Debts incurred as a result of the Legacy Pension Conversion (LPC) measure
With the commencement on 7 December 2024 of the Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024, the LPC measure began. This measure was an initiative to encourage individuals to move from inflexible, but asset-test exempt superannuation products, to another type of superannuation product that is more flexible, but to which asset testing applies.
Under the VEA, it is possible to commute an asset-test exempt product such that the commuted amount maintains an asset-test exempt status – but only under very restricted conditions, as per 5JA(2), 5JB(2) and 5JBA(2) of the VEA. However, the LPC measure does not meet these conditions. To prevent this from discouraging people from moving away from the asset-test exempt products, the Government decided to waive the debts generated by including the commuted amount in the asset test.
The following policy only applies to Service Pension, Income Support Supplement and Veteran Payment. The Age Pension is covered by the Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025
The following Commission waiver policy applies.
Debts arising from commutation of an asset-test exempt income stream
A delegate of the Commission must waive a debt, as per 206(1)(b)(i) of the VEA, if the debt meets the following conditions:
- it is a debt due to the Commonwealth by a person under section 52ZMA of the VEA; and
- the debt did not arise because the person knowingly made a false or misleading statement, or knowingly provided false information to the Commonwealth;
- and the debt arose because the whole of an asset-test exempt income stream was commuted between 7 December 2024 and 6 December 2029 in accordance with:
- regulation 1.08AA of the Retirement Savings Accounts Regulations 1997; or
- regulation 1.05AA of the Superannuation Industry (Supervision) Regulations 1994; or
- regulation 1.06C of the Superannuation Industry (Supervision) Regulations 1994.
Note:
an asset-test exempt income stream has the meaning given in 5JA, 5JB and 5JBA of the VEA.
N.B. The VEA General Delegation limits the amount that a delegate can waive in line with their classification. Page 23 of TRIM reference 19410855E should be consulted prior to making a waiver decision.
The enabling changes to the Retirement Savings Accounts Regulations 1997 and the Superannuation Industry (Supervision) Regulations 1994 made as a result of the LPC measure have the consequence of changing the contract and governing rules that determine the asset-test exemption status of these income streams. Some of those who decide not to commute may find their income stream losing asset-test exempt status despite having met the conditions under 5JA(2), 5JB(2) and 5JBA(2) of the VEA. In order to prevent this group from being unfairly disadvantaged, the Government has decided to waive all debts related to the inclusion of the income stream in the asset test because of the LPC measure.
The following policy only applies to Service Pension, Income Support Supplement and Veteran Payment. The Age Pension is covered by the Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025
The Repatriation Commission has authorised the following waiver policy.
Debts arising from change of contract rules or governing rules of an asset-test exempt income stream
A delegate of the Commission must waive a debt, as per 206(1)(b)(i) of the VEA, if the debt meets the following conditions:
- it is a debt due to the Commonwealth by a person under section 205 of the VEA; and
- the debt did not arise because the person knowingly made a false or misleading statement, or knowingly provided false information to the Commonwealth; and
- the debt arose from payment of service pension, income support supplement or veteran payment; and
- the debt arose because paragraph 5JA(1)(c), paragraph 5JB(1A)(c) of subparagraph 5JBA(1)(a)(v) of the VEA ceased to be satisfied in relation to an income stream; and
- the only reason paragraph 5JA(1)(c), paragraph 5JB(1A)(c) or subparagraph 5JBA(1)(a)(v) of the VEA ceased to be satisfied in relation to the income stream is because the contract or governing rules of the income stream were changed to enable the income stream to be commuted in accordance with:
- regulation 1.08AA of the Retirement Savings Accounts Regulations 1997; or
- regulation 1.05AA of the Superannuation Industry (Supervision) Regulations 1994; or
- regulation 1.06C of the Superannuation Industry (Supervision) Regulations 1994.
N.B. The VEA General Delegation limits the amount that a delegate can waive in line with their classification. Page 23 of TRIM reference 19410855E should be consulted prior to making a waiver decision.