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Social Security Legislation Amendment Bill (No. 2) 1993
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Parliamentary Research Service Department of the Parliamentary Library
Caution: This Digest was prepared for debate and should not be taken as a complete guide to the legislation which may reflect
amendments.
Social Security Legislation Amendment Bill (No.2) 1993
Date Introduced: 19 August 1993 House: House of Representatives Portfolio: Social Security
Purpose To include the value of certain fringe benefits in the parental income and means tests for family payments and the job search and sickness allowances for those under 18; introduce a seniors health card that will entitle those who meet the income test to receive concessional treatment for pharmaceutical benefits and hearing services; and to include foreign source income in the family payments income test.
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Background Fringe benefits are usually provided to employees and others as part of a salary package where cars, loans, school fees and other items are provided by the employer. The effect of the benefits is to reduce the assessable income of the recipient for tax purposes. The effect on government revenue
of such practices has been minimised by the fringe benefits tax which taxes the empioyer or other provider of the benefits. The tax aims to place the provision of remuneration as salary or benefits in the same position as far as revenue is concerned. The definition of income contained in the Social Security Act 1991 (the Principal Act) does not refer to any fringe benefits received, which are therefore
excluded. While this may not be important in regard to most social security pensions and benefits as they depend on the beneficiary not being in receipt of an income, it can effect the position of those in receipt of a benefit that depends on the income of another person, such as the social security benefits being dealt with in this Bill.
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One area where the proposals relating to fringe benefits contained in this Bill may be of significant effect is for workers who have subsidised accommodation provided at their workplace. This will effect a number of categories, including miners in isolated areas and military personnel.
The proposal to introduce a seniors health card was announced by the Prime Minister in the 1993 Eiection launch on 24 February 1993. The card will be available to non-pensioners of pension age who satisfy the income test for the card (i.e. whose income is below the pension cut-off point). The card will offer two benefits, namely:
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concessional pharmaceutical benefits - card holders will pay $2.60 for each prescribed drug covered by the pharmaceutical benefits scheme with prescriptions being free once the person has spent $135.60 in a year on pharmaceuticals; and
access to concessional hearing services that provide a hearing aid and batteries for a fee of $25 per year.
The Minister for Social Security has estimated that this measure will assist approximately 200 000 people.'
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Social Security Legislation Amendment Bill (No.2) 1993
Main Provisions
Benefits
Clause 7 will insert a new Part 3.12A into the Social Security Act 1991 (the Principal Act) which contains general provisions dealing with the inclusion of the value of certain benefits in calculations for the income and means tests that apply to family payments and the jobsearch and sickness allowances for those under 18. The benefits that are to be included are:
Car benefits An employee will be taken to receive a car benefit it the vehicle is applied for personal use, or is available for personal use, and is provided by their employer, by an associate of the employer or is provided under an arrangement between the provider of the car and the employer or their associate. A car will be taken to be available for private use it it is held by the provider or their associate, there is an arrangement relating to the use of the vehicle and:
* the car is kept at or near the employees residence; or
* the car is not at the employers or associates business premises and the employee, or their associate, is entitled to the private use of the vehicle, has the vehicle and is not on duty.
If there is a prohibition on the private usa of the vehicle but this is not consistently enforced, the C) employee will be deemed to be entitled to use the car for private purposes (proposed section 1157B). .
The benefit will be exempt it the vehicle involved is a taxi, a panellian, utility or any other vehicle of less than one tonne that is principally designed to carry passengers and is used for work related travel by the employee and the private use is of a minor, infrequent and irregular nature (proposed section 1157D).
The value of the benefit is, unless the Minister determines another method, to be determined in accordance with the table contained in proposed section 1157L, and is based on the engine capacity of the vehicle, its age and the period it is used during the year. Where the vehicle is provided to both members of a couple the value of their benefit to each member of the couple is half of the value listed in the table. Proposed section 1157M allows the Minister to determine another method for
establishing the value of the benefit. Any such determination will be disallowable by either House of Parliament and will have effect for a maximum of six months.
Schools Fees Benefit A person will be taken to have received such a benefit where another person provides payment for:
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tuition at a primary or secondary schools or for books or equipment associated with such tuition; and
the tuition, books or equipment is provided to a person who is a dependent child of the recipient or their partner, or who would be such a dependent it they were not in receipt of a job search or sickness allowance.
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A person will also be taken to receive a benefit where the above criteriaare satisfied and the payment is made directly to the school concerned or is related to boarding fees (proposed section 1157E).
The value of the benefit will be the amount of any such payment (proposed section 1157N).
Health Insurance Benefits Such a benefit will arise where a person pays another person or a health insurance fund an amount that is for the cost of health insurance and the insurance covers the recipient, their partner, a dependent child or someone who would be a dependent child it they were not in receipt of a job
search or sickness allowance (proposed section 1157F).
Under proposed section 11570 the value of the benefit will be the amount of the payment.
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Social Security Legislation Amendment Bill (NO.2) 1993
Loan Benefits Subject to proposed section 1157H (see below), a person will be taken to have received a loan benefit when a person provides a loan to them (proposed section 1157G). Where a person owes a debt that is not a loan and the time for the repayment of the debt has passed and an amount remains unpaid, they will be taken to have received a deemed loan.
Where the rate of interest payable in respect of the loan exceeds zero, the person will be taken to have received a deferred interest loan. (However, a loan will not be a deferred interest loan if all of the interest is payable wtthin six months of the loan being made or the interest is payable by instalment and the period between instalments does not exceed six months.) If the loan is a deferred interest loan, the provider of the loan will be taken to have made a deemed loan to the recipient every six months equal to the amount of interest payable less any payment of interest.
A loan benefit will be exempt:
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if it is provided by a person whose business includes the making of loans and the rate of interest on the loan is not less than that which wouid be payable in an arm's length transaction;
the loan is made by an employer to an employee and is solely to meet work related expenditure of the employee that will be incurred for a maximum of six months and the loan is not substantially greater than the amount of expenses that could reasonably be expected to be incurred in the period of the loan and the employee has to account for the expenditure and repay any unspent amount; or
the loan is made by an employer to an employee and is made solely to allow the employee to pay a rental bond, a securtty for gas, electrictty or a telephone, or for a similar purpose, and is repayable wtthin one year.
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SUbject to proposed section 1157R (see below), the value of a loan beneftt will be determined according to proposed section 11570. The value will be calculated by determining the notional rate of interest of the loan (the notional rates are contained in the proposed section) and deducting the actual rate of interest payable. If the actual rate is equal to or exceeds the notional rate, the loan benefit will be taken to have no value. If the notional rate exceeds the actual rate, the value of the loan will be determined by multiplying the excess by the outstanding value of the loan. This will be done
for each tax year and divided by 52 to reach a weekly value. Again, if the benefrt is provided to both members of a couple the value of the beneftt to each member of the couple will be haif that calculated above.
Proposed section 1157R allows the Minister to determine another method for establishing the value of the beneftt. Any such determination will be disallowable by either House of Parliament and will have effect for a maximum of six months.
Housing Benefits A person will be taken to have received a housing benefit if they have been granted a . housing right' (Le. a lease or licence to occupy a unit of accommodation that is their usual place of residence). Such a benefit will not arise where the accommodation:
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is provided by an employer that is a government or religious body or a non-profit company and whose activities include the provision of care to mature or disadvantaged people;
the employees duties consist of providing such care and the employee lives in accommodation prOVided by the employer with those receiving care; and
the reason the person is living in the accommodation is directly related to their duty to provide the care.
SUbject to proposed section 1157U (see below), the value of the housing benefit will be determined according to proposed section 1157T. The basic procedure is to determine the weekly market rent of the accommodation according to the table contained in the proposed section, mUltiply
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Social Security Legislation Amendment Bill (No.2) 1993
this amount by the number of weeks for which the accommodation is provided and deducting the allowable rent for the accommodation (this is the amount that the Secretary is satisfied is payable for the accommodation). Where the person is a member of a couple and both members receive the housing benefit, the value of the weekly market rent and the allowable rent are halved when calculating the value of the benefit to each member of the couple.
Proposed section 1157U allows the Minister to determine another method for establishing the value of the benefit. Any such determination will be disallowable by either House of Parliament and will have effect for a maximum of six months.
[ncome and Means Tests The value of the above fringe benefits will be taken into account for the income and means tests for the job search and sickness allowances received by those under 18 and for family payments by amendments to the benefit rate calculators, tables and modules which are used when calculating the benefit to which a person is entitled.
The new process to include the value. of fringe benefits in the income test applicable to the parents of people entitled to such benefits involves:
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determining the value of the fringe benefits, IT any, received;
calculating the value by which such benefits exceed the free area (Le. $1000); and
including any excess in the income of the parent.
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For the means test, where the parent subject to the means test does not have a partner the value of the fringe benefits will be included in the calculation as to whether the benefit should be reduced due to the value of the parent's assets. Where the parent does have a partner, the total value of the person's fringe benefits and their partners fringe benefits will be included in the calculation.
The amendments relating to fringe benefits will apply from 1 January 1994 (clauses 2 and 3).
Seniors Health Card
To be eligible for a seniors heatth card (SHC) a person must satisfy the following criteria:
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generally be aged 60 or more for a female and 65 or more for a male (also see below);
be an Australian resident in Australia;
satisfy the SHC income test; and
not be in receipt of a social security pension or benefit.
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Where a male is between 60 and 65 and a woman is between 55 and 60 they may be eligible for the SHC IT they satisfy the other requirements mentioned above and are eligible for a service pension or would be so entitled had they satisfied the 10 years residency requirement for such a pension (proposed section 1061 ZA).
Even though a person may be eligible for the benefits available under the SHC, they are not to receive the benefits unless they hold a card (proposed section 1061.Z6).
Proposed sections 1061 ZK and 1061 ZL allow the Secretary to give a SHC holder notice that they are required to inform the Department of certain changes in their circumstances. Where the Department is so notffied and the changed circumstances mean that the person is no longer eligible for the SHC, the person will cease to be eligible for the SHC at the end of the period allowed to notify the change (proposed section 1061ZN). If they fail to notify the change, they will cease to be entitled
on the day after the change in circumstances occurs (proposed section 1061ZO).
The income test for the SHC is contained in proposed Part 3.9 which will be inserted into the
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Social Security Legislation Amendment Bill (No.2) 1993
Principal Act by clause 12. The first stage of the process is to calculate the person's yearly ordinary income (Le. income earned or derived, including certain investment returns and deemed income). Where the person is a member of a couple, their income is calculated by adding the incomes of both members of the couple together and dividing by two to determine the individuals income. Second, the person's income test iim~ is calculated by reference to the table contained in proposed section 1071-3. The iim~ varies from $15 646.80 per year for a person w~h a partner to $18 787.60 for a single person.
An add~ional $624 is allowed for each dependent child. If the person's ordinary income is below the income lim~ they will be eligible for the SHC and IT their income exceeds or is equal to the limit they will not be eligible for the SHC.
Proposed section 1071-4 and clause 13 provide for the indexation of the income iimits from 20 September 1993. As well, ciause 14 provides for the adjustment of the income limit four times a year to reflect any changes in the rates of benef~s and the income free area (this is the amount that may be earned before benefits are effected under the income test). The income iimit calculated under
clause 14 will be based on twice the relevant maximum basic rate of pension and pharmaceutical allowance plus the reievant income free area amount. (These amounts vary depending on the person's family position.)
Clause 17 will amend section 64 of the National Health Act 1953to include a SHC holder in the definition of a concessional beneficiary for the pharmaceutical beneftts scheme. This will allow such people to receive concessional treatment in the payment for pharmaceuticals. The definition of dependent in this Act will also be altered by the addition of a sub-section that provides that if a person
is a concessional beneficiary solely by being a SHC holder they will be taken not to have dependents. The effect of the amendment will be to deny concesslonal treatment to the people who would otherwise qualify as dependents of the SHC holder. Similarly, section 5 of the Hearing Services Act 1991 will be amended by clause 18 to include a SHC holder in the definition of an eligible person, thus making such a person eligible for benefITs under the Act.
These provisions will commence on 1 July 1994 (clause 3).
Family Payments - Foreign Income
Part 4 of the Bill will amend the income and means tests for the family payment to include 'targeted foreign income' in the calculation of a person's income when determining IT they are eiigible for the family payment. 'Targeted foreign income' will be income earned, derived or received from outside Australia and any periodic allowance or benefit received from outside Austraiia that is not taxable income or a fringe benefit (clause 19).
References 1. Minister for Social Secur~, Media Release, 17 August 1993,
Bills Digest 8ervice Parliamentary Research 8ervice
1 September 1993
This Digest does not have any official legal status. Other sources should be consuited to determine the subsequent official status of the Bill,
© Commonweaith of Austraiia 1993
Except to the extent of the uses perm~ed under the Copyright Act 1968, no part of this publication may be reproduced or transm~ed in any form or by any means, including information storage and retrieval systems, without the prior wr~en consent ofthe Pariiamentary Library, other than by Members of the Australian Parliament in the course of their official duties.
Published by the Department of the Pariiamentary Library, 1993,
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