DATE OF ISSUE: 29 January 2008
Funeral Bonds – increased exemption limit
Amends DI No. |
Purpose |
This Departmental Instruction explains the changes occurring from 1 January 2008 to the means test exemption of funeral bonds. |
Background |
The means test exemption of funeral bonds was initially set in the early 1990s. Since then the cost of funerals has increased, but the exemption amount of $5,000 had not changed. Refer to previous DIs B42/90, B46/91 and B19/93. |
Summary of the changes |
From 1 January 2008, the income and assets test assessment of funeral bonds changed as follows:
Increasing the means test exemption for funeral bonds to $10,000 will help people make better provision for their funeral arrangements without affecting their income support. The future indexation of this amount will also ensure that the value of this exemption remains in line with general cost increases of funerals. |
Publicity |
These changes were announced in the 2007/08 Budget. An article titled: “Funeral bonds exemption limit increased” was also published in the December 2007 edition of Vetaffairs. For DVA staff, a Funeral Bonds page has been added to the Income Support Intranet site as a key reference. A Businessline was issued on 3 January 2008 providing details of this measure, including the planned systems and procedural changes. The TRIM reference is 08847E. |
Legislation |
Legislation for this measure is Schedule 4 of Families, Community Services and Indigenous Affairs Legislation Amendment (Further 2007 Budget Measures) Act 2007. Royal Assent was given on 28 September 2007 and the changes for Schedule 4 commence from 1 January 2008. Both the Social Security Act 1991 (SSA) and the Veterans' Entitlements Act 1986 (VEA) have been similarly amended. A summary of the legislative changes to both acts is provided at Attachment A. An updated VEA compilation is available in the CLIK Legislation Library. |
Policy amendments |
Details of the policy changes are available in the CLIK Policy Library under the following topics:
CLIK glossary terms have also been adjusted as follows: exempt asset (amended), funeral bond (amended), funeral bond threshold (new term), prepaid funeral (amended), pre-arranged funeral (deleted). |
Information products |
You & Your Pension has been reviewed. Minor changes will be made to Chapter 4 Your Income and Assets. |
Form changes |
There are no new forms planned for this measure. Minor amendments are being made to the booklets: D503/4B About Claiming Service Pension and D529B About Claiming ISS. |
System changes – PIPS release Jan 2008 |
Changes to the Managed Investment screen in PIPS have been incorporated in the quarterly release on 25 January 2008. The PIPS Managed Investments screen will display two new data entry fields called 'Amount Invested' and 'Current Value'. These fields will be linked to the new funeral bond assessment rules. The exemption status and asset value for each funeral bond will be automatically determined by PIPS where a person owns 1 or 2 funeral bonds. Where a person owns 3 or more funeral bonds, the exemption status and asset value for each funeral bond must be determined manually. Appropriate messages will be displayed in these cases. |
Procedures |
From 1 January 2008, the 'Amount Invested' and the 'Current Value' of the funeral bond must be obtained and recorded in all cases. Staff have been advised to set aside cases that are affected by the new funeral bond rules until the PIPS changes occur on 25 January 2008 and the new fields are available. The funeral bonds data collection tips on the Investment Database Unit intranet site have been updated to reflect the new procedures. |
Affected cases – January 2008 |
The funeral bond changes are intended to benefit income support pensioners with new and existing funeral bond investments. The people most likely to benefit from the doubling of the funeral bond threshold on 1 January 2008 are those who:
Existing less than maximum rate cases with non-exempt funeral related investments are being reviewed by the Investment Database Unit and other nominated Income Support Service Delivery staff to determine whether or not they will benefit from the funeral bond changes. |
Affected cases – annual indexation |
The funeral bond threshold will be CPI indexed on 1 July annually and the first indexation will be 1 July 2008. Affected cases are expected to be those income support pensioners with non-exempt funeral bonds that may become exempted if the amount invested falls within the increased indexed funeral bond threshold. The exemption status of any non-exempt funeral bond will be retested against the indexed funeral bond threshold every July. More information about the planned system changes and procedures for annual indexation will be made available via the funeral bonds data collection tips on the Investment Database Unit intranet site before July 2008. |
Contact officers |
The contact officer for:
|
|
Jeanette Ricketts National Manager Income Support and Aged Care Policy |
Peta Stevenson National Manager Business Modernisation & Integration |
Jill de Vaus A/g National Manager Income Support Service Delivery |
29 — th January 2008
VEA/SSA Amendments
Description |
Amendment |
VEA |
SSA |
Excluded income amounts |
new/adjusted |
Para 5H(8)(zj) – new note |
Para 8(8)(MA) –note adjusted |
Exempt funeral investments – definition |
new |
s5PC |
s19E |
|
Exempt funeral investment – definition Type A funeral investment – definition Type B funeral investment – definition |
deleted |
ss5Q(1) |
ss23(1) |
Disregarded assets |
new/adjusted |
Para 52(1)(ja) – new note |
ss1118(1) – note 4 adjusted |
Indexed and adjusted amounts table |
new item |
s59A – new item 13B |
s1190 – new item 36 |
CPI indexation table |
new item |
ss59B(1) – new item 8B |
ss1191(1) – new item 26 |