Purpose

This DI provides an overview of the Family Law Legislation Amendment (Superannuation) (Consequential Provisions) Act 2002, which has been enacted to provide for the splitting of superannuation interests on marriage breakdown.

The DI sets out the revised income and assets treatment of the income streams of divorcing couples, which are split according to a superannuation agreement or court order under Part VIIIB of the Family Law Act 1975.

The amendment Act also removes the existing rules regarding the assessment of profit arising from early withdrawals from a superannuation fund.  These rules were applicable to a person withdrawing from a superannuation fund prior to age 55.  From 28 December 2002, the profit rules will no longer apply to any pensioner.

Background

Prior to the amendments to the Family Law Act, the determination of superannuation interests on marriage breakdown was a difficult procedure.  Problems included the lack of court authority to divide superannuation or to impose obligations on the trustees of superannuation funds, to flag (or 'freeze') superannuation until an agreement is reached, or to provide information about a member's superannuation entitlement to a spouse.

The amending Act authorises the Family Court, or the parties to a property settlement, to split a superannuation interest on marriage breakdown.  This authority is now included in Part VIIIB of the Family Law Act 1975 (the FLA), with court orders being binding on the trustees of superannuation funds.

Courts may also flag a superannuation interest for future splitting, to prevent trustees from paying out a superannuation entitlement until an agreement is reached between the divorcing parties.  This subsequent agreement (a flaglifting agreement) allows a couple to split the superannuation interest.

Trustees will also be required to provide financial information to non-member spouses, so that they may be properly informed of a superannuation interest in order to assist, where possible, with the private settlement of property division on divorce.

Additionally, the amended Superannuation Industry (Supervision) Regulations enable the parties to a marriage separation to achieve a clean financial break, for common types of superannuation (most commonly, the fully vested accumulation plans).  Trustees can now create a new interest, transfer or roll-over the benefit, or in certain circumstances make a lump sum payment to the non-member spouse where a condition of release is satisfied.

Date of effect

The amendment Act received Royal Assent on 2 December 2002.  The consequential amendments to the VEA contained within the legislation commence on 28 December 2002, immediately after the primary changes to the FLA take effect.

The legislation has no retrospective effect, and any property settlements finalised, by mutual agreement or court order, prior to 28 December 2002 will not be covered under the amended rules.

Transitional Arrangements

Specific rules exist in the amending legislation for transitional arrangements, where settlement proceedings have commenced but are yet to be finalised.  Advice may be sought from this Office as necessary, if transitional cases arise.

The scope of this Departmental Instruction

The wide variety of superannuation schemes and the many options for superannuation splitting results in some complexity, requiring that each case that arises be carefully considered and dealt with on an individual basis.   Attachment C summarises several of the most common superannuation splitting scenarios that may arise, and how they should be assessed.

This DI does not attempt to deal with every possible scenario that may be encountered.  It does however flag:

• the need to recognise:

• new cases; and
• affected cases, when processing variations;

• the need to refer certain affected cases to the appropriate area for action;
•       in what circumstances existing cases need be referred; and
•       the availability of policy assistance.

This DI provides information in the following areas:

1. General information about splitting superannuation
2. Overview of changes to the VEA
3. Specific changes to the VEA
4. Other general information
5. Processing of cases
6. Removal of profit rules
7. System changes
8. Guidelines

In addition, there are several Attachments.

Attachment A: provides general reference information about income streams.

Attachment B: includes some common examples, with calculations, of pension reassessments where superannuation interests are split.

Attachment C: is a Question and Answer document.

Contact

Enquiries regarding reassessments arising out of the splitting of superannuation interests as part of a property settlement on marriage breakdown can be referred to the Income Support Policy Section in National Office.

Splitting of superannuation by agreement of the parties or by court order

The methods by which superannuation interests can be split, for the purposes of the Act, are -

1. The parties can agree by mutual consent to the splitting of any superannuation interests.  Failing a mutual agreement, then:

2. Under the amended Part VIIIB of the FLA, a court may exercise jurisdiction to split a superannuation interest.

The types of superannuation splitting are –

• A percentage payment split – this occurs where the superannuation agreement or court order specifies a percentage split to the member spouse's superannuation entitlements; or

• A base amount payment split – where the superannuation agreement or court order specifies the dollar amount that the non-member spouse is entitled to receive from the member spouse's base amount of superannuation, that is, as a lump sum payment.

Splitting of superannuation by the fund trustee, under regulation 14G

Fund trustees are bound by a court's decision on superannuation splitting. Once a court decision is made, a trustee will have the discretion (subject to any contrary instructions), under regulation 14G of the Family Law (Superannuation) Regulations 2001, to either –

• Pay a lump sum to the non-member spouse – the value must be at least equivalent to that agreed to or ordered by the court; or

• Create a new interest (income stream) in the same fund in favor of the non-member spouse with a value at least equivalent to the value of that agreed to or ordered by the court; or

• Transfer or roll-over an amount at least equivalent to the value of that agreed to or ordered by the court over to another fund or Retirement Savings Account to be held for the non-member spouse.

In the above cases, the non-member spouse would not be entitled to any further payments.

Superannuation fund trustees are provided with the above discretion under regulation 14G, in view of restrictive fund rules that frequently require that monies remain within a fund.  A trustee decision under 14G will require a DVA reassessment of a pensioner's circumstances.

The difference between percentage payment and base amount splits

A basic principle of the new rules is that the asset value and the deduction amount (the amount by which a purchased asset-test exempt or an asset-test (long-term) income stream will be reduced, for income test purposes) applying to income streams payments will be split between the spouses.  The split will be in the proportions agreed by the parties, or as decided by court order.

As outlined, a superannuation agreement or court order will specify that the non-member spouse is entitled to be paid either:

• a percentage of each future income stream payment; or
• a base amount.

For a percentage payment split, the member spouse's income stream will be split between both parties in the proportion resulting from the agreement or order.  In this case, the asset value and the deduction amount applying to the continuing income stream payments will be split between the spouses in the same proportion.

For a base amount split, the entitlement of the non-member spouse is specified as a dollar amount, rather than a proportion of future income stream payments.  In this case, the non-member spouse may be able to take the base amount (in whole or in part) as a commuted amount from the income stream.  Both parties will be assigned a proportion of the asset value and the deduction amount that would have applied to the continuing income stream payments of the member spouse if there had been no payment split.  For each spouse, the proportion will be equal to the proportion of these original income stream payments that are payable to that spouse.

Consequential amendments to the VEA

The changes to the Family Law Act 1975 have means-test implications for both DVA and Centrelink payments.  The required consequential changes to both the VEA and the SSA were made as part of the Family Law Legislation Amendment (Superannuation)(Consequential Provisions) Act 2002.

The splitting of superannuation interests will affect the assessment of superannuation income under the income stream rules contained in both the VEA and the SSA.

The changes will also affect the existing rules in the VEA and the SSA that apply to withdrawals from superannuation funds made by persons under the age of 55 years.  The existing rules are being repealed, so as not to disadvantage divorcing couples who are required to withdraw from a superannuation fund as part of a property settlement.  Pensioners will therefore be able to make withdrawals prior to age 55 without affecting their income support payments.

Objectives of amendments

The changes to the VEA will ensure that superannuation entitlement splits will be assessed fairly and consistently under the means test, with no unintended consequences for persons who have their superannuation entitlements split as part of a property settlement.

Underlying principle of changes

An underlying principle of the amendments is that the assessment for means test purposes will be based on the actual respective legal entitlement of each party (following the application of Part VIIIB of the FLA and the Family Law (Superannuation) Regulations 2001).

Specific changes to the VEA

The legislative changes to the VEA are:

(1)    Amendments to the definitions and to the sections relevant to income streams, to take account of superannuation interests that are income               streams subject to an agreement or court order splitting the               superannuation interest.

The new definitions include a definition of a:

• family law affected (FLA) income stream;
• original FLA income stream;
• primary FLA income stream; and
• secondary FLA income stream.

2.                  Isolating the existing income streams rules into a new Subdivision B               of Division 4 of Part IIIB of the VEA; and

3.               Establishing, specifically for family law affected income streams, a               new Subdivision C of Division 4 of Part IIIC.  The rules for the               adjustment of family law affected income streams will, on finalisation,

be found in guidelines to be determined by the Commission pertaining to three sections:

• Sections 46ZA and ZB which both apply to the income test; and
• Section 52BA, which applies to the assets test.

      All three sets of guidelines are disallowable instruments, which are legally binding instruments that are required to be tabled in both               Houses of Parliament and are subject to disallowance.  Once               promulgated, the guidelines will be available through the Legislation               library on CLIK.

The inclusion of the new subdivisions B and C of Division 4 of Part IIIB of the VEA merely clarify that the pre-existing rules for assessing               the income and asset value of income streams do not apply to family               law affected income streams.

4.               Repeal of the rules that apply to penalties for early withdrawals from

superannuation funds by persons under the age of 55 years.

Specific changes to the VEA cont.

(5)  Guidelines determined by the Commission for dealing with family law affected income streams, that will contain the method to apply               when working out the annual rate of:

• Ordinary income from:

• Asset-test exempt income streams – a new section 46ZA
• Asset-tested income stream (long term) – a new section 46ZB

• Asset value from:

• asset-test exempt income streams – a new section 52BA

New terminology under the legislation

The original family law affected income stream is the income stream acquired or purchased by a person (called the member) from a relevant superannuation fund.  This is the income stream that is subject to an agreement by the parties, or an order of the court, splitting it between the former parties to a marriage.

The payments resulting from the splitting order are known as:

• the primary FLA income stream, when paid to the member; and
• the secondary FLA income stream, when paid to the member's spouse or former spouse (the non-member).

Both the primary and secondary FLA income streams are family law affected income streams.

The diagram below indicates the resulting income streams which will require a reassessment in the light of the application of the new family law:

Other effects of the amendments

The amendments to the Act also include amendments to:

• determine when a 'split superannuation interest' becomes assessable;
• ensure 'split income streams' are income streams for pension purposes;
• ensure that payments to the original owner of an asset test exempt (ATE) income stream retain their asset test exempt status following the split; and
• include guidelines for the valuation of the assessable income and assets of a pensioner whose superannuation is split, or who receives a superannuation entitlement due to property settlement.

Sections 46Q and 46R of the VEA (relating to the treatment of superannuation fund investments, including withdrawals, before pension age) are repealed.  This will ensure that a split of a superannuation interest in the 'growth phase' is not treated as a realisation of the investment, and therefore potentially assessable as income.

Assessments will usually affect the member spouse (veteran)

It is expected that in most cases the income and assets reassessment arising out of a split income stream will reflect the proportion of the original income stream remaining with the pensioner in question.  Under the VEA, where the pensioner is a veteran receiving service pension, the necessary reassessment will be restricted to the veteran, as their partner will no longer be payable under the VEA unless the partner is also a veteran in his or her own right.

Treatment of commuted amounts

If either spouse receives a commuted amount as part of the base amount payment split and this amount is not rolled over, the commuted amount will be treated as a lump sum payment, not as income.  In accordance with normal means test rules, if the amount received is used to purchase an asset, or invested, it may be treated as an assessable asset.  Under the income test, the asset may be deemed or actual income may be assessed, depending on the nature of the asset.

If either spouse uses the amount commuted to purchase another income stream, the income stream will be treated as a new income stream (with a new commencement day and relevant number) for means test purposes.

Treatment of  continuing income stream payments

The trustee of the superannuation fund may create a new interest in the fund, transfer or roll over an amount to another superannuation fund, or pay an amount in satisfaction of the non-member spouse's entitlement.  If this occurs, the:

• new asset value; and
• new deduction amount,

of the reduced income stream payments of the member spouse will reduce in the same proportion as the reduction that applied to their original income stream payment.

Continuity of asset test exemption (ATE) status

For a percentage payment split:

• both the member spouse's and the non-member spouse's split income streams will retain the asset test exempt status of the member spouse's original income stream.

For a base amount split:

• the non-member spouse's split income stream will retain the asset test exempt status of the member spouse's original income stream.  The member spouse's split income stream will also retain the asset test exempt status of the original income stream, provided the amount commuted does not exceed the amount required to meet the entitlement of the non-member spouse under the payment split.

Treatment of funds split during the growth phase

The guidelines under section 46ZA (as well as those under section 46ZB and section 52BA) will not apply to assessments where the superannuation interest is split during the growth phase.

This is because a person's interest in a superannuation fund during the growth phase is not assessed under the income streams rules.  An interest at this stage is not an income stream, as no payments are being made by the fund to the member.  A person's investments in a superannuation fund are effectively quarantined from assessment until they reach the relevant pension age.

It is only necessary to assess the superannuation of a person not yet receiving superannuation pension or annuity (i.e. in the growth phase) if they are still making fund contributions beyond their relevant pension age.

In these cases, it will be necessary to rely upon the method of assessing the value of the superannuation investments under the Family Law (Superannuation) Regulations 2001.  Actuarial advice is likely to be required in this situation, to properly value the superannuation interest.  Revised values can be entered into a person's assessment when they satisfy the minimum conditions for release, i.e. at the earliest retirement age.  As these circumstances are expected to rarely arise, policy advice should be sought from the Income Support Policy Section before seeking actuarial advice.

Circumstances in which actuarial valuation may be required

Actuarial valuation may be required to extrapolate superannuation amounts and interests through to retirement age, where the option to flag a superannuation interest is not taken up.

The deferral of the actual splitting of payments until retirement age, whether payments are by ongoing pension or lump sum, will simplify the process of valuing the interest concerned, as it will avoid the need for costly actuarial valuations.

Treatment of the first income stream payment, for means test purposes

Where an income stream is:

• not an allocated pension, and
• the first income stream payment is also the first splittable payment after the payment split, and
• a base amount split has been awarded,

then the first payment after a base amount split is treated differently from the subsequent payments from the income stream.

The first splittable payment after a base amount split has been awarded may also be:

• the first income stream payment; or
• a lump sum payment separate from the income stream.

Where the first splittable payment:

• equals or exceeds the base amount awarded to the non-member spouse OR the combined base amount split, the non-member spouse is entitled to be paid the base amount from that payment.  The non-member spouse will not be entitled to any further payments.  Where the non-member spouse's base amount exceeds the first splittable payment, the non-member spouse is entitled to be paid all of the first splittable payment.  In this case the member spouse will not receive any part of the first splittable payment.  All payments will usually go to the non-member spouse until that person has been paid out in full;

• is also the first income stream payment, no income will be assessed for either spouse before the date of the first income stream payment.  This is because the member spouse will not usually receive the first splittable payment.  The amount paid to the non-member spouse from this payment will form part of the base amount and will be assessed as an exempt lump sum, not as income;

• is a lump sum separate from the member spouse's original income stream, the first and subsequent 'split' payments from the original income stream will be split in the proportion necessary to meet the non-member spouse's entitlement to the outstanding portion of the base amount.  The first income stream payment will be assessed in the same manner as subsequent income stream payments.

Frequency of cases

The number of cases of superannuation splitting following marriage breakdown is difficult to estimate.  Currently there are approximately 21,000 married DVA clients receiving income stream payments.  Australian Bureau of Statistics data indicate an annual divorce rate for married males, age 60, of 0.28%.  These figures suggest that approximately 60 cases of superannuation splitting will occur annually, across all DVA Offices.  Many of the non-member spouses will be on partner service pension, and hence will leave the repatriation system.  This level of anticipated workload will minimise the exposure of any one State Office or individual examiner to the complexities of the revised assessments.

Processing of cases centrally being canvassed

Many of the possible superannuation splitting scenarios are likely to arise infrequently, with complex features and formulas needing to be applied.  The infrequency of these cases combined with their complexity results in little opportunity to develop expertise, unless processing is undertaken within a centralized area or by specific individuals.

Input was sought from States on this issue via the Stateline issued on 13 November 2002.  Further advice on the outcome of this consultation will be provided, when all State Office responses are received.

Interim measures

In the interim, cases of superannuation splitting should be notified, as they arise, to the Income Support Policy Section.  Notification of cases will assist in developing and refining the guidelines and policy statements, for the assistance of local examiners.  The contact person for case notification is Brian Butler, Income Support Policy Section, on (02) 6289 6110.

Manual override of the PIPS income streams rules is likely to be required

For both percentage payment splits and base amount payment splits, the commencement day of the split income streams for the purpose of recording on the income streams screen will be taken to be the commencement day of the member spouse's original income stream.  However, many of these cases are likely to have the income streams rules in-built into the system turned off by use of the drop box option that disables the rules, allowing for full manual input to be undertaken without edits occurring.

Effective PIPS date for superannuation split

The operative date of the superannuation split will be contingent on:

• the date when a superannuation fund trustee elects to exercise the splitting options available under regulation 14G; or

• the implementation date of the court's splitting order.

Review procedure

The asset values of the split income streams will be reassessed at the usual six or twelve monthly intervals.

Deletion of profit rules

From 28 December 2002, the profit rules pertaining to withdrawals from superannuation investments by persons under 55 years of age will cease to apply.  Profit will still remain assessable for affected pensioners up until that date.

These changes ensure that the provisions that were only applicable to those persons aged under 55 years cease to apply to all pensioners from 28 December 2002.  It should be noted that these sections still apply to any profit on withdrawals made by persons under the age of 55 years before 28 December 2002.  Profit remains assessable up to and including 27 December 2002.

VEA amendments regarding profit calculation

The following sections of the Veterans' Entitlements Act 1986 have been repealed:

• 46Q  - Treatment of superannuation fund investments before pension age;
• 46R  - Early withdrawal from superannuation fund; and
• 46S   - Adjustment of ordinary income for investment losses

The repeal of these sections ensures that a split of superannuation interest in the growth phase is not treated as the realisation of the investment, and therefore is not potentially assessable as income.

In addition, the definitions of 'assessable growth period' and 'assessable period' have been removed from section 5J(1) of the VEA.

Existing profit  assessments

As these changes become effective on 28 December 2002, there are currently some cases that will still have profit in the assessment as at that date.  These cases will require existing profit assessments to be removed from the pension assessment.  Affected cases can be identified through the Ad Hoc Inquiry System (AIS), for manual processing.  A recent AIS interrogation by this Office, using the “Profit Amount” query, identified 64 cases where held profit amounts will need to be removed.

Reassessing existing profit cases

State Office processing staff should follow these steps to reassess existing cases which are affected by these changes:

Step

Action

1

Register a DIR (Departmentally Initiated Review) using CMS screen CM.CP.

2

Create a PIPS PC worksheet, selecting 'Date of Effect Rules Do Not Apply' and enter the relevant date of effect, as specified on the lists of affected cases.

3

Delete the relevant profit entry from the PIPS PC Profit data collection screen.

4

Add the following suggested 'Free Text' to the PIPS PC Advices screen:

"Under new rules, from 28 December 2002, profit will no longer be counted as income when a withdrawal is made from a super fund investment.  As a result of these changes your existing profit income has been removed from your pension assessment."

CLIK & FACT sheets

The affected policy statements in the Consolidated Library of Information and Knowledge (CLIK), and the DVA Fact Sheets, will be examined and revised to ensure that all references to the assessment of profit for early withdrawal from superannuation fund investments by persons age 55 or over have been removed.

Pre Pension Age Super Fund Withdrawals Worksheet

The 'Pre Pension Age Super Withdrawals Worksheet' will remain in use for the time being, but will only be relevant for retrospective calculations involving withdrawals where the assessment period pre-dates the implementation date of 28 December 2002.

Pending system changes

Identified systems changes at this stage are:

• to PIPS PC to prevent the addition or inclusion of profit post 28/12/2002;

• to $FORT Profit Delete sub program, to be removed after 28/12/2002; and

• to Advices, to remove reference to profit being assessed or deleted.

A separate Stateline will be issued when the required system changes are identified and finalised.

Guidelines to assist determinations

The guidelines set out in the following table are divided into a number of different categories, depending on:

• the type of assessment being considered, that is, income or assets;

• the type of superannuation product;
• whether the product is in the growth phase or the payment phase; and

• the type of split occurring, that is whether it is a percentage payment split or a base amount split.

The examples in Attachment B outline the common scenarios that are likely to be encountered.  Many of the other scenarios outlined in the guidelines are unlikely to be commonly encountered.

Assistance is available from the Income Support Policy Section if cases arise which do not fall within the scenarios outlined in Attachment B.  State Office advice of these cases will assist in refining the guidelines over time.

A summary of general income stream terminology and categories has been included at Attachment A, for reference purposes.

What are income streams?

Under the VEA, an income stream is defined to include the following categories of superannuation:

1. an income stream raising under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993; or
2. an income stream arising under a public sector scheme, within the meaning of the same Act.

This means that in the majority of cases, superannuation interests that have been split by agreement or court order will be assessed under the income streams rules.

What is an Asset Test Exempt (ATE) income stream?

An income stream is an ASSET TEST EXEMPT (ATE) income stream only if it is:

• paid for life; and
• meets all of the characteristics listed in subsection 5JA(2) of the VEA;

OR

• paid to life expectancy; and
• is purchased or acquired on or after pension age; and
• meets all of the characteristics listed in subsection 5JB(2) of the VEA

OR

• paid for a fixed term of 15 years or more; and
• is purchased or acquired on or after pension age; and
• the person's life expectancy is 15 years or more; and
• the term is not greater than the person's life expectancy; and
• meets all of the characteristics listed in subsection 5JB(2) of the VEA.

ANY INCOME STREAM THAT DOES NOT MEET THESE CRITERIA WILL BE AN ASSET TESTED INCOME STREAM.

Types of ATE income streams

The VEA provides for two broad categories of ATE income streams:

• Defined benefit income streams – section 46V;
• Non-defined benefit income streams – section 46U

What is a defined benefit income stream?

An income stream is a defined benefit income stream if the amount of the payments under it:

1. is not fully determined by the purchase price; but
2. is determined by:

1. reference to the purchaser's salary before retirement or the purchaser's years of service; or
2. the governing rules.

What is a Asset Tested income stream (long term)

An income stream is an asset-tested long term income stream (ATLT) if it:

• is not an ATE income stream; and
• has a term greater than 5 years;

OR

• is not an ATE income stream; and
• has a term of 5 years or less that is equal to or greater than the person's life expectancy.

What is an Asset Tested income stream (short term)

An income stream is an asset tested short term income stream (ATST) only if it is:

• not an ATE income stream; and
• not an Asset Tested Long term income stream.

Allocated income streams

Allocated pensions are income streams purchased with a lump sum eligible termination payment (superannuation money) into a personal account to which investment earnings are added and from which payments are drawn regularly.

Growth phase

The growth phase of superannuation arises typically whilst a person is employed and making contributions to it, or whilst the person's investment in the fund and is not being drawn down by regular payments.

Payment phase

The payment phase arises when a person commences to receive ongoing pension payments out of the fund.

Prior to split

Prior to the operation of the new family law, section 46U applies to working out the income from an ATE income stream that is not a defined benefit income stream (refer example below).

Example of how rules apply prior to split

The following example from the legislation explains how section 46U operates:

Mark is 65 years old and married. He receives superannuation payments of $380.58 per fortnight from rolling over $100,000 into a non-defined benefit superannuation fund with a term based on life expectancy (i.e. 15.41 years, which he chooses to round up to 16 years).  The annual payment from the superannuation fund held in the assessment is $9,895. Mark's assessable income from this income stream prior to the operative date of the split is:

where:

• annual payment means the amount payable to the person for the year under the income stream.
• purchase price has the meaning given by subsection 5J(1).
• relevant number has the meaning given by subsection 5J(1).

= the assessable income.

Application of amended procedures

The annual income from the income stream will be determined in accordance with the guidelines to be issued under section 46ZA.  The guidelines will provide that the original family law affected income stream will be reduced in accordance with the percentage payment split.

Example

In the above example Mark divorces, and in a settlement with his ex-spouse agrees to split his ATE income stream 50/50.

The guidelines then apply to determine the annual rate of income from the split income stream (known as the primary FLA affected income stream).

The annual rate of income from the primary FLA income stream is determined by multiplying the amount of the “annual payment” and the “purchase price” held in the assessment under section 46U by 0.5 to reflect the percentage of the original family law affected income stream retained by Mark, as follows:

The relevant number remains unchanged in the assessment.

Comments

This scenario is likely to be the most common type of split likely to arise.

Procedures

Follow the steps below to reassess the income stream for the member spouse (MS) and non-member spouse (NMS) (if necessary) below:

Steps

Actions

1.

Determine the percentage split awarded to the MS and the NMS by agreement or court order.

2.

Adjust the “annual payment” and the “purchase price” held in the assessment on PIPS PC to take account of the proportion awarded to the MS (and the NMS if necessary).

Prior to split

The value of a defined benefit ATE income stream is worked out in accordance with section 46V of the VEA.

Section 46V states that if the asset-test exempt income stream is a defined benefit income steam, the amount that the person is taken to receive from the income stream each year is worked out as follows:

The deductible amount is defined in subsection 5J(1) and is the amount that would be a deductible amount calculated under subsection 27H(2) of the Income Tax Assessment Act. 1936 (ITAA).

The deductible amount is an amount by which the gross income payments from a defined benefits income stream are reduced in order to determine the assessable income for pension purposes.

The deductible amount is worked out by using the ITAA definition, being –

Undeducted Purchase Price (UPP) ? Relevant Number ? 26 = deductible amount per fortnight.

Example of how rules apply prior to split

Mark is 65 years old and married to Betty. He received superannuation payments of $200 per fortnight ($5,200 pa) from a defined benefit income stream prior to his divorce.  The relevant number is in this case 20, and the Undeducted Purchase Price is $10,000.  The deductible amount is therefore 500.

Section 46V states that if the asset-test exempt income stream is a defined benefit income steam, the amount that the person is taken to receive from the income stream each year is worked out as follows:

Mark's assessable income for pension purposes from this income stream is:

$

                      = $ 4,700 ($180.77 per fortnight)

Application of amended procedures

Mark and Betty divorce, and in a property settlement they agree to a 50/50 split of the income from the above ATE defined benefits income stream.

The guidelines under section 46ZA are applicable.

Example

The new income streams are:

$100 pf to the member spouse (MS)

$100 pf to the non-member spouse (NMS)

Therefore the assessable income from the above income stream attributed to member spouse (Mark) is -

$100 per fortnight ? 26

Comment

(1). This example scenario is also likely to occur.

(2) The income stream created as a consequence of the splitting order for the non-member spouse (NMS), Betty, is a defined benefits income stream by definition and should be assessed as either a ATE or an ATLT income stream depending upon its relevant number.

(3) The Australian Taxation Office is determining, under section 27H of the ITAA 1936, the deductible amounts for a new pension that is deemed to have commenced when a pension is split on divorce or separation.

Procedures

Follow the steps below to assess an ATE defined benefits income stream that has been subject to a splitting order:

Step

Action

1.

Confirm the percentage payment split made to the MS and the NMS (if necessary).

2.

Determine the assessable income for pension purposes by entering the new deductible amount and revised pension payments from the defined benefit income stream into PIPS PC.

Example

The only difference between this scenario and scenario (a)(i) is that the agreement or court order will specify an amount to be paid to the non-member spouse.

Application of guidelines

The treatment of this case is similar to that of scenario (a)(i), with adjustments being made to the “purchase price” to reflect the payment to the ex-spouse.  The annual payment to be held in the assessment for the MS can be determined by dividing this new revised purchase price by the same relevant number held in the assessment.

Full range of possible scenarios

The three example scenarios outlined above are expected to most commonly occur.  The full range of possible superannuation splitting permutations is summarised in the following table.

INCOME TEST guidelines

Guidelines under section 46ZA, VEA

Asset Test Exempt (ATE) income stream

(a)

(b)

(c)

(d)

Split during Payment Phase:

Percentage payment split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Base amount split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Split during Growth Phase:

Percentage payment split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Base amount split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Guidelines under section 46ZB, VEA

Asset Test Long Term (ATLT) income stream

(e)

(f)

(g)

(h)

Split during Payment Phase:

Percentage payment split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Base amount split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Split during Growth Phase:

Percentage payment split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Base amount split;

(i) Non-defined benefit income streams

            (ii) Defined benefit income streams

Asset Tested Short Term (ATST) income stream

(i)

(j)

Split during Payment Phase:

Percentage payment split.

Base amount split.

(k)

(l)

Split during Growth Phase:

Percentage payment split.

Base amount split.

ASSET TEST guidelines

Guidelines under section 52BA, VEA

Asset Tested Long Term (ATLT) income stream

(m)

(n)

Split during PAYMENT PHASE:

Percentage payment split;

Base amount split;

(o)

(p)

Split during GROWTH PHASE:

Percentage payment split

Base amount split.

Asset Tested Short Term (ATST) income stream

(q)

Split during PAYMENT PHASE:

Percentage payment split.

Purpose

The purpose of this Departmental Instruction is to outline the procedures to follow to ensure that single orphans pension is correctly paid.

Background

Single Orphans pension can be paid through PIPS or through IPS. When a single orphan turns 16, they continue to be eligible for orphans pension while they remain in full-time study and are under age 25. Orphans pension is cancelled at age 16 if the person in receipt of orphans pension also receives VCES Education Allowance or Youth Allowance.

A number of cases have been identified throughout Australia where the child is over 16 and still in receipt of orphans pension. A number of these cases have been restored in error due to confusion regarding PIPS PC and IPS processing procedures.

System changes have been made to reduce the likelihood of single orphans pension being inadvertently restored.

PIPS problem

Orphans pension can be restored through the PIPS system. A warning message appears whenever a worksheet is opened. “Client X is older than 16. Do you want DP refreshed/continued?”  By selecting  “Yes”, the orphans pension is put back into payment.

System Changes to PIPS

The warning message that appears for single orphans in PIPS has been changed to alert the user that selecting “Yes” will grant single orphans pension. Where Single Orphans pension is not payable staff processing Income Support actions must select “NO” to ensure that single orphans pension is not restored.

IPS problem

The IPS system allows payment of single orphans pension to be cancelled using Unauthorised Manual Assessments. However, when this happens, the child may still be active in the Income Support assessment and the payment is therefore restored the next time a batch process, such as a Statutory Increase, is run.

Confusion exists when a single orphan continues to receive orphans pension as a result of the batch processing run and PIPS assessment when it appears that the payment has been cancelled through IPS.

System Changes to IPS

An edit has been put into the Unauthorised Manual Assessments folder in IPS (accessed via the Payabilities tab in VIEW.) If an attempt is made to cancel a PIPS single orphans pension using Unauthorised Manual Assessments, an error message will appear and the user will not be able to be finalise the case in IPS. These cases must be processed through PIPS PC.

Contact Officer

Any queries should be directed to Warren Walsh, who can be contacted on (03) 9213 7254 or by email.

Purpose

The purpose of this Departmental Instruction is to:

1. provide a list of saved child-related payment cases that require manual action to pay indexation increases by ex gratia payments, which will
   re-align them with similar payments of Family Tax Benefit (FTB);
2. advise of a breakdown in work practices that is resulting in overpayments of saved child-related payments; and
3. re-state the policy and procedures for cancellation of saved child-related payments for children turning 16 years.

Background

The indexation anomaly was outlined in the Stateline of 20 December 2001, titled Saved Child Related Payments - January 2002 Indexation Anomaly.

The Stateline advised that until an amendment was made to the Veterans' Entitlements Act 1986, the movement in the CPI could not be applied to the saved child-related payments.

Status

The minor and technical amendment is contained in Veterans' Affairs Legislation Amendment Bill (No.3) 2002, which has just been introduced into Parliament.  To bring these payments into alignment with similar FTB payments, a retrospective commencement date of 1 July 2001 (being the introduction of the new Family Tax Benefit) has been sought.

Due to the busy Parliamentary schedule and  the time lapse since these pensioners have received their intended child payment rate, Prime Minister and Department of Finance and Administration (DoFA) approval was obtained to pay the increases by way of ex-gratia payments until the legislation is passed.

Ex-gratia funding

DoFA has approved ex-gratia payments pending corrective legislation.  This will allow arrears payments and correct fortnightly payments to be made to existing saved child-related cases.

If the corrective legislation is not passed before 1 July 2003, further approval will be sought from the Minister for Finance to meet the shortfall.

The approval is based on the number of eligible saved child-related payments cases.  It is critical to the funding calculation that saved cases for children who have reached their 16 — th birthday are cancelled as detailed in this DI.

Issue of Funds

The funding is from existing service pension allocation.

The existing IPS payabilities for Dependant Child Add On (DCAO) and Guardian Allowance (GA) will apply:

Payment Type — Codes

GA — A11100 85420

DCAO — A11100 85425.

Current saved cases

An AIS run has identified DVA pensioners receiving 'saved' child-related payments (data as at 23 November 2002).  The records were cross-checked against VIEW and a list of cases needing manual action was compiled.

The number of 'saved' child-related payments cases  by State are:

NSW  9

QLD  7

VIC  4

TAS  9

SA  4

WA  1

Trusts & Companiesnil

(note: some cases have more than one child in the assessment)

A listing of file numbers will be e-mailed separately to all IS Managers.

(Note:  This list also contains names of children who are over 16 years and still incorrectly in payment.  Please refer to Issues 2 and 3 for further information about these cases.)

Impact of non-
alignment with FTB

As notified in the earlier Stateline, indexation was applied without legislative authority to the saved child-related payments in January 2001.  Thus, the rates of DVA payments exceeded the FTB equivalents from that time, until the FTB rates were indexed in July 2001.  The DVA saved child-related payments have been under paid since then.

A comparison of the amounts payable are shown in the following table.

Date

Child payment component

DVA saved rate p.f.

Similar FTB

payment

Difference

1/1/01

under 13 years

$81.30

$78.82

$2.48

13 – 15 years

$113.40

$109.90

$3.50

*Guardian Allowance

$40.10

$38.90

$1.20

1/7/01

under 13 years

$81.30

$83.44

-$2.14

13 – 15 years

$113.40

$116.34

-$2.94

*Guardian Allowance

$40.10

$41.20

-$1.10

1/7/02

under 13 years

$81.30

$85.96

-$4.66

13 – 15 years

$113.40

$119.98

-$6.58

*Guardian Allowance

$40.10

$42.47

-$2.37

Action required – arrears

Manual action is required to pay amounts owed to the pensioners due to the indexation anomaly of DVA saved child-related payments.  These arrears amounts will be made by way of ex-gratia payments.

State Offices will need to calculate any arrears payable by comparing the differences advised in the above tables and offsetting any initial overpayments (due to DVA's Jan 2001 incorrect indexation) from subsequent underpayments (due to the July 2001 and July 2002 FTB indexation).

Action required – ongoing payments

Ongoing payments are to be processed using the manual rate screen in PIPS to apply the correct rates of child-related payments.  These adjustments are also covered by way of ex gratia payments.

The processing officer should include a paragraph in the free text to inform the pensioner of the indexation correction.  Suggested wording of advice:

“The {payment type/s} in respect of {child/ren's name/s} has/have been adjusted to align with the indexed rates of the equivalent Family Tax Benefit payments.  The new rates of payments are outlined below.”

Manual action will no longer be necessary once the legislative correction to this anomaly is enacted and the relevant rates can be updated in PIPS.  The legislation is currently proposed to commence on 1 July 2003.  Further advice will be provided when this legislation is passed and receives Royal Assent.

Background

Effective 1 January 1998, the responsibility of paying child-related payments was transferred to Centrelink with the intention of simplifying and rationalising family assistance.  At that point, approximately 250 pensioners were identified as being financially disadvantaged by the transfer of payments.  Accordingly, special savings provisions were introduced to allow these pensioners to continue to receive their child-related payments from DVA.  The savings provisions continue until the child becomes ineligible or the new rate payable by Centrelink exceeds the current 'saved' rate.

From 1 July 1998 most payments made by Centrelink for dependent children 16 years and over were replaced by the youth allowance (YA).  DVA saved child-related payments should be cancelled from the date of the child's 16 — th birthday as the child would then be entitled to apply to Centrelink for YA.

The Veterans' Children Education Scheme was excluded from the payments integrated into YA.

Issue

There are 12 cases nationally identified as incorrectly in payment of dependent child add-on (DCOA) and/or guardian allowance (GA) in respect of 'saved' children over the age of sixteen years.  These cases are marked on the listing provided to IS managers.

Action required – Overpayment recovery

In most of these cases, an overpayment will have occurred as the payments  should have been cancelled from the date of the child/student's 16 — th birthday.

Care should be taken with these cases to offset any arrears payable from the indexation correction (prior to the child's 16 — th birthday), against any subsequent overpayment of pension.

Normal overpayment procedures will apply.  There is an existing IS Standard Letters - “routine OP letter” – which can be amended to notify the pensioner if an overpayment is to be recovered.

Ongoing assessment

Saved child-related payments are not payable once the dependent child turns 16 years.  Refer to DI C40/98 [5] for details.

An automatic report is generated for child reviews at 16 years at which time the system generated student review form should be issued.

If on review the child no longer meets the definition of dependent child, then the saved payment should be cancelled from the 16 — th birthday.  If the child is continuing in full-time education and continues to satisfy the relevant eligibility criteria, then the child details screen in PIPS should be updated with the appropriate indicators, i.e. student, receiving youth allowance etc.

It is important that the above indictors are noted correctly to ensure that the veteran and/or partner receive the benefit of the additional income free area and additional income limit for treatment eligibility.

Eligibility for a child 16 years and over

Under the VEA, a dependent child has the same meaning as in the SSA.   Eligibility for a child 16 years and over is as follows:

A young person who has turned 16 years but is under 22 years can still be a dependent child of the pensioner if:

• they are wholly or substantially dependent on the pensioner, AND
• their income in the financial year will not exceed the personal income limit, AND
• they are receiving full-time education at a school, college or university.

A young person over 16 years cannot be considered a dependent child if:

• they receive a social security pension or benefit such as Youth Allowance, or

• their personal income is more than $7,706.20 per annum.  Income includes earning from casual, part-time or full-time earnings, or
• they have turned 22 years of age.

Legislative references:VEA: section 5F

SSA: sections 5(1) to 5(4).

Children  remain in the DVA pension  assessment

Although the child-related payments are cancelled, dependent children continue to impact on the assessment of income support pensions from DVA:

Additional income free area

• The additional income free area for each child is still included in the pension assessment until the child's 18th birthday, whilst the child continues to be either a dependent child (including a prescribed student i.e. receiving VCES) or a YA recipient.

• The additional income free area in respect of a dependent child, who is not receiving YA and is not a prescribed student, is included in the pension assessment until the child turns 22 years.

Additional threshold for DVA treatment eligibility

Section 53E(2A) of the VEA provides the authority to consider a YA child to be a dependent child for the purposes of calculating the veteran's income/assets reduction limit for treatment eligibility.  Thus, the treatment benefits income levels for Gold Card continue to include the treatment income reduction amount until the child's 22 — nd birthday for each dependent child or YA recipient.

Pensioner Concession Card

•       Dependent children (including YA recipients and prescribed student child) continue to be included on the DVA Pensioner Concession Card until the child's 22 — nd birthday.

Priority action requested

Once the lists are received, priority action on processing is required to correct the payments for the affected pensioners.

Contact

For further information in relation to the above mentioned changes please contact Cheryl Oliver, Income Support Policy Section, on (02) 6289 6078.

Students

At Home

$

Living Away from Home  $

Homeless

$

Under 16 years

38.40

205.00

310.10

16 – 17 years

169.70

310.10

310.10

18 years and over

204.20

310.10

310.10

Double Orphans

$

Under 16

169.10

16 - 20 years

310.10

21 years and over

376.70

Age/Education Level

Method of Indexation / Increase

Primary students

indexed annually in line with CPI for the previous financial year (in accordance with the provisions of section 1191(1) table item 3A of the Social Security Act 1991)

Secondary/tertiary students aged under 16 and living at home

indexed annually in line with CPI for the previous financial year (in accordance with the provisions of section 1191(1) table item 3A of the Social Security Act 1991)

Secondary/tertiary students aged under 16 and living away from home

aligned with the rate for Assistance to Isolated Children (AIC) as determined by the Department of Education, Training and Youth Affairs

Secondary/tertiary students aged over 16 and living at home or away from home

increased annually and aligned with the maximum rates for Youth Allowance as determined by the Department of Family and Community Services under part 3.5 of the Social Security Act 1991

Secondary/tertiary homeless students

increased annually and aligned to the maximum rate for Youth Allowance for people who are independent as determined by the Department of Family and Community Services under point 1067G-B3 of the Social Security Act 1991

Double orphans aged under 16

set by using formula:  VCES double orphan education allowance rate for 16 to 20 year olds less the amount of the double orphan's pension

Double orphans aged 16 to 20

the equivalent of  the Youth Allowance rate for 18 years and over living away from home

Double orphans aged 21 and over

the equivalent of the maximum rate of Youth Allowance Special Rate

Double orphans at “frozen” rates

students on “frozen rates” remain on that rate until such time as the frozen amount is equivalent to, or less than, the DO rate that they would be entitled to due to age

(Refer to C31/98 [7] for origin of and need for “frozen” rates)

Purpose

This departmental instruction provides information about the minor and technical amendments contained in the Veterans' Affairs Legislation Amendment Act (No. 1) 2002 (VALA No. 1 2002).

VALA No. 1 2002 includes six schedules which contain measures relating to income support matters:

Schedule 1 – amendments to the Social Security Act 1991, which are consequential to the introduction of Income Support Supplement (ISS) payments under the Veterans' Entitlements Act 1986 in 1994;

Schedule 2 – amendments to the Social Security (Administration) Act 1999 which are also consequential to the introduction of ISS payments;

Schedule 3 – amendments to the Aged Care (Consequential Provisions) Act 1997 clarifying the definition of principal home for the purposes of the assets test, and the determination of a couple as a respite care couple;

Schedule 4 – a technical amendment to the Social Security and Veterans' Affairs Legislation Amendment (Family and Other Measures) Act 1997 in respect of the definition of rent;

Schedule 5 – technical amendments to the Veterans' Affairs Legislation Amendment (Budget and Compensation Measures) Act 1997; and

Schedule 6 – minor and technical amendments to the Veterans' Entitlements Act 1986.

The technical amendments contained in Schedule 7 do not relate to income support matters.

Link to

VALA 1 2002

The link to VALA No 1 2002 is available through the Scaleplus web site situated at: http://scaleplus.law.gov.au/ [9]

Commencement Dates

The date of commencement for Schedules 1 and 2 is 6 September 2002, being the date of Royal Assent.

The date of commencement for Schedule 3 is 20 September 1998, being the date immediately after the commencement date of the Aged Care (Consequential Provisions) Act 1997.

The date of commencement of Schedule 4 is 1 January 1998, being the date immediately after Schedule 19 to the Social Security and Veterans' Affairs Legislation Amendment (Family and Other Measures) Act 1997 commenced.

The date of commencement of Schedule 5 is 3 November 1997 (first amendment), and 20 September 1998 (second amendment).

The date of commencement of the items contained in Schedule 6 vary, generally being either the date of Royal Assent, or the date immediately after the various Acts amended by Schedule 6 came into effect.

The commencement date of the individual amendment items contained in VALA No 1 2002 can be confirmed by reference to Clause 2 of the Act (Commencement), as shown on the Scaleplus web site.

Details of changes

Details of the changes contained in the six schedules to the Act are attached.

Contact

For further information in relation to the above mentioned changes please contact Brian Butler, Income Support Policy Section, on (02) 6289 6110.

Background

The amendments to the Social Security Act 1991 are consequential to the introduction of the payment of Income Support Supplement (ISS) under the VEA in 1995.

Issue

At the time of introduction of ISS payments in 1995, the Social Security Act 1991 (the SSA) was amended to prevent a war widow/er from receiving a social security payment (unless they elected to do so).  Other consequential changes to the SSA relating to ISS have also since been made.  However, the overall position is that the required consequential amendments to the SSA are not yet complete.  This situation has resulted in some anomalies arising, occasionally requiring that Centrelink approve "Act of Grace" payments to rectify.  An example is where a person has been ruled ineligible to receive a bereavement payment under the SSA, on the basis that ISS is not a qualifying partner payment.

Legislative changes

Schedule 1 contains 111 amendments, which give effect to all the remaining consequential amendments that are required to the SSA, in respect of ISS payments.

Most amendments take the form of –

• Adding the phrase “or income support supplement” after the words “service pension” already appearing in the SSA; or

• Adding the word “supplement” after the word “pension” already appearing in the SSA.

The amendments generally fall into the following categories –

• References to ISS payments are now included within the definitions contained within the SSA, such as family relationship, income test, financial asset and income stream, assessable period, pensioner couple, asset test, social security recipient status, and payday;

• One substantive change is that the income test definition within the SSA now excludes ISS payments;

Legislative changes cont

• ISS is now a qualifying payment for a surviving partner to receive a bereavement payment, and for continued pension payments on the death of a partner;

• The multiple entitlement exclusion provisions of the SSA now provide that social security payments are prevented, or are cancelled, if ISS is granted;

• ISS is included as a qualifying payment, when determining payments which establish eligibility for a partnered social security benefit;

• ISS is added to the eligible VEA payments which attract payment of Pensioner Education Supplement (which is required in order to make payments of Education Entry Payment);

• The Rate Calculation Modules in the SSA now make references to ISS payment; and

• ISS payments to a partner may establish that a person has a partner with a rent increased pension.

Systems Changes

No required systems changes have been identified.

Procedural Changes

None identified.  The consequential amendments to ISS align the Social Security Act 1991 with the VEA.

Fact Sheets/ CLIK

Required revisions will be made as identified.

Background

This Schedule amends the Social Security (Administration) Act 1999 (the SSAA) consequential to the introduction of ISS payments under the VEA in 1995.

Issue

The amendments give effect to all the remaining consequential amendments that are required to the SSAA, in respect of ISS payments.

Legislative changes

The amendments to the SSAA relate to –

• The automatic cancellation of a benefit, on a person transferring to a new payment type;

• The recognition of ISS as an eligible partnered benefit, for the purposes of suspension of disability support pension;

• Automatic rate reductions, when a person's partner starts receiving a new benefit; and

• The date of effect calculations, on the death of a partner.

System Changes

No required system changes have been identified.

Procedural Changes

None identified.

Fact Sheets/CLIK

No amendments required.

Background

This Schedule contains two items which amend Schedule 4 of the Aged Care (Consequential Provisions) Act 1997, which itself amends the Veterans' Entitlements Act 1986.

Issue

The two amendments are technical in nature, to correct earlier amendments which were misdescribed and which did not result in the intended amendments occurring.

Legislative changes

The first amendment relates to the definition of principal home, for the purposes of section 5L of the VEA (Assets test definition).

Paragraph 5L(7)(d) provides that a residence of a person is taken to continue to be the person's principal home during periods of care, for a period of up to two years.  Paragraph 5L(7)(d) currently states that this two-year period begins at the time when the person's partner or non-illness separated spouse “started to be in a relevant care situation”.  This is now amended to read “...started to be either in a care situation or an aged care resident”.

The effect of this amendment is to more carefully define the care circumstances during which a residence can continue to be regarded as a person's principal home.

The second amendment relates to a determination under section 5R of the VEA that a couple is a respite pair couple.

Paragraph 5R(6)(c) provides that the determination of a couple as a respite care couple can be made where one member “has entered the approved respite care...”.  This wording is now replaced with the wording “...is in respite care...”.

System changes

No required system changes have been identified.

Procedural changes

Determining staff should be aware of the revised definitions and effective starting periods.

Fact Sheets/CLIK

Amendments to the appropriate CLIK chapters and Fact Sheets will be made.

Background

This amendment changes the VEA (through a change to the above amending Act), regarding the definition of rent.

Issue

The current definition of rent in section 5N of the VEA does not allow for the payment of Rent Assistance to people who live in premises for which another person pays Government rent.  This is because the second tenant is himself regarded in these circumstances as paying subsidised government rent, and is therefore ineligible for Rent Assistance.

This amendment provides for two exempt circumstances to be recognised, which will allow Rent Assistance to be paid where a second tenant pays rent for premises for which government rent is already paid.

Legislative changes

This amendment adds a new sub-section 5N(4) to the VEA (Rent definitions).  The sub-section reads  -

4. If a person pays, or is liable to pay, rent for living in premises in respect of which another person pays Government rent, the rent paid or payable by the person for living in those premises is taken to be Government rent, unless:

1. the rent paid by the other person is at or above a rate that the authority receiving the rent has told the Department is the market rate; or

2. the person shares the premises with that other person and the person's income has been taken into account in calculating the amount of Government rent payable in respect of those premises.

Legislative changes cont

That is, the sub-section allows for two exempt circumstances, where a person would be regarded as not paying Government rent.  They are (i) if the rent was at or above the market rate; or (ii) where the premises are shared and the secondary tenant's income is taken into account when calculating the amount of Government rent.

This is a beneficial change, giving some tenants greater opportunity to satisfy circumstances where they would not be regarded as paying Government rent, and would therefore be eligible for rent assistance.

System changes

No required system changes have been identified.

Procedural changes

Determining staff should be aware of the revised circumstances where a

person may be regarded as not paying Government rent, thereby being eligible for Rent Assistance.

Fact Sheets/ CLIK

Amendments to the appropriate CLIK chapters and Fact Sheets will be made.

Background

This Schedule makes two minor technical amendments to the above Act, relating to the date of effect of a provision, and a misdescribed reference, within the VEA.

Issue

The two technical amendments correct earlier amendments which were misdescribed and which did not result in the intended amendments occurring.

Legislative changes

• the first amendment is to sub-section 5H(8)(zm) of the VEA, which provides that advance payments of pension and ISS are excluded amounts, when determining income under the Act.  The Schedule provides that the renumbering of this sub-section as (zm) is taken to have commenced on 4 July 1996, rather than on 20 March 1996;

• the Amendment Act omitted a note to section 56J(1) of the VEA (Pension may be cancelled at a pensioner's request).  However, this note appears following section 56J(2).  The second amendment corrects this misdescribed reference.

System changes

No required system changes have been identified.

Procedural changes

None identified.

Fact Sheets/ CLIK

None identified.

Background

This Schedule contains 89 minor and technical amendments, which correct incorrect legislative references, redundancies, omissions and typographical errors identified within the VEA.

Issue

No identified issues.

Legislative changes

General house-keeping changes made to the VEA arising out of this Schedule include:

• the addition, repeal, and amendment of the sections dealing with definitions, including some amended references.  The new definitions primarily relate to compensation matters;
• misdescribed references within the VEA have been corrected;
• non-existent references have been deleted;
• minor typographical errors, and grammatical errors, have been corrected; and
• the wording of some Division and section headings has been changed.

More substantial changes include:

• Income Support Supplement has been included as a payment which is covered by the disposition rule (disregard if more than 5 years old), the definition of assessable period, and the cancellation determination rule;

• Eligibility for the Education Entry Payment has been extended to include those receiving invalidity service pension; and

• The definition of partner with rent increased pension can now include those receiving income support supplement.

System changes

No required system changes have been identified.

Procedural changes

Determining staff should be aware of the extended eligibility for Education Entry Payment.

Fact Sheets/ CLIK

Amendments to the appropriate CLIK chapters and Fact Sheets will be made.

Purpose

The purpose of this Departmental Instruction is to provide information about system changes to automate the processing of partnered and illness separated Age Pensioners through the Death Processing System (DPS).

This change automates the processing, bereavement payment calculations and making of payment to the survivor of the deceased.

Structure of document

This document contains the following sections:

1. Background.
2. The application of the new Centrelink rules applying to bereavement payments for married couples.
3. The application of the new Centrelink rules applying to bereavement payments for illness separated couples.
4. The application of the new Centrelink rules applying to new single rate – surviving partner.
5. Examples of cases processed using the new rules.
6. Scenarios demonstrating how the rules apply regardless of when the case is processed.

Start date

The changes were implemented for the DPS run on the evening of Friday 22 November 2002.

Reason for change

Automatic processing of Age Pensioners has been an issue since Date of Effect legislation was introduced.  The Department is required to process Age Pensioners under rules defined in the Social Security Act rather than in accordance with the Veterans' Entitlements Act 1986 (VEA).  Given the complexity of the Social Security rules, all Age Pension deaths have in the past been processed as “manuals”.  However, a recent reinterpretation of the rules by Centrelink has meant that it is now possible to program DPS to process these cases automatically.

Summary of Old System

Prior to this enhancement DPS identified if the deceased was a Social Security Age Pensioner and if so turned off the deceased's eligibility for treatment.  It then reported the case for manual termination and calculation of bereavement payment.

Related changes

The automation of Age Pension cases has been divided into a two part enhancement:

The first change affected Single Age Pensioners and was implemented on 27 July 2002 (DI C36/2002 [11] refers).

The second change (covered in this DI) deals with the automation of Age Pensioners who are married or illness separated couples.

Which cases are affected?

The method of assessment (MOA) types affected by this change are :

•     Married Age Pensioner, Spouse eligible as a Dependant (MOA 34) and
•     Married Age Pensioner, Illness Separated, Spouse eligible as a Dependant (MOA 38)

This will mean 95% of Age Pension Assessments will now be automated.

Expected savings

Based on the information available through AIS2000 it is expected that more than 95% of Age pension assessments will be automated by the enhancement of single, married and illness separated Age pensioner death processing.  The table below provides a breakdown of the case types affected by this change and indicates which will now be automated.

Overview

This Section contains a description of the Centrelink rules relating to the calculation of bereavement payments for married aged pensioners and the application of these rules to partnered and illness separated aged pensioner couples within DVA.

Interpretation

Centrelink has advised that they interpret the above rule as follows:

The surviving partner of an Age Pensioner is entitled to receive as a lump sum a bereavement payment equivalent to the combined married rate of pension less the survivors new rate of pension, from the date of death to the end of the period that death occurred plus 6 fortnights (84 days) and also to be reassessed at the single rate from the date of death.

Centrelink Rule

Bereavement Payment for married couples - a surviving partner can claim a bereavement payment until the end of the 'bereavement period' (ie 98 days from date of death).

The Bereavement Payment is calculated using the following formula:

LBP = (7 minus NEPED) multiplied by (CMR minus NSR)
            (except where NEPED equals zero.  See Exception Rule below)

Where:

LBP is the lump sum bereavement payment.

NEPED is the number of entitlement period end days for which the deceased customer was paid after and including the date of death. If NEPED equals zero see exception below.

CMR is the combined fortnightly married rate. That is, the combined fortnightly amount that would have been payable to the couple if not for the death.

NSR is the new single fortnightly rate paid to the surviving customer.

Exception rule  -  NEPED equals zero

LBP Exception:  Calculation of the lump sum when NEPED equals zero

Where death is notified and actioned during the entitlement period in which the person died, NEPED equals zero. In this instance the following formula applies:

LBP = (6 multiplied by (CMR minus NSR)) plus (NDEP multiplied by
            (CMR minus NSR) then divided by 14).

Where:

NDEP is the number of days from and including the date of death until and including the end of the entitlement period.

Note:There are Age Pension notification Rules that require the notification of death to be within 28 days of death.  If the notification is outside the 28 days then the reassessment of the survivor could be from a different date.  The BP is still calculated the same however.

DVA Manual Action Required to process

Should a death relating to a married Age Pensioner require manual action the following rules should be followed:

1. Cancel the deceased's assessment and payments from day of death (or day after death if the survivor becomes a war widow)
2. Cancel deceased's entitlements to fringe benefits from day after death
3. Identify if date of processing is during the pension period in which death occurred (see following paragraphs)

Processing during period of death

If processing is during the pension period in which death occurred:

1. Calculate the number of days remaining from the day of death to last day of entitlement period (period in which the person dies)
2. Calculate the number of fortnights remaining in the Bereavement period (if processing in the death period then the number of fortnights will be 6 or 84 days)
3. Add that number of days remaining in the death period to the number of fortnights remaining and total as a number of days.
4. Identify the combined married rate of payment immediately prior to the death
5. Identify the new survivors rate of Age pension
6. Subtract the survivors' rate of pension from the combined rate.  Divide by 14 to get a daily rate and multiply by the number of days previously calculated.  ie. 87 x CMR – NSR =  87 x  (450-385)/14.  This is the lump sum bereavement payment (LBP).
7. Pay the LBP as lump sum amount to survivor's default bank account using the payability type of Age Pension Bereavement Payment.

Processing after the period in which death occurred

If processing is after the pension period in which death occurred:

1. Calculate number of pension periods since date of death (A).  It is easiest to count the number of the end days of each pension period that have gone by.  Ie the Monday before the payday.
2. Subtract the number of pension periods paid from 7 (B)
3. Identify the combined married rate of payment immediately prior to the death
4. Identify the new survivors rate of Age pension

Subtract the survivors' rate of pension from the combined rate. Multiply this by the number of pension periods remaining (B)     ie. (7 – 1)  x CMR – NSR =  6 x  (450-385).  This is the lump sum bereavement payment (LBP).

Disability Pension for Age Pensioners

There is no requirement to change any existing Rules for the calculation of Bereavement Payment for the Disability Pension component as a result of the death.  eg:

• There continues to be a LBP of 6 x Veterans DP rate capped at 100%.
• No DP is payable for and after the pension period in which the death occurs.
• Pay the LBP as lump sum amount to the survivor's default bank account using the payability type of Disability Pension Bereavement Payment.
• Where WW and Domestic Allowance is granted automatically, the grant is made on a daily basis with any spouse's dependant DP being cancelled on a daily entitlement as well.

Differences between SP and AP

To assist in identifying the differences in how to treat a Service Pensioner and an Age Pensioner see below:

Married Service Pensioner

Married Age Pensioner

Bereavement notification period

98 days

28 days

LBP Calculation

98 x CMR – NSR

7 – NEPED x CMR – NSR

or

(6 x CMR – NSR) + (NDEP x CMR – NSR/14)

War Widow Grant

97 x CMR – NSR

7 – NEPED x CMR – NSR

or

(6 x CMR-NSR)  +  [(NDEP – 1)  x  (CMR-NSR)/14]

Illness separated and respite care couples

If the members of a couple were being paid at the single rate because they were an illness separated or respite care couple, bereavement payments are worked out as if they were living together.

In this case, an adjustment to the LBP is required using the following formula:

LBP = [(7 - NEPED) x (CMR - NSR)] - {[(combined single rates - CMR)
           x NEPED] - [(combined single rates - CMR) ? 14 x (14 - NDEP*)]}

*  For war widow grants the calculation must replace NDEP with (NDEP-1)

Where:

LBP is the lump sum bereavement payment.

NEPED is the number of entitlement period end days that elapse before conversion to the new single rate.

NSR is the survivor's new single rate after conversion.

CMR is the combined married rate. That is, the sum of the amounts that would have been payable to the couple if not for the death.

NDEP is the number of days from and including the date of death until and including the end of the entitlement period.

The LBP exception rule

If NEPED equals 0 then the same calculation used for ordinary married couples should be used (ie. “The  LBP Exception Rule described above**”) as there has not been any monies released at the incorrect rate.

** For war widow grants the calculation must replace NDEP with (NDEP-1)

Explanation: The amount subtracted at the end of the formula represents the 'overpaid' difference between the combined illness separated couple rates and the combined partnered rate.

Overview

This Section contains a description of the Centrelink rules relating to the calculation of the new single rate for the surviving partner of aged pensioners and the application of these rules to partnered and illness separated aged pensioner couples within DVA.

Staff in the past have had difficulty manually calculating the bereavement payment and new rate for the surviving aged pension partner.  Since in future it will be rare for staff to manually process an aged pension case, for the benefit of staff a restatement of the rules is provided in this Section.

Centrelink Rule

Centrelink Rules  -  New single rate - surviving partner (as described in Social Security Guide 3.1.5.30)

Following notification of the partner's death, the survivor's rate is immediately adjusted to the single rate from the LATER of the following, if the customer and their partner were in receipt of a benefit or pension:

• The day of the partner's death, OR
• The day after the date paid to, of the combined married rate, OR

if the customer's partner was NEITHER a long term social security recipient or a pensioner:

• the payday on or after the death, provided the department was notified of the death within 4 weeks of the day after the person died, OR
• the date of notification if the department was notified outside the 4 week period.

Application of Centrelink rules

Given the complexities of Assessment Histories and the provision of Treatment Benefits, it has been determined that DVA will always reassess the survivor's rate from the day of the partner's death (or the day after death for War Widow grants).  Therefore, the date of death (or day after death) will always be used for the creation of the death Assessment History.

Note 1:As a continuation of existing DPS practices, any overpayment or arrears amounts will be taken into account in the final payment made as the LBP and passed as DPS Bereavement Payment to IPS.  (ie IPS will not calculate any overpayments or arrears as a result of DPS processing.)

Note 2:It is still possible that batch processing will identify a client who was in a valid assessment after the date of death and action it according to its own rules, possibly reinstating payment to the deceased.  However, the new IPS enhancement to prevent payment of recurring payments to someone who has a date of death recorded will identify these cases for subsequent action.

Future assessment history cases

A decision was made previously on how DPS should handle cases with future assessment histories where the pension rate changed on a date after the date of death.  These future assessment history cases were processed prior to the date of death being recorded.  (eg. A reduction that had a date of effect as 14 days after notification.)

With SP clients, DPS takes any payments that have been made after the date of death into account in the calculation of bereavement payment and arrears paid to the survivor.  The reassessment of the survivor from date of death then also follows through and the new single assessment is updated with the change effective after the date of death.

AP to adopt SP rules for future assessment history cases.

It has been determined that AP should take into account any changes in pension paid after death in the BP calculation.  DPS will therefore apply the above SP rule for Age Pension cases.

This decision is believed to impact on only a very small number of cases.  The majority of deaths are notified within 3-5 days of death.

Note:  this issue is only about cases processed prior to the date of death being recorded.  It is not related to any cases processed after the Department has been notified of death.  Social Security rules state “If the Lump Sum Bereavement Payment has already been made, it(the survivors assessment) is NOT adjusted for subsequent changes in income and assets.”  See also DI 21/99 relating to the Retrospective Reassessment of Age Pension.

Contact

Any enquiries relating to this topic should be directed in the first instance to Steve Claypole, System Delivery, on 02 6289 6792.

Example 1

Veteran dies Day 1

Processed in pension period #1

Veteran on $280 pf Age Pension

$140 pf Disability Pension

Spouse on $280 pf Age Pension    NR = $400pf Age Pension

Veteran reduced to 0 on day of death

Spouse increased to $400 on day of death

Exception rule applies

6  x  (CMR – NR)  + 14  x  (CMR – NR/14)

6  x  160  +  14  x  (560 – 400/14)

6  x  160  +  14  x  11.428571

= 960  +  160

= 1120

Veteran gets 0 on payday #1

Spouse gets $400 on payday #1

Example 2

Veteran dies on Day 9

Processed in pp#1

Veteran reduced to 0.00 on day of death

Spouse increased to $400 on day of death

Exception rule applies

6. x  (CMR – NR)  + 6  x  (CMR – NR/14)

6. x  (560 – 400)  +  6  x  (560 – 400/14)

6  x  160  +  6  x  11.428571

= 960  +  68.57

= 1028.57

Veteran gets $160  on payday #1  (8 days @ 280pf)

Spouse gets $331.42 on payday #1 (8 days @ 280pf and 6 days @ 400pf)

Example 3

Veteran dies on day 6 of PP #1

Processed in PP #2

Veteran was paid $280pf on payday #1

Spouse was paid $280pf on payday #1

7 – NEPED  x  (CMR – NR)

= 7 – 1 — x  (560 – 400)

= 6 — x — 160

= 960

Example 4

Veteran dies on day 6 of PP #1

Processed in PP #5

Veteran was paid $280pf on payday #1, 2, 3, and 4

Spouse was paid $280pf on payday #1, 2, 3, and 4

7 – NEPED  x  (CMR – NR)

= 7 – 4 — x  (560 – 400)

= 3 — x — 160

= 480

Note:   if the notification of death is greater than 28 days after the actual death then specific rules apply to the reassessment of the survivor and the date of effect of that reassessment.

Example 5

WAR WIDOW GRANT

Veteran dies on day 6 of PP #1

Processed in PP #2

Veteran was paid $280pf on payday #1

Spouse was paid $280pf on payday #1

Spouse eligible for ISS of 124.90

7 – NEPED  x  (CMR – NR)

= 7 – 1 — x  (560 – 124.90)

= 6 — x — 435.10

= 2610.60

DP

WW Arrears of 8 days x 446.80pf

Veteran DP o/p of 14 days at the DP rate

Dependent DP o/p of 8 days at the DP rate

LBP of 6 x 100%(capped)DP rate

Example 6

WAR WIDOW GRANT

Veteran dies on day 14 of PP #1

Processed in PP #2

Veteran was paid $280pf on payday #1

Spouse was paid $280pf on payday #1

Spouse eligible for ISS of 124.90

7 – NEPED  x  (CMR – NR)

= 7 – 1 — x  (560 – 124.90)

= 6 — x — 435.10

= 2610.60

DP

No WW Arrears

DP o/p of 14 days at the DP rate

No Dependent DP o/p

Example 7

WAR WIDOW GRANT

Veteran dies on day 6 of PP #1

Processed in PP #1

CMR-NR)  +  [(NDEP – 1)  x  (CMR-NR)/14]

= 6 — x  (560 – 124.90)  + [(9 – 1) x (560 – 124.90)/14

= 6 — x — 435.10  +  (8 x 31.08)

= 2610.60  +  248.64

= 2859.24

DP

No WW Arrears

No Veteran DP o/p

No Dependent DP o/p

LBP of 6 x 100% (capped) DP rate

Example 1

Veteran on 416.30 (max single rate)

Spouse on 416.30

Spouse New Rate 416.30

Veteran dies day 6 and processed in period #2

Veteran received on pday#1 — 14 days @ 29.7357  416.30

Spouse received on pday#1 — 14 days @ 29.7357  416.30

Spouse receives next 6 pays — 6 x 416.30 — 2497.80

[7 – NEPED x (CMR – NR)]  -  {[(CSR – CMR)  x  NEPED] –
[(CSR – CMR)/14 x (14 – NDEP)}

=6 x 274.70-(141.60 – 50.57)

=1648.20- 91.03=1557.17

Total paid for 7 fortnights 4887.57

Example 2

Veteran on 416.30

Spouse on 416.30

Spouse New Rate 416.30

Veteran dies day 6 and processed in period #3

Veteran received on pday#1,2 — 28 days @ 29.7357  832.60

Spouse received on pday#1,2 — 28 days @ 29.7357  832.60

Spouse receives next 5 pays — 5 x 416.30 — 2081.50

[7 – NEPED x (CMR – NR)]  -   {[(CSR – CMR)  x  NEPED] – [(CSR – CMR)/14 x (14 – NDEP)}

=5 x 274.70- (283.20 – 50.57)

=1373.50-232.63=1140.87

Total paid for 7 fortnights 4887.57

Example 3

Veteran on 421.80 (max single rate)

Spouse on 421.80

Spouse New Rate 124.90 (War Widow and ISS)

Veteran dies day 12 and processed in period #2

Veteran received on pday#1 — 14 days @ 30.1286  421.80

Spouse received on pday#1 — 14 days @ 30.1286  421.80

Spouse receives next 6 pays — 6 x 124.90   749.40

[7 – NEPED x (CMR – NR)]  -   {[(CSR – CMR)  x  NEPED] – [(CSR – CMR)/14 x (14 – NDEP-1)}

=6 x 579.30-(139.40 – 119.49)

=3475.80-19.91=3455.89

Total paid for 7 fortnights 5048.89

Example 4

Veteran on 421.80 (max single rate)

Spouse on 421.80

Spouse New Rate 124.90 (War Widow and ISS)

Veteran dies day 12 and processed in period #1

Use War Widow Exception rule

6 x CMR – NR + {(NDEP-1) x CMR – NR/14}

=  6 x 704.20 – 124.90  +  2 x 41.38

=  6 x 579.30  +  82.76

=  3558.56

Veteran paid 12 days @ 30.1286  361.54

Spouse paid 12 days @ 30.1286  361.54

Spouse (WW) paid 2 days @ 8.9214    17.84

Spouse gets 6 payments @ 124.90  749.40

LBP3558.56

TOTAL paid over 7 pays5048.88

Overview

The following scenarios demonstrate how the rules apply regardless of when the case is processed.

For each scenario the total of all payments (not including DP) made for the Bereavement period is the same.

For all following scenarios the veteran and spouse were on 266.55 AP and 2.90 PA.  The reassessed rate for spouse is 300.70 AP and 5.80 PA

Clarification – weeks vs days

Note that the Centrelink legislation talks in terms of weeks while in DVA we use days and days are the figure included in the reports.

6 weeks equals 84 days.

The scenario calculations follow the Centrelink rules and use weeks.

Scenario 1

Veteran dies day 3 of pp#1.  Processed in pp#1.

Veterans AP is stopped from day of death and spouse is reassessed from day 3.  Payments are passed to RECORD and CRASS with no arrears calculated.

Veteran receives on pday#1 — 2 days @ 19.2464    38.50

Spouse receives on pday#1 — 2 days @ 19.2464    38.50

Spouse receives on pday#1 — 12 days @ 21.8928  262.71

Spouse receives next 6 pays — 6 x 306.501839.00

              2178.71

BP=6 x CMR – NR**

=12 x (CMR-NR)/14 — 6 x 232.40=  1394.40

=12 x 232.40/14=  199.20

              1593.60

Total paid for 7 fortnights 3772.30

(266.55 + 2.90) x 2 x 7 = 3772.30

Display on Processing Report

Scenario 2

Veteran dies day 3 of pp#1.  Processed in pp#2.

Veterans AP is terminated from day of death and spouse is reassessed from day 3.  Payments are passed to RECORD and CRASS with no arrears or overpayment calculated by CRASS.

Veteran received on pday#1 — 14 days @ 19.2464  269.45

Spouse received on pday#1 — 14 days @ 19.2464  269.45

Spouse receives next 6 pays — 6 x 306.501839.00

              2377.90

BP =6  x CMR – NR**

=6  x 232.40 — 1394.40

Total paid for 7 fortnights 3772.30

Display on Processing Report

Scenario 3

Veteran dies day 3 of pp#1.  Processed in pp#4

Veterans AP is terminated from day of death and spouse is reassessed from day 3.  Payments are passed to RECORD and CRASS with no arrears or overpayment calculated by CRASS.

Veteran received on pday#1,#2 & #3 — 42 days @ 19.2464  808.35

Spouse received on pday#1,#2, & #3 — 42 days @ 19.2464  808.35

Spouse receives next 4 pays — 4 x 306.501226.00

                                                        2842.70

BP = 4 x CMR – NR

=4 x 232.40                                929.60

Total paid for 7 fortnights 3772.30

Display on Processing Report

Scenario 4

Auto WW grant.  Veteran dies day 3 of pp#1.  Processed in pp#2.

Veterans AP is terminated from day after death and spouse is reassessed as WW and ISS from day 4.  Payments are passed to RECORD and CRASS with no arrears or overpayment calculated by CRASS.

Veteran received on pday#1 — 14 days @ 19.2464  269.45

Spouse received on pday#1 — 14 days @ 19.2464  269.45

Spouse receives next 6 pays — 6 x 124.90  749.40

BP = 6 x CMR – NR**

=6 x 414.00 — 2484.00

Total paid for 7 fortnights 3772.30

Display on Processing Report

Purpose of Instruction

This instruction clarifies the role of the Income Support Policy Section in providing policy advice on matters that are to be reviewed by the AAT.  The procedures for monitoring, and reporting on, Income Support cases which are scheduled for AAT hearing have also been revised.

This instruction replaces the previous Departmental Instruction, C26/2001 [13], which is rescinded.

AAT Reviews

AAT reviews are an important component of the system of administrative law.  They provide an avenue for the independent external review of Departmental decisions, based on interpretations of the relevant law and policy and an assessment of the individual merits of the case.

Clearly, some AAT decisions will involve issues that will have implications for the administration of income support within the Department.  It is important that the issues considered, and the judgments arising out of the AAT consideration of income support cases, are reflected in the policy framework adopted by the Department.

Role of Income Support Policy Section

The role of the Income Support Policy Section primarily involves the overall monitoring of the progress and outcome of AAT cases.  It also includes the consideration of case issues and providing policy input in the preparation of cases, where this is sought by State Offices.

1. Monitoring –

The monitoring of income support decisions, for which an application for AAT review has been made, will allow the policy implications of the cases to be identified and for policy revisions to be made where necessary.

To this end, the assistance of State Offices is sought in advising the Income Support Policy Section of all cases where an application for AAT review of a decision has been made, following the internal review of the case under section 57 of the VEA.  Brief case details only, including a description of the issue to be reviewed, the position of the State Office, the grounds for seeking review, and the AAT timeframe, are required so that the progress of the case can be monitored.

The details to be referred to the Income Support Policy Section are outlined below.

2. Policy Input –

The Income Support Policy Section will provide a policy response on the issues raised by AAT cases being prepared by State Offices, where this is requested.

It is not expected that policy input will be required in all cases, but it may be appropriate in situations where the existing policy parameters are unclear or fail to address the income support issues in question.  Cases where a legal ruling or interpretation is sought should also be referred to the Income Support Policy Section, which will then arrange for referral to the Legal Services Group.

Where policy input is requested, this should be sought at the case preparation stage, to allow sufficient time for the issues to be properly considered and a response to be forwarded prior to the AAT hearing dates.  State Offices should advise the date by which a policy response is required, with particular reference to the AAT timeframe.

Qualifying service cases

Cases involving the issue of Qualifying Service are monitored by the Disability Compensation Branch, and should not be referred to Income Support Policy Section.

Private trusts and companies cases

As at present, all AAT cases involving issues arising out of the ownership or control of private trusts or companies are to be referred to the Income Support Branch in National Office.

Information to be provided

The following information on AAT casework should be referred, for monitoring purposes –

1. Name of case (veteran)

2. Brief outline of the case and the issue(s) raised, including legislative references to the VEA

3.State Office position

4.Veteran's position (grounds for seeking review)

5.Does the State Office assessment of the reviewable decision indicate that it is sound, if not why not?

6.Next critical action (eg 1st preliminary conference, Directions Hearing, Hearing) and date.

7.Advocate's comment

8.Advocate's name and contact number

The information should be forwarded by e-mail to NAT Policy Advisings Income Support.

List of current AAT cases

The listing of current AAT cases maintained by the Income Support Policy Section is attached.  It would be appreciated if State Offices could review and amend this listing, including providing details of any current AAT cases which do not appear on the list, and forward the updated listing to NAT Policy Advisings Income Support.

AAT Hearings on the papers

If the AAT or an Advocate wishes to have an Income Support matter determined by the AAT “on the papers”, specific approval to do so should be sought from either the Director Income Support Policy or the Branch Head, Income Support.  A minute requesting instructions to have the matter determined on the papers should provide:

• a brief outline of the issue;
• an assessment whether the case is unique or may have more general implications for Income Support; and
• reasons for the request.

These requests can also be e-mailed to NAT Policy Advisings Income Support.

Contact

The contact person in this matter is Brian Butler, Income Support Policy Section, on (02) 6289 6110.

Purpose

The purpose of this Departmental Instruction is to:

• advise of the issues that have been identified in the current practice in State Offices for the processing of requests for the release of personal information, particularly in relation to eulogies; and

• request States to ensure that such releases of personal information are being processed correctly.

Background

The Strategic Review Section (SRS) of the Strategic Support Branch in National Office recently concluded a review of FOI arrangements in DVA.  Recommendation 11 of the SRS report was that DVA promote consistent practices by providing guidance to State-based FOI personnel on what activities should, or should not, be treated as a request for access to information under the Freedom of Information Act 1982 (the FOI Act) and subsequently recorded in the FOI database.

The recommendation went on to say “...In particular, there is a need to clarify whether information requested for eulogies ought to be dealt with under the provisions of the FOI Act.”

The issues raised by the SRS review were discussed with some State FOI sections, and by all State FOI officers at the DVA National FOI Conference held in Canberra in September 2002.

Identification of Issues

It is clear from comments of State FOI officers and from discussions at the DVA National FOI Conference that there are two separate issues raised by SRS Recommendation 11:

1. the practice by some State Offices under which requests for personal information, particularly requests for eulogies, are treated as FOI requests in circumstances whereas in other State Offices they are not treated as FOI requests; and

2. the broader issue of ensuring that all DVA officers are aware of the department's obligations when releasing personal information, and that such obligations are consistently and uniformly met.

Consideration of Issues

(a)Treatment of Eulogies and other requests for personal information as FOI requests

Discussion at the Conference established that there are differences between State Offices as to the types of request which should be dealt with under the FOI Act.  Some State Offices treat many requests for eulogies and some other types of requests (for example, nursing home information requests) as FOI requests, even when the requests do not comply with the legal requirements set out in subsection 15(2) of the FOI Act.  For example, the request may not be in writing, the issue of payment or waiver of a fee is not always dealt with, and often the response does not involve the provision of documents.

It is appreciated that the intention is to balance the need for urgency with a desire to obtain the protection offered by the FOI Act, and that subsequent action is often taken to bring such requests within FOI (for example, by seeking the submission of FOI request forms after the matter has been resolved).  Nevertheless, the practice is a breach of the FOI Act and the correct procedure must be followed.

Correct Procedure

• Requests for personal information relating to eulogies and similar urgent requests should be treated outside the FOI Act whenever possible.  Such release of personal information must be made in accordance with DI B54/91 [15] as amended by DI B04/92 [16] (Disclosure of Personal Information Relating to a Deceased Person and his or her Dependants, see attached).

Where there may be difficulties in releasing information in relation to eulogies and similar requests, the matter must be processed under, and comply with the requirements of sub-section 15(2) of the FOI Act as follows - it must:

• be in writing;

• provide enough information to identify the document;

• specify an address in Australia at which notices under the FOI Act may be sent to the applicant;

• be sent to the relevant DVA State or National office address; and

• if applicable, be accompanied by the fee payable.

Examples of such difficulties are when there is a question of identity of the applicant, or of relationship with the person concerned, or where personal information of third parties are also on file.

•                  Only requests made in compliance with section 15(2) of the FOI Act should be included in the FOI statistics.

•             Personal information released outside FOI should comply with the requirement of the Privacy Act 1988 (Privacy Act).

Consideration of Issues

(b)Ensuring all DVA officers are aware of obligations regarding personal information and that such obligations are uniformly met.

The FOI Manual presently being finalised and to be circulated to all staff will note the obligations of staff.  A Privacy Manual is also under preparation – this manual will address the relationship between the disclosure of personal information under the FOI Act and the requirements under the Privacy Act that regulate the lawful disclosure of personal information.

Correct Procedure

Prior to the circulation of the FOI and Privacy Manuals and/or relevant training, officers should take particular care to comply with the requirements of both the FOI Act and Privacy Act.  Officers should familiarise themselves with the provisions of section 41 of the FOI Act and the Information Privacy Principles under section 14 of the Privacy Act.  For specific guidance for releasing personal information under the Privacy Act, officers should refer to DI B54/91 [15] as amended by DI B04/92 [16].

Contact

Contact officers for this Departmental Instruction are Derek Emerson-Elliott (telephone (02) 6289 6577) and Norman Kalagayan (telephone: (02) 6289 6208).

Purpose

The purpose of this Departmental Instruction is to provide information on the various stages of the annual property valuation exercise.

Background

Every November, specific income support cases requiring a property valuation are automatically selected and forwarded to the Australian Valuation Office (AVO) for valuation by April in the following year.  Once the valuations have been completed, they are forwarded back to DVA with the new valuation amount.  The output is then forwarded to the State Offices for updating.

A listing of manual cases is also produced at the time of the bulk run.  State Offices are required to manually prepare and forward these cases to the AVO.

Due to the implementation of IPS schedules previously printed for State Office use are no longer available.  Automatic and Manual cases will be provided to the states in a Microsoft Excel format.

Production run

The data extraction was carried out on 4 November 2002.  The data containing information on the automatic review was forwarded to the AVO on 5 November 2002.  Excel spreadsheets for automatic and manual cases have been provided to the State Offices.

Number of cases extracted

The data has been extracted through the AD Hoc Inquires System (AIS).

The following is a breakdown of automatic and manual cases extracted from this years bulk run:

State

Auto

Manual

Manual (Business)

NSW

668

263

7

VIC

640

201

5

QLD

461

152

2

SA

127

48

7

WA

172

89

0

TAS

128

29

0

Total

2196

782

21

Criterion for extracting cases

The following criteria was used for extracting cases:

• All income support and income support supplement recipients who are asset tested;

All income support and income support supplement recipients who are income tested but have assets within $10,000 of their prescribed assets limit and have property, business, farm or sublet portion of their home.

Cases excluded from exercise

The following pensioners have been excluded from this year's bulk run.

• Pensioners who have had an AVO property valuation done since the last bulk run (3 November 2001);
• All single pensioners who are assessed as blinded and are not paid rent assistance;
• All couples where both are assessed as blinded and are not paid rent assistance.

State Office to action manual cases

Manual cases have been forwarded to the State Offices in an Excel format for further action.

State Office action is required to provide the AVO with a form containing detailed information on each of the manual cases where a property valuation is required.  Records are to be kept and a Claims Management Systems (CMS) case should be created to ensure that all such requests are returned by the AVO and action completed.

AVO conduct valuations

The AVO will conduct the necessary valuations in the period from December 2002 to April 2003.  The AVO will update the valuation information and forward the updated information to DVA by the end of April 2003.

Updated data forwarded to State Offices

Printouts and an Excel spreadsheet of the updated property valuations will be provided to the contact officer in each State Office.  These reports can be expected early May 2003.

State Office update valuations

Once the updated data is received manual action will be required to update the Central Data Base (CDB) to take effect in conjunction with the indexation of the free areas in July 2003 (Ordinary Income Free Area, Asset Value Limit & Adjusted Income Free Area).  Cases where the value of property has reduced may be actioned for increase of the service pension from the next convenient payday.

Date of valuation to be used

All States should use 4 November 2002 as the date of valuation when updating cases from this exercise.

It is essential that this date be used to enable all the appropriate cases to be selected for next year's exercise.  Using another date creates complications for the bulk extraction.

Processing Information

Screens and processing information for PIPS/PC can be found in Departmental Instruction C54/96 [18].

Contact Officer

The contact officer for this exercise is Nasreen Haque (02) 6289 1125, Business Operations and Support Section, Income Support Branch.

Purpose

The purpose of this Departmental Instruction is to replace DI B12/95 [20] DVA/DSS Clearance, and to provide further direction on the revised procedures between Department of Veterans' Affairs and Centrelink for clearances processing and associated debt recovery.

Commencement

The changes commence on 1 November 2002.

Contact

The NO contact officers for this project are Elaine Tse on (02) 6289 6011 and Peter Feinler on (08) 8290 0441.

ROGER WINZENBERG

Branch Head

INCOME SUPPORT

Background

The clearance process is a long established arrangement between Centrelink and DVA to prevent excess payments to pensioners when they transfer between the agencies and excess payment that results from the grant/variation of a disability pension (DP) that affects the benefit currently being received.

The process ensures that:

•     the losing (ie the first) agency's payments are cancelled or varied from the date on which the gaining (ie the second) agency commences payment, and

• when a retrospective grant or increase of a DVA pension is made to a Centrelink income support recipient, the backdated amounts are adjusted to account for any overlapping payments.

Both DVA and Centrelink have acknowledged that the existing arrangements were inefficient, with associated risks such as processing delays, inadequate training/support and lost transmissions leading to adverse client impact.

Streamlined Clearance procedures

Centrelink and DVA have worked together to identify the priorities in the clearance process.  The jointly initiated project has a phased approach.  The objective of Phase 1 is to streamline the procedures and to resolve some of the concerns raised in State Office consultations that could be achieved independent of significant IT system changes.

Functions provided by the current clearance and printing systems used by some State Offices will not require any major amendments to accommodate the new procedures.

Electronic transmission options will continue to be investigated in Phase 2 of this project, and enhancements to IT systems for both agencies to facilitate fully automated clearance processing will be explored in Phase 3.

Key components of Phase 1

To streamline the clearance and debt recovery procedures, the following standards/changes are being introduced:

• Centralised processing of DVA clearance requests by Centrelink
• Agreed service levels/service delivery times
• Enhancement of Centrelink clearance forms
• Recovery of overpayment
• Revised letters
• Debt Reporting

Centrelink Centralised Processing Units

Centralised processing or 'cluster' office structure was already in place in some states. The direct liaison between a limited number of personnel in Centrelink and DVA has achieved excellent response time for clearance processing and debt transactions.

However, in other states where clearance requests were sent to the local area offices, the response times varied significantly, with lack of awareness or lack of priority for DVA work by some Centrelink staff leading to long delays.

From October 2002, designated processing units will be responsible for the processing of clearances from DVA.  There are 1 to 3 Centrelink Centralised Processing Units (CCPU) established per state, with the work allocated according to the postcode of the pensioner concerned.

This arrangement will allow staff in the CCPU to establish a good network with DVA teams and build up their knowledge of all aspects of clearance and debt processing.

Communication protocols for data exchange between DVA and Centrelink are being established.  These will detail service level agreements and recommend that biannual meetings take place within the states to consolidate local relationships and business arrangements.

The procedures, protocols and contact details are available in the CLIK Reference Library, under Centrelink Information.

Clearance Requests

Decision-makers should assess the need to send a clearance based on the information provided by the claimant.   Where claimants have declared themselves as non-recipients of Centrelink payments, the question of means of support must be adequately addressed. If there is any doubt, the relevant CCPU should be contacted to establish if a Centrelink payment record exists.  Clearances should also be sent for War Widow's Pension (WWP) granted through Death Processing System where there is no DVA income support payment.

Clearance Requests (continued)

For grants of income support payment where the DVA rate is less than the Centrelink rate, (ie. DVA arrears will not be sufficient to cover the Centrelink adjustment), contact the CCPU concerned to arrange a “cut-off” for the Centrelink payment to be cancelled, such that there is no overlapping entitlement period and no interruption to payment. *

Minor differences in pension rates could arise due to investment updates but significant differences may suggest that the previous entitlements were incorrect.  The CCPU should be furnished with the relevant details so that Centrelink can determine if any further investigation is required.

*An EATERS action should be undertaken to record the correct dates where additional treatment eligibility is gained from the grant of the income support payment.

Clearance Data

Pending development of clearance requests for electronic transfer, State Offices should ensure that the clearance forms currently used contain the key fields for each client that requires a clearance.

Part A (DVA's request):

• Full Name (including any other name the client is known by)
• Date of birth
• Address
• DVA and Centrelink reference numbers
• Date of grant/variation
• Payment type/s and rate/s (eg. Disability Pension 10%)
• Fortnightly payment amount/s

Part B (Centrelink's response):

• The additional phrase for Centrelink to specify that the adjustment amount is a recoverable debt under s.1223(1) of the Social Security Act 1991 (SSA),

• Include a request for residential, income and asset details in the case of War Widows' Pension (WWP) grants, to facilitate assessment of Income Support Supplement (ISS) on the basis of details held by Centrelink.

Part C (DVA's acknowledgment):

• Include the options of DVA recovery or referred back to Centrelink

A clearance request sample is shown in Attachment A

War Widow's Pension and ISS

Procedures for the combined WWP/ISS claim form are outlined in DI C18/2000 [21].  Once ISS eligibility is established, Centrelink should be requested via the clearance to provide an itemised income and assets statement.

Given the high income and asset limits for ISS, most war widow/ers who were in receipt of age pension from Centrelink will receive the maximum rate of ISS.  If necessary, contact the war widow/er by telephone to clarify any details about the income and asset assessment, or any other aspect of the case.  Where the income and/or asset levels are close to the limits, or, are sufficient to generate a reduced rate of ISS, an income and asset statement should be sent to the war widow/er after the grant of ISS to verify the details.

If the existing payment from Centrelink was paid at a higher rate than WWP (eg. maximum rate age pension and rent assistance), the case should be referred to Income Support without delay for ISS eligibility to be investigated.

Bereavement Payment

It should be noted that it is Centrelink policy that once the lump sum bereavement payment (LBP) is calculated and paid, it is NOT adjusted.  For partnered assessments, the survivor is paid an ongoing rate.  Variations can be made to the ongoing rate of pension, even during the bereavement period.

Where WWP is granted and a clearance is sent by DVA, Centrelink will cancel the social security payment with effect from date of grant of WWP.

Centrelink then requests recovery of the overpaid amount back to date of cancellation, but no re-calculation of the LBP is performed.  DVA will adjust the pension arrears and assess eligibility and payability of ISS based on information provided by Centrelink.

Agreed response times

DVA is to provide a clearance request within 2 days of processing a payment grant/variation.  The agreed turnaround time is 5 working days from either agency to undertake the required action.

If the standard interval is insufficient due to difficulties in retrieving data or pending action that will affect the arrears amount/recovery outcome, then the respective liaison officer should be advised about the potential delay.

Centrelink overpayments

Overpayments of social security pension or benefit to DVA pensioners can arise in the following circumstances:-

• Multiple entitlement exclusions exist in the SSA precluding payment of certain social security entitlements when a service pension (SP) or WWP becomes payable to the person.  That is, the Centrelink payment ceases to be payable from the date of grant of SP or WWP, and any amount of Centrelink payment paid since that date is an overpayment.

• When a retrospective grant or increase of DP is made to a Centrelink pensioner, any amount of income support which would not have been payable during the period had the DP been in payment, is an overpayment.

If Centrelink makes a social security payment and a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit, the amount of the payment is a debt to the Commonwealth by the person who obtained the benefit of the payment.  Subsection 1223(1) of the SSA defines debts that are recoverable.

Recovery of these overpayments is authorised under s.205 and 205AA of the VEA.  These can be applied to recover the overpaid amounts from the person, either in a lump sum or by instalments from the new pension.

Recovery of excess payment to Partners

If the veteran has a partner who has been receiving a social security pension or benefit, the calculation of arrears as set out in s.27 (A) allows for the reduction of excess income support paid to the veteran's partner.

This section applies when:

• Arrears of disability pension become payable;
• The veteran has been a member of a couple during the arrears period;
• The veteran's partner has been receiving an income support payment; and
• The rate of that income support is retrospectively reduced because of the disability pension arrears.

The amount of arrears payable to a veteran may also be affected by section 205 or 205AA and should be adjusted first.  The balance is then compared against any excess recovery for the partner.

If the excess payment is less than the balance of arrears, the amount payable to the veteran in respect of the arrears period is reduced by the excess payment of income support to the veteran's partner.  If the partner's excess income support payment is equal to or greater than the balance of arrears, the pension payable to the veteran in respect of the arrears period is reduced to zero and no lump sum is payable.

Example

John and his partner Mary are both in receipt of Newstart Allowance.  John applies for an increase in disability pension, which is subsequently increased to 70% of the General Rate as from 10 June 2002.  A clearance request with this information is sent to Centrelink

Because disability pension is income for Centrelink payments, the Newstart Allowance payments that John and Mary receive will need to be adjusted from the date of grant of the increase.  Centrelink advises DVA the adjustment amount for each recipient.

The adjustment amount for John is recovered from his arrears first.

If John's arrears are sufficient to cover his adjustment amount, then Mary's overpayment can be considered.  The balance of John's arrears can be used to offset Mary's overpayment but this balance can only be reduced to zero (ie. no lump sum payable).  Any further excess for Mary will need to be referred back to Centrelink, as Mary has no ongoing payment at DVA.

If John's arrears are not sufficient to cover his adjustment amount, then the outstanding amount for John can be recovered from his ongoing payments as per s.250AA.  However, there is no authority for DVA to apply deductions in respect of Mary's adjustment amount, therefore, her overpayment must be referred back to Centrelink for any recovery action.

DVA arrears

It is the responsibility of DVA to ensure that arrears are not released during the agreed response interval, prior to receipt of relevant clearances.

Upon receipt of Centrelink's clearance response, DVA will calculate and release the balance of arrears to the pensioner or to the Centrelink Overpayment Recovery destination through Integrated Payment System (IPS) as required.

As per Centrelink's waiver of small debts policy, debt accounts of less than $50 are waived and no action should be required by DVA.

In the majority of cases, if the existing payment is varied/cancelled within the agreed response time, then the adjustment amount should not exceed the arrears.  Queries about the adjustment amount should be referred to the Centrelink Liaison officer.

Where the arrears are insufficient to cover that person's adjustment amount, DVA will initiate recovery from ongoing pension payments on behalf of Centrelink.  Extra care should be taken if such a case relates to a grant of WWP and ISS eligibility should be investigated before starting the recovery plan.

Where there is an overpayment to the partner that cannot be recovered from the veteran's DP arrears, the outstanding amount must be referred back to Centrelink.

Recording Centrelink Debts on DMRS

Centrelink clearance debts being recovered by DVA should be recorded on the DMRS as overpayment, “Other Department DSS”.  This allows for an audit trail with the corresponding Centrelink Overpayment destination in the Outward Payments tab in VIEW.

Only the outstanding adjustment amount should be entered as a debt.  The DMRS business rules will initiate the appropriate recovery plan.

Add “clearance received dd MMM yy” or similar notation in the comment column for reference.  These debts should not be included in the DVA total of outstanding debts for Annual Reports or any other similar publication.

An extract from the DMRS guide is provided in Attachment B and the full guide is available via the following link:

http://sharepoint/programsandprojects/systemguides/view/dmrs/Documents/DMRSProceduralGuidePartsABCD.doc [22]

Adjustment Outcome

A response is not required for cases where Centrelink has no current payment record, or no adjustment was requested.  For all other cases, Centrelink must be notified about the outcome of the adjustment.

The final part of the clearance form should be completed with details of the amount recovered.  If there is an outstanding balance, it must be clearly indicated whether DVA has initiated debt recovery, or if the case is referred back to Centrelink for their action.

Debt Reporting

As DVA undertakes debt recovery on behalf of Centrelink, the agency should be advised of the status of each debt at monthly* intervals.  This includes debt initiated by DVA following clearance adjustments as well as requests for ongoing deductions from Centrelink.  All debts recovered in the reporting period need to be recorded in the report even if the debt is $0 at the end of the reporting period, so that they can be clearly identified as fully recovered.

The debt reports should be sent to the Area Recovery Teams at Centrelink.  A listing of contacts for these Teams is available from the Centrelink Information folder in CLIK.

*System changes are being investigated to produce the scheduled DMRS report, “Outstanding Debts – other Department” monthly to facilitate this exchange of information.

Pensioner Notification

DVA is responsible for advising the pensioner of the outcome of the arrears adjustment.  Two new standard letters have been developed for notifying the pensioner of overpayment recovery following clearance processing.

Available on:

IS Standard Letters, Pay Admn, Recovery post-clearance debt grant.dot

IS Standard Letters, Pay Admn, Recovery post-clearance debt increase.dot

(See Attachments C and D)

The name and telephone number of the Centrelink contact is maintained in DMRS if the debtor wishes to discuss the recovery or seeks a review of the calculations.

For portion recovery, an automatic letter will be generated when the debt has been repaid advising the client of the date pension will be restored to the level of full entitlement.  If the debt is repaid in a lump sum, a letter should be sent to the client to acknowledge the payment once it has been processed.

DVA will need to notify Centrelink immediately if ongoing payments cease before the debt is fully recovered.  It is then Centrelink's responsibility to renegotiate repayment arrangements with the debtor.