-separated spouse”. The definition is applied in a number of areas of the VEA such as subsection 5G(4), subsection 5L(7) and subsection 118Q(4). The amendment will ensure that unintended outcomes do not arise under the VEA in cases where the veteran is the non-illness-separated spouse.

Legislative changes

This initiative involves two technical amendments to the definition of “non-illness separated spouse” which ensures that all non-illness separated spouses are taken into account under the VEA.  The technical amendments are:

1. Removing the requirement for the person to be married to a veteran.  This is because the definition assumes that the veteran is not the “non-illness separated spouse” when the non-illness separated spouse could be either party to the marriage.
2. Removing the requirement for “a person not to receive age or invalidity service pension”.  The problem is that non-illness separated spouses may receive such a pension and this limitation again causes problems with the application of the definition elsewhere in the VEA (refer to Example 2).

The definition will now read as follows:

Subsection 5E(1) non-illness separated spouse means a person:

1. who is legally married to another person but living separately and apart from that other person on a permanent basis; and
2. whose separation has not resulted in a direction under subsection 5R(5).

Examples

Example 1

An example of where the application of the definition of “non-illness separated spouse” causes a problem with regard to the requirement for the person to be married to the veteran, is where a person must be a “telephone subscriber” to receive telephone allowance (paragraph 118Q(1)(c) of the VEA).

In subsection 118Q(4), telephone subscriber means a person:

1. who is an Australian resident; and
2. who has a telephone service connected to a home of the person in Australia; and
3. whose telephone service is connected:

1.                                         in that person's name; or
2.                                        if subparagraph (i) does not apply to the person and the person is a non-illness separated spouse – in the name of the person to whom the person is legally married; or
3.                                      if neither (i) or (ii) applies to the person and the person is a member of a couple – in the name of the person's partner.

The difficulty arises if the veteran is the non-illness separated spouse and the following circumstances apply:

• Veteran and spouse are married but separated and living separately and apart on a permanent basis; and

• The telephone service is in the name of the estranged spouse not the veteran.

In these circumstances the veteran will not satisfy the definition of a 'telephone subscriber' and hence be ineligible to receive telephone allowance for the following reasons:

• Subparagraph 118Q(4)(c)(i) does not apply because the telephone service is not connected in the veteran's name.
• Subparagraph 118Q(4)(c)(ii) cannot apply because the veteran by virtue of the definition of non-illness separated spouse cannot be the non-illness separated spouse.

• Subparagraph 118Q(4)(c)(iii) does not apply because the veteran is not a “member of a couple” as defined in subsection 5E(2) because the veteran is living separately and apart from the other person on a permanent basis.

The technical amendment will ensure that in this case the veteran as a non-illness separated spouse will satisfy the criteria as a telephone subscriber and hence, will be eligible to receive telephone allowance.

Examples, continued

Example 2

Where the application of the definition of “non-illness separated spouse” causes a problem with regard to the requirement “of a person not to receive age or invalidity service pension”, for example:

Fred and Wilma are married and both receiving age service pension.

Upon separation (not divorce) eligible partners, Fred and Wilma will continue to receive the single rate of age service pension.  As Wilma receives age service pension this will exclude Wilma to be considered as a “non-illness separated spouse” and therefore Wilma could miss out on other benefits/allowances under the VEA where the definition is relevant such as telephone allowance.

This technical amendment prevents unintended outcomes from the application of the definition of “non-illness separated spouse” under the VEA.

System Changes

There was no requirement for system changes regarding this initiative.

Procedural change

There are no changes to current procedures in relation to this measure.

CLIK

CLIK has been updated to reflect the changes.