5.4 Pension Loans Scheme
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This chapter outlines the eligibility requirements, administration, payment arrangements and debt recovery for the Pension Loans Scheme.
See Also
Chapter 3.10 Financial Hardship [2]
Chapter 5.6 Pension Bonus Scheme [3]
Chapter 9.6 Deprivation of Income & Assets [4]
Chapter 3.1 Service Pension Eligibility [5]
Chapter 3.2 Income Support Supplement (ISS) Eligibility [6]
5.4.1 Overview of Pension Loans Scheme
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What is the Pension Loans Scheme?
The pension loans scheme is a voluntary reverse equity mortgage that offers older Australians an income stream to supplement their retirement income. This allows people who have assets in the form of Australian real estate, but who need or want additional income in retirement, to draw on the value of those assets in the form of a fortnightly payment.
The maximum fortnightly payment underthe scheme, including any actual pension or ISS entitlement, is 150% of the maximum rate of service pension or income support supplement.
The person's outstanding debt is subject to a compound interest rate and the debt is secured by a statutory charge over the person's real estate in Australia. The debt would normally be repaid if the real estate is sold, or from the person's estate after their death.
Who is eligible to participate in the scheme
Persons who are eligible for service pension [11], partner service pension or income support supplement [11] and gave reached pension age (qualifying age for income support supplement) may elect to participate in the pension loans scheme.
More ? [12]
Administration of the scheme
The Pension Loans Scheme application form must be completed by all participants in the scheme. An interview should be conduced in all cases to ensure issues associated with participation in the scheme are fully understood.
More ? [13]
Payment of Pension Loans Scheme
This section explains how the amount of the pension loan is calculated, how it is to be paid to the debtor (pensioner), the applicable interest rate and how it is to be managed including the taking of a statutory charge as a security.
More ? [14]
Review of Pension Loans Scheme
Specific changes in personal or financial circumstances may require a full review of the loan or a recalculation of the amount of loan payments.
More ? [15]
Recovery of loan debt
A debt under the pension loans scheme is not usually recovered until after the death of the pensioner, however the Repatriation Commission may require a loan to be repaid before death in certain circumstances.
More ? [16]
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
5.4.2 Eligibility Criteria for Pension Loans Scheme
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To be eligible to participate in the pension loans scheme, a person must be:
- a veteran [11] who has reached pension age [11], or
- the partner [11] of a veteran, where the veteran has reached pension age [11], or
- a war widow/widower [11] who has reached qualifying age [11],
- receiving or eligible to receive a service pension [11], partner service pension or income support supplement [11],
- not be declared bankrupt or subject to a personal insolvency agreement, and
- own real estate in Australia of suffucient value to secure the payment of any debt that may become payable.
Income Support Supplement (ISS) and the Pensions Loans Scheme
A person who has reached qualifying age and receiving or is eligible to receive income support supplement is eligible to participate in the pension loans scheme.
War widows or war widowers who are also veterans and the pension loans scheme
A war widow/widower who is also a veteran is eligible to participate in the pension loans scheme. Prior to 20 September 2002, the pension loan payable was limited to a “maximum” of $124.90 per fortnight, however, after 20 September 2002 the maximum pension loan payable will increase in line with the indexation of ceiling rate [11] service pension.
Transfer from the original Pension Loans Scheme to the revised Pension Loans Scheme
The origanal scheme was closed to new entrants on 9 July 1996. Pension loans scheme participants under the original scheme may request at any time to trasfer to the revised pension loans scheme. Provisions of the revised pension loans scheme apply from the first pension payday after the request is lodged to transfer to the revised scheme. Once a transfer is made to the revised pension loans scheme, it is not possible to transfer back to the original scheme. if no request to transfer is made, the person continues to be covered by the original scheme.
Security required for Pension Loans Scheme
Before payment under the pension loans scheme may be considered, a pensioner needs to have sufficient real assets [11] less any nominated amount that they are prepared to offer as security against the loan. Only real estate owned in Australia can be used as security for a loan under the pension loans scheme. Any real estate, including the principal home, may be used.
Securing the debt
A debt arising from a pension loan is secured by a statutory charge over the property that the person has offered as security. In practical terms, the Commonwealth lodges a caveat over the property, which prevents the sale of the property until those identified on the caveat are given a hearing. The caveats are lodged by Legal Services and Audit Branch. In some states a 'notice of charge' may be issued rather than a caveat. A notice of charge has the same effect as a caveat, in protecting the Commonwealth's interest in the property.
The effect of a mortgage on property
A mortgage on a property which is offered as security for a pension loans scheme debt does not necessarily disqualify a person from participating in the scheme. The mortgage should be taken into account when valuing the person's equity in the real asset, and when calculating the maximum loan available to the person.
Payment for costs involved
The applicant is responsible for the costs to the Commonwealth in placing the charge or caveat on the property. Payment of costs can be made either at the time of registration, or can be added to the debt. The person is also responsible for the subsequent cost of removing the charge or caveat. If this occurs after the person's death, their estate will incur the charge.
Insurance
Before the granting of a Pension Loan, proof of adequate and appropriate insurance is required. Participants are required to keep the insurance current and notify DVA of any significant changes.
Adequate insurance means having a building insurance policy that covers the property for standard events including:
- fire,
- escape of liquid;
- flood;
- storm and
- explosion,
for an insured amount that is equivalent of at least 90 per cent of the value of all buildings on the property. PLS recipients are required to advise of any significant changes to the insurance policy covering the property used to secure a PLS loan.
As vacant land may be used as a securable “real asset/real property” and therefore can be offered as security for a PLS loan, Third Party Liability Insurance would be required for this type of asset.
Nominated amount
A nominated amount is the agreed amount of equity of a person’s secured asset that they elect not to be included in the determination of their maximum loan amount. This limits the growth of their PLS debt, but does not prevent the recovery of this amount by the Commonwealth. The recipient may change the nominated amount at any time.
The nominated amount will also be taken into account in determining whether the value of a person’s real assets are sufficient to secure the payment of any debt that may become payable to the Commonwealth under the PLS.
Example: A person has a property valued at $200,000 that they offer as security for their PLS debt. They wish to nominate an amount of $85,000 to limit the total PLS debt that they will accrue with the Commonwealth. When determining their maximum loan amount under the PLS, the value of real assets will be $115,000 (i.e. $200,000 minus $85,000). This is the difference between the total value of the property and the amount of equity they have nominated. The person’s PLS debt reaches $100,000 by the time they cease to participate in the scheme. If the value of the real estate has fallen to $150,000 at the time it is sold and the debt is to be repaid, the full $100,000 debt must be repaid, even though this would leave the person with less than their nominated amount.
For the purposes of Part VI of the VEA [28], a reference to a veteran is taken to be a reference to:
- a veteran as defined in subsection 5C(1) of the VEA [28];
- a member of the Forces as defined in subsection 68(1) of the VEA [28]; or
- a member of a Peacekeeping Force as defined in subsection 68(1) of the VEA [28].
For the purposes of Part VII of the VEA [28], according to subsection 5C(1), veteran means a person (including a deceased person):
- who is taken to have rendered eligible war service [11], or
- in respect of whom a pension is, or pensions are, payable under subsection 13(6) and
- in Part III and Part VIIC of the VEA [28] includes a person who is:
- a Commonwealth veteran [11], or
- an allied veteran, or
- an allied mariner.
Currently, the pension age for a veteran is 60 years of age (VEA 5QA).
The pension age for a non-veteran is determined by the table below:
Date of birth (both dates inclusive) | Age Pension age |
1 July 1952 to 31 December 1953 | 65 years and 6 months |
1 January 1954 to 30 June 1955 | 66 years |
1 July 1955 to 31 December 1956 | 66 years and 6 months |
On or after 1 January 1957 | 67 years |
A person's 'partner' is someone who is a member of a couple with that person.
Currently, the pension age for a veteran is 60 years of age (VEA 5QA).
The pension age for a non-veteran is determined by the table below:
Date of birth (both dates inclusive) | Age Pension age |
1 July 1952 to 31 December 1953 | 65 years and 6 months |
1 January 1954 to 30 June 1955 | 66 years |
1 July 1955 to 31 December 1956 | 66 years and 6 months |
On or after 1 January 1957 | 67 years |
A war widow/widower is generally a person who immediately before their partners death, was the partner of, or was legally married to:
- a veteran [11]; or
- a person who was a member of the forces [11]; and
- who is receiving:
- a war widow's/widower's pension [11]; or
- a pension that is payable under the law of a foreign country that is, in the opinion of the Commission, similar to a war widow's/widower's pension.
Refer to 5E(1) [29] of the VEA for the full definition.
Qualifying age is defined in section 5Q(1) of the [30]VEA [30]and is equivalent to the pension age for a veteran which is described in section 5QA VEA as:
- 60 years for a male,
- for females subject to age equalisation (refer to the table in section 5QA VEA).
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
The ceiling rate of service pension and income support supplement (ISS) is applied to all war widows/widowers when assessing the rate of pension. This amount was previously frozen at $124.90 per fortnight, however, since legislation was introduced in September 2002, is now indexed twice yearly in line with percentage increases in the maximum rate service pension. A higher ceiling rate can apply, however, in the following cases:
If a person:
-
became a war widow/widower-pensioner before 1 November 1986,
-
has continually received service pension, social security pension or ISS since that date, and
-
the rate of pension immediately before that date was more than $120.10
in such a case the ceiling rate is equal to the pre-November 1986 rate plus 4%.
If a person:
-
is a person to whom ISS is payable,
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is not permanently blind, and
-
whose Part II or IV pension is [glossary:compensation reduced:DEF/Compensation reduced pension],
the ceiling rate is the sum of the ceiling rate as calculated above and the amount of the reduction in the Part II or Part IV pension. The maximum ceiling rate cannot exceed the maximum rate of single service pension. For ceiling rates refer to SCH6-A4 to A9 of VEA. The amount of increase to the ceiling rate pension under Part II or Part IV is worked out by using the formula in SCH6-A9 of the VEA.
Real Assets includes any real estate of the person in Australia (including the principal home) nominated by the person as security but excluding any specified property which the person wishes to exclude. Refer to subsection 52ZAAA(1) for a full definition.
5.4.3 Administration of Pension Loans Scheme
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This section explains the policy for applying for pension loans scheme including the need for an interview, and the impact of pension loans scheme on other entitlements.
Application for Pension Loans Scheme
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Applicants for Pension Loans Scheme
Applicants usually fall into four groups:
- current part-rate pensioners,
- current maximum rate pensioners,
- persons whose pension claim was previously rejected under the income and assets tests, or
- persons who have lodged a pension loans scheme claim on the assumption that they would not be eligible for a pension.
If a person has not previously applied for a service pension [11] or partner [11] income support supplement [11], basic eligibility for such pension must be established for the person to participate in the scheme. There is no legal requirement for income and asset details to be collected for those non-pensioners who would not meet the means tests.
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Participation in the scheme - current pensioners
Pensioners receiving a pension can use the scheme to top-up their pension payments to:
- 150% of the maximum rate they would be entitled to if the income/assets test were not applied (less any remote area allowance), or
- any lesser rate they nominate. More ? [34]
Participation in the scheme – non pensioners
Persons who do not receive pension due to the combined income/assets test, can use the scheme in a similar manner to obtain a substitute for pension payments.
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Pension Loans Scheme application form
VEA ? [36]
The Pension Loans Application form gives DVA [11] the authority to collect information to establish whether or not a person meets the eligibility criteria for pension loans scheme. The application form is a contract between DVA and the applicant and states:
- any property nominated for exclusion from the calculation of the amount of loan available,
- the interest rate that is to be charged on the loan, More ? [37]
- any nominated to be excluded from the value of secured assets available for calculation of the maximum loan amount,
- the charge against any of the person's property used as security for the loan,
- More ? [38]
- insurance details,
- confirmation they are no subject to any bankruptcy or personal insolvency agreements, and
- the rate of loan paid each fortnight.
Completing the Pensions Loan Scheme application form
VEA ? [39]
A person who wants to apply for the pension loans scheme must complete the Pension Loans Application form. The applicant must sign the application form in order to agree to the terms of the loan. If only one member of a couple applies for a loan, both members must sign the application form even though only one member of the couple may be accessing the scheme. The contract is binding on both members of a couple.
Pension Loans Scheme interviews
An interview is to be conducted in all cases to:
- ensure that the applicant is fully aware of all the terms and conditions associated with the pension loans scheme payments and the debt,
- negotiate any problems, and
- obtain the signed agreement of the applicant to the terms of the loan on both the application form and on any interview notes which record the explanation of the loan conditions to the person/s.
Eligibility for service pension and income support supplement
Chapter 3.1 Service Pension Eligibility [5]
Chapter 3.2 Income Support Supplement (ISS) Eligibility [6]
Section 52ZD(1) [43] VEA - Need to make a request to participate in the scheme
Section 52ZD(2) [43] VEA - Who is required to sign request to participate in scheme
Section 52ZD(3) [43] VEA - Form of request to participate in scheme
A service pension is an income support payment broadly equivalent to the social security age and disability support pensions. It may be paid once a veteran or partner has reached the nominated age or is incapacitated for work.
A person's 'partner' is someone who is a member of a couple with that person.
ISS is an income support payment that may be paid to eligible war widows and widowers under the VEA and persons receiving wholly dependent partners' compensation under the MRCA, and who satisfy the means tests. It is an indexed rate, increased twice-yearly in March and September in line with changes to the cost of living and/or average wages. Income Support Supplement (ISS) legislation commenced on 20 March 1995. It is a payment created to replace the ceiling rate income support age, carer, wife and disability support pensions, paid to war widows/widowers by Centrelink.
The Department of Veterans' Affairs.
Impact of Pension Loans Scheme on Other Entitlements
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Effect on other entitlements – part rate pensioners
VEA ? [51]
If a person participating in the pension loans scheme is entitled to a part-rate pension under the income and assets test, their participation in the scheme does not impact on their eligibility to receive the additional benefits associated with receipt of that pension, such as a Pensioner Concession Card, Pension Supplement [11] and treatment benefits.
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Effect on other entitlements – non-pensioners
VEA ? [53]
If the person is not otherwise entitled to a partial rate of pension, and is participating in the scheme to obtain a substitute for pension rather than just a top-up of pension, they are not entitled to the additional benefits associated with receipt of pension, such as a Pensioner Concession Card, and treatment benefits. The provisions of the Scheme require that for fringe benefits purposes, the participants are taken not to be receiving service pension or income support supplement.
This does not apply to people who hold a reinstated PCC because their income support pension was cancelled on 1 January 2017 due to changes to the assets test. There is no requirement for PLS participants in this category to be receiving an income support pension as their entitlement to the PCC arises through separate legislation unrelated to PLS participation.
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Participation in Pension Loans Scheme and hardship provisions
Participation in the pension loans scheme precludes payment under the hardship provisions. Because the person is using their assets as security for borrowing, their assets cannot be regarded as unrealisable, which is one requirement that must be met for a person to access the hardship provisions.
However, the fact that a person may be able to use their assets as security for a loan under the pension loans scheme should not be used to prevent them from accessing the hardship provisions if they are not actually participating in the scheme. That is, a pensioner should not be required to test their eligibility for a loan under the pension loans scheme to determine whether or not their assets can be regarded as unrealisable for hardship purposes.
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Appeals and obligations
Pensioners participating in the pension loans scheme do not have any appeal rights or statutory obligations imposed on them under the VEA [11] as a result of participation in the scheme. However part rate pensioners who participate in the pension loans scheme must comply with the statutory obligations relating to the part rate pension, and will retain the associated appeal rights.
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Effect on Bereavement Payment
If a member of a couple receiving pension loans scheme dies, then any payment made under pension loans scheme is not included as part of the bereavement payment [11].
More ? [57]
Pension Supplement
Chapter 5.12 Pension Supplement [59]
Chapter 5.8 Fringe Benefits [60]
Chapter 7.1 Treatment at Departmental Expense [61]
Pension Supplement
Chapter 5.12 Pension Supplement [59]
Chapter 5.8 Fringe Benefits [60]
Chapter 7.1 Treatment at Departmental Expense [61]
More ? (go back) [64]
The pension supplement is added to a person's maximum basic rate [11]. The pension supplement is calculated as a 'combined couple' rate. The 'not a member of a couple' rate is 66.33% of the 'combined couple' rate. The member of a couple rate is 50% of the combined couple rate. From 1 July 2010, the minimum pension supplement amount [11] will be able to be claimed on a quarterly basis rather than on a fortnightly basis.
Veterans' Entitlements Act 1986.
A bereavement payment is an amount payable in respect of a deceased pensioner that represents a continuation of the pensioner's entitlement for a period following the death (the bereavement period).
The payment can be made as:
- a lump sum in advance, or
- a continuation of the deceased person's pension instalments, or
- a combination of both, or
- a portion of the rate of pension payable to the surviving member of a couple identified as a separate amount only for taxation purposes.
5.4.4 Payment of Pension Loans Scheme
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This section explains the policy for calculating the amount of the pension loan, paying the fortnightly amounts to the debtor, and managing the ongoing rates of the loan payments.
Calculation of Pension Loan
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Maximum Pension Loans Scheme loan available
VEA ? [72]
Each fortnightly payment made under the pension loans scheme increases the amount owed by the pensioner under the scheme. Accordingly, ongoing payments can only be made until the balance of the loan reaches the maximum loan available to the person under the scheme.
The maximum loan available to a person is calculated according to a set formula using the age component amount [11] to set a loan limit as a percentage of secured assets.
The maximum loan amount increases on each relevant birthday taking into account the new age component amount and the latest asset valuation on the secured assets.
Calculating the maximum loan
VEA ? [73]
The maximum loan available to a person under the pension loans scheme can be calculated using the following equation:
Maximum loan = Age component amount [11] x (value of real assets [11] - nominated amount / $10,000
Age Component amount
in the case of members of a couple, the age component is based on the age of the YOUNGER partner on their last birthday, Although the age component is drawn froma single person, each partner's share of the value of real assets is used to work out the maximum loan amount.
Value held for real assets
VEA ? [74]
If the value of a person's real assets is greater than $10,000; their value is rounded down to the nearest multiple of $10,000. If the value of the real assets is less than $10,000; their value is taken to be nil. A person's real assets are to be reduced by the nominated amount.
Effect of nominated amount on maximum loan available
By nominating an amount and thereby excluding that portion of the asset value over which a charge is to be placed, also reduces the maximum loan available because it has the effect of reducing the value of real property.
Example:
A couple aged 72 and 68 years of age, offer property valued at $240,000 as security for a loan to each of them. The property is jointly owned by the couple, and they each have a nominated amount of $45,000. The younger partner's age is used to determine the age component ($2,850 at age 68), and the maximum loan available for each partner is calculated as follows:
·real assets equal $120,000 minus $45,000. After rounding, this comes to $70,000
·maximum loan for each member of a couple equals $2,850 multiplied by ($70,000 divided by $10,000) = $19,950
Note: Where one member of a couple owns a greater than 50% share of the securing property, a 50-50 arrangement will operate where the maximum loan available for an individual applicant of a member of a couple is based on 50% share of the securing property. This arrangement also applies to members of a couple who are qualified for but not receiving income support payments.
Assessing the fortnightly Pension Loans Scheme loan rate
VEA ? [75]
If a person is eligible for payment under pension loans scheme, the loan rate is determined by either:
- A top-up amount, comprising the difference between:
* the rate of pension assessed under the normal income / assets test; and
* 150% of the maximum pension rate including allowances, except remote area allowance, applicable to the person's circumstances, or
- a lower amount nominated by the pension loans scheme recipient.
A pensioner can choose between a fixed fortnightly loan payment and the maximum rate being 150% of the maximum rate of service pension.
Section 52ZCA(1) [43] VEA - Maximum loan available under the Pension Loans Scheme
Section 52ZCA(3) [43] VEA - Age component amount table
An age component amount is used for varying ages to set a loan limit as a percentage of the secured assets. The age component amount is intended to take into account the risk of debt exposure of the Commonwealth by reference to a person's current age. Its aim is to ensure that sufficient real assets are available to repay the loan at the time of recovery.
A person's age for the purpose of the table is his or her age at his or her last birthday. In the case of a couple, it is the age of the younger member of the couple on his or her last birthday. Refer to subsection 52ZCA [80] of the VEA for a full definition. The Age Component Amount table is found in the Social Security (Pension Loans Scheme – Age Component Amount) Determination 2019. [81]
An age component amount is used for varying ages to set a loan limit as a percentage of the secured assets. The age component amount is intended to take into account the risk of debt exposure of the Commonwealth by reference to a person's current age. Its aim is to ensure that sufficient real assets are available to repay the loan at the time of recovery.
A person's age for the purpose of the table is his or her age at his or her last birthday. In the case of a couple, it is the age of the younger member of the couple on his or her last birthday. Refer to subsection 52ZCA [80] of the VEA for a full definition. The Age Component Amount table is found in the Social Security (Pension Loans Scheme – Age Component Amount) Determination 2019. [81]
Real Assets includes any real estate of the person in Australia (including the principal home) nominated by the person as security but excluding any specified property which the person wishes to exclude. Refer to subsection 52ZAAA(1) for a full definition.
Management and Maintenance of Pension Loans
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Decrease in loan rate - assets tested pensioners
The amount owed by a person under the pension loans scheme is deducted from the value of the assets held as security against the debt. If the assets held as security are assessable under the assets test, the person's pension entitlement under the assets test increases as the amount is deducted from the value of those assets. As the person's pension entitlement increases, their fortnightly loan rate may decrease depending on how they have set their PLS rate.
Any exempt assets [11] used for security do not affect the loan rate in this way, as the reduction in the value of an exempt asset has no impact on the assets test.
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Members of a couple
Members of a couple may nominate different loan rates or only one member of a couple may apply for pension loans scheme. These loans are not joint loans but individual loans to each member of a couple and are paid off separately.
Interest charged on the Pension Loans Scheme loan
VEA → [84]
Interest under pension loans scheme is charged at a rate set by the Minister for Social Services by notice in the Australian Government Gazette. Interest Rates are published on the Department of Human Services Website: https://www.humanservices.gov.au/customer/services/centrelink/pension-loans-scheme [85]
. The rate is currently 4.5% per annum, compounding fortnightly, and is reviewed periodically.
Interest is calculated on the outstanding balance, owing each fortnight, of:
- combined loan payments and accrued interest, less
- any repayments made by the pensioner.
Interest will accrue on the outstanding balance until the loan has been repaid in full by the person or their estate. Any legal costs associated with establishment of the loan do not attract interest, and will just be added to the outstanding loan amount to be repaid.
Deduction of repayments from balance
If a loan repayment is made, that repayment is deducted from the balance of the debt on the pension payday immediately prior to the date the repayment is made. If repayment is made on a payday, that repayment is deducted from the total loan balance before interest is calculated for the payday on which the repayment was made.
An exempt asset is one that is disregarded when calculating the value of a person's assets [11] under the assets test [11]. Examples of exempt assets include:
- the value of a person's principal home [11],
- any motor vehicle provided under the Vehicle Assistance Scheme,
- the value of any medal or decoration awarded for valour, other than used as an investment or hobby,
- up to two funeral bonds [11] where the combined amount invested is within the funeral bond threshold [11],
- a prepaid funeral [11] or cemetery plot
- value of a superannuation fund [11] investment prior to pension age [11].
For a full legislative definition see section 52 of the VEA.
Security for Pension Loans
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VEA ? [90]
Security for the loan
A debt arising from a loan is secured by a statutory charge over a person's real assets [11]. The applicant is responsible for the cost incurred by the Commonwealth in placing the charge.
The person has the option to pay the costs up front or to add them to the total loan amount. The subsequent cost of removal of the charge is also borne by the person or their estate upon their death. Legal Services and Audit Branch are responsible for the placement and removal of a charge on behalf of the Commonwealth.
Rearrangement of assets
A person may wish to rearrange their assets and consequently it may become necessary to remove the charge from one property and place it on another. The associated costs of such a change are the responsibility of the person and can be added onto the loan debt. The rearrangement of assets is not an impediment to continuing in the scheme provided the property's value is sufficient compared with the continuing level of debt to allow continuing participation in the pension loans scheme. If the property value offered as security is insufficient, the person may need to make a repayment of part or all of the outstanding loan balance to allow continued participation in the scheme, or their participation in the scheme will need to cease.
More ? [91]
If an officer has doubt regarding the security of a debt
Where doubt exists regarding the security of the debt or there are legal issues impacting on such security, details of the case should be referred to the Policy Development Branch for direction.
Seeking refund of a debt under the pension loans scheme
5.4.6/Recovery of Debt Prior to Death of Debtor [93]
Real Assets includes any real estate of the person in Australia (including the principal home) nominated by the person as security but excluding any specified property which the person wishes to exclude. Refer to subsection 52ZAAA(1) for a full definition.
5.4.5 Review of Pension Loans Scheme
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Change in pension entitlement
Where changes in income, assets or pension entitlement occur as a result of a DVA [11] or pensioner initiated review, the amount of the loan payments may need to be recalculated i to ensure that the total of the PLS payment and any actual pension entitlement does not exceed 150% of the maximum payment rate and that the PLS rate is consistent with the person's choice on how to set the PLS rate.
Recalculation of loan payments is not required for pensioners who chose to receive a set rate as a loan subject to the total of their PLS rate plus their new rate of pension does not exceed 150% of the maximum rate payable.
More → [96]
Change to nominated amount
VEA → [97]
A request to change the nominated amount or withdraw from the pension loans scheme can be made at any time to DVA in writing and must be signed by the veteran and, if they are a member if a couple, their partner.
A request to increase the nominated amount is subject to the pensioner remaining under the maximum loan applicable to their circumstances. An increase in the nominated amount requires a re-assessment of the pension loan to ensure that the assets on which the charge is placed are still sufficient. This may require a re-valuation of assets by a property valuation service provider.
Revaluation of property/asset
Valuation of the real estate used as security on a pension loans scheme loan is conducted at the time of grant and each year following the grant. Property valuations are done by a property valuation service provider at no cost to the client.
If any changes are made that may impact on the value of the property, a revaluation may be required. For example, the creation of an easement, that limits the way part of the property can be used, will require a revaluation by a property valuation service provider.
A check should be made after each revaluation to ensure that the pension loans scheme recipient has not exceeded their maximum loan and is still entitled to ongoing pension loans scheme payments.
More → [98]
Pensioner becomes a member of a couple
If a pensioner becomes a member of a couple, a review based on the new circumstances is necessary to establish continued entitlement to any payment of pension under pension loans scheme. Payment under pension loans scheme is suspended until the new member of a couple signs a Pension Loans Application. The suspension is lifted and payment resumed to one or both members of the couple if continuing eligibility is established and a new application form is signed by both members of the couple (even if the partner is not accessing the scheme).
Separation of a couple
If a couple with a debt under pension loans scheme separate, the pension loan should be suspended until a full review of the pensioner's circumstances is completed. The review needs to establish:
- whether any asset securing a debt is affected by any property settlement,
- what impact this may have on continuing eligibility for payment under the pension loans scheme, and
- what impact this has on recovery of the debt.
if the separation is permanent, and one member of the couple is no longer entitled to receive payments under the PLS, the debt owed by that person may be recovered in part or in full:
- when property settlement occur, or
- at an appropriate time dependanr in the circumstances of the case.
Example: A person who no longer qualifies becuase they are under pension age or have insufficent assets to secure the debt.
If the separation is permanent and both people wish to continue in the scheme, then each member of the couple will need to qualify for payments under the PLS in their own right.
Relocation of a separated couple
If the pensioner or pensioners decide to relocate and their principal residence is the secured asset, the person's entitlement must be reassessed to decide whether it is appropriate to allow transfer of the charge to the new property. This depends on the value of the new property offered as security. There must not be a time gap between the sale of the old property and the purchase of the new property. Effectively, the old debt is recovered and a new assessment is done using the new property as security.
Portability of payments under pension loans scheme
Payments under the PLS are not directly affected by portability rules. However, for PLS participants living outside Australia, the portability provisions may reduce the maximum payment rate under the rate calculators, which may result in a lower maximum fortnightly PLS rate being available than to PLS participants living in Australia.
More → [99]
Portability of service pension and income support supplement
Chapter 11.4 Portability of Pensions and Allowances [100]
Portability of service pension and income support supplement
Chapter 11.4 Portability of Pensions and Allowances [100]
The Department of Veterans' Affairs.
5.4.6 Repayment of Pension Loans Scheme
- Log in [107] to post comments
This section outlines the policy regarding the repayment of debts under the pension loans scheme.
Repayment of Loan After the Death of Pensioner
- Log in [108] to post comments
Loan repayment following death
VEA ? [109]
When a PLS recipient dies, the debt under the scheme is usually recovered from their estate.
If a pensioner with a pension loans scheme debt dies and... | Then... |
there is no surviving partner, | DVA [11] usually enforces the charge on the property used as security and recovers the debt immediately as a lump sum. |
there is a surviving partner entitled to loan payments but who does not wish to continue receiving them, | that person may choose to repay the debt at any time by making repayments or by withholding an amount from any pension entitlement. |
there is a surviving partner entitled to loan payments and wishes to continue receiving them, | Payments will continue and recovery of the debt is deferred until the death of the surviving partner. |
there is a surviving partner who is not entitled to receive pension loans scheme payments as they are below the pension age, | the debt may be recovered after the bereavement period [11]. More ? [110]
Note: In this case, discretion exists to phase, delay or accept partial recovery where the family home is involved. |
Restrictions on recovery
VEA ? [111]
The restrictions on the recovery of a loan are shown in the table below.
If a member of the couple dies and the partner... | Then... |
receives bereavement payment | the debt may be recovered after the last day on which a bereavement payment is payable. More ? [112]
|
is over veteran pension age and has use of all or part of the assets subject to the charge | the debt may be recovered after the death of the partner. |
Manner of recovery negotiable
Where the amount of the debt is recovered from a person's estate, it is expected that the full amount of the debt should normally be repaid by the executor of the estate as a lump sum. However, the manner of recovery can be negotiated between the Commission and the executor.
The Department of Veterans' Affairs.
Bereavement period, as defined in section 53H of VEA [30], in relation to a person's death, means the period of 98 days starting on the day on which the person died.
Repayment of a Loan Prior to Death
- Log in [117] to post comments
Situations where loan repayment occurs prior to death
VEA ? [118]
A person can choose to repay all or part of the debt and accrued interest at any time. The Commission has the discretion to accept repayments by instalments or lump sums.
Additionally the Commission [11] has the discretion to seek debt recovery before a person's death where:
- the pensioner sells or disposes of the property used as security, or
- a property settlement occurs.
Example of debt recovery prior to death
A farm property is devalued placing full recovery in jeopardy. Sale of part of the property may be sought to ensure the prospects of future full recovery are assured.
More ? [119]
Debt recovery limits
If DVA [11] is given prior notice of the sale or disposal of a property, the maximum amount of debt payable by a person is the value of the loan. Any nominated amount may still be recovered from the sale of the property if the outstanding loan is more than the sale price less the nominated amount.
Recovery of debt after pension loans scheme ceases to operate
VEA ? [120]
Ongoing payments under the scheme cease from the pension payday after
- a request to withdraw from the scheme is made; or
- the scheme ceases to operate because debt exceeds the maximum loan available
If a pensioner withdraws from the pension loans scheme, they can either:
- repay the debt in full;
- repay part of the debt and accrued interest at any time; or
- defer recovery from their estate until after their death.
Separation of Pension Loans Scheme couple
If a couple separate permanently, the debt may be recovered when the property settlement occurs or at an appropriate time dependent on the circumstances of the case.
Section 52ZK [43] VEA - Effective date of withdrawal from scheme
Section 52ZKA [43] VEA - Repayment or recovery of debt after scheme ceases to operate
According to Section 179 [28]of the VEA [28], the Commission is a body corporate under the name of Repatriation Commission.
The Department of Veterans' Affairs.
Links
[1] https://clik.dva.gov.au/user/login?destination=node/16234%23comment-form
[2] https://clik.dva.gov.au/compensation-and-support-policy-library/part-3-income-support-eligibility/310-financial-hardship
[3] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/56-pension-bonus-scheme
[4] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/96-deprivation-income-and-assets
[5] https://clik.dva.gov.au/compensation-and-support-policy-library/part-3-income-support-eligibility/31-service-pension-eligibility
[6] https://clik.dva.gov.au/compensation-and-support-policy-library/part-3-income-support-eligibility/32-income-support-supplement-iss-eligibility
[7] https://clik.dva.gov.au/compensation-and-support-policy-library/part-2-applying-pension/21-claims
[8] https://clik.dva.gov.au/compensation-and-support-policy-library/part-9-principles-determining-pension-rate/91-income-and-assets-test-principles
[9] https://clik.dva.gov.au/compensation-and-support-policy-library/part-11-administration-payments/116-taxation
[10] https://clik.dva.gov.au/user/login?destination=node/16245%23comment-form
[11] https://clik.dva.gov.au/%23
[12] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn73
[13] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn74
[14] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn75
[15] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn76
[16] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn77
[17] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/542-eligibility-criteria-pension-loans-scheme
[18] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn73
[19] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/543-administration-pension-loans-scheme
[20] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn74
[21] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/544-payment-pension-loans-scheme
[22] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn75
[23] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/545-review-pension-loans-scheme
[24] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn76
[25] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/546-repayment-pension-loans-scheme
[26] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn77
[27] https://clik.dva.gov.au/user/login?destination=node/16168%23comment-form
[28] http://clik.dva.gov.au/legislation-library
[29] http://www.comlaw.gov.au/Details/C2015C00011
[30] http://www.comlaw.gov.au/Series/C2004A03268
[31] https://clik.dva.gov.au/user/login?destination=node/16268%23comment-form
[32] https://clik.dva.gov.au/user/login?destination=node/16257%23comment-form
[33] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn81
[34] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn82
[35] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn83
[36] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn84
[37] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn85
[38] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn86
[39] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn87
[40] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn81
[41] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn82
[42] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn83
[43] https://clik.dva.gov.au/service-eligibility-assistant-updates/all-determinations-order-date-signed-oldest-most-recent/determinations-under-vea
[44] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn84
[45] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/544-payment-pension-loans-scheme/management-and-maintenance-pension-loans
[46] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn85
[47] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/544-payment-pension-loans-scheme/security-pension-loans
[48] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn86
[49] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn87
[50] https://clik.dva.gov.au/user/login?destination=node/16260%23comment-form
[51] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn88
[52] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn89
[53] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn90
[54] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn91
[55] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn93
[56] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn94
[57] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn95
[58] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn88
[59] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/512-pension-supplement-psup
[60] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/58-fringe-benefits
[61] https://clik.dva.gov.au/compensation-and-support-policy-library/part-7-common-allowances-and-benefits/71-treatment-departmental-expense
[62] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn89
[63] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn90
[64] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn92
[65] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn93
[66] https://clik.dva.gov.au/compensation-and-support-policy-library/part-12-compliance-and-obligations/125-reviews-and-appeals
[67] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn94
[68] https://clik.dva.gov.au/compensation-and-support-policy-library/part-8-bereavement-assistance
[69] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn95
[70] https://clik.dva.gov.au/user/login?destination=node/16263%23comment-form
[71] https://clik.dva.gov.au/user/login?destination=node/16247%23comment-form
[72] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn96
[73] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn97
[74] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn98
[75] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn99
[76] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn96
[77] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn97
[78] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn98
[79] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn99
[80] http://clik.dva.gov.au/node/32981
[81] https://www.legislation.gov.au/Details/F2019L00420
[82] https://clik.dva.gov.au/user/login?destination=node/16147%23comment-form
[83] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn100
[84] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn101
[85] https://www.humanservices.gov.au/customer/services/centrelink/pension-loans-scheme
[86] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn100
[87] clik://LEGIS/VEA/section 52ZC
[88] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn101
[89] https://clik.dva.gov.au/user/login?destination=node/16242%23comment-form
[90] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn102
[91] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn103
[92] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn102
[93] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/546-recovery-pension-loans-scheme/repayment-loan-prior-death
[94] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn103
[95] https://clik.dva.gov.au/user/login?destination=node/16194%23comment-form
[96] https://clik.dva.gov.au/node/16194/edit#tgt-cspol_part5_ftn104
[97] https://clik.dva.gov.au/node/16194/edit#tgt-cspol_part5_ftn105
[98] https://clik.dva.gov.au/node/16194/edit#tgt-cspol_part5_ftn106
[99] https://clik.dva.gov.au/node/16194/edit#tgt-cspol_part5_ftn107
[100] https://clik.dva.gov.au/compensation-and-support-policy-library/part-11-administration-payments/114-portability
[101] https://clik.dva.gov.au/node/16194/edit#ref-cspol_part5_ftn107
[102] https://clik.dva.gov.au/compensation-and-support-policy-library/part-5-income-support-allowances-and-benefits/54-pension-loans-scheme/544-payment-pension-loans-scheme/calculation-pension-loan
[103] https://clik.dva.gov.au/node/16194/edit#ref-cspol_part5_ftn104
[104] https://www.comlaw.gov.au/Series/C2004A03268
[105] https://clik.dva.gov.au/node/16194/edit#ref-cspol_part5_ftn105
[106] https://clik.dva.gov.au/node/16194/edit#ref-cspol_part5_ftn106
[107] https://clik.dva.gov.au/user/login?destination=node/16148%23comment-form
[108] https://clik.dva.gov.au/user/login?destination=node/16251%23comment-form
[109] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn108
[110] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn109
[111] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn110
[112] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn111
[113] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn108
[114] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn109
[115] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn110
[116] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn111
[117] https://clik.dva.gov.au/user/login?destination=node/16222%23comment-form
[118] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn112
[119] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn113
[120] https://clik.dva.gov.au/book/export/html/16234#tgt-cspol_part5_ftn114
[121] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn112
[122] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn113
[123] https://clik.dva.gov.au/book/export/html/16234#ref-cspol_part5_ftn114