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Tuesday, 3 May 1994
Page: 51

  The ACTING DEPUTY PRESIDENT (Senator Colston)—Pursuant to the resolution of the Senate of 13 February 1991, I present the government's response to the report of the Standing Committee on Community Affairs on the effects of the proposed treatment of capital gains and losses on listed securities under the income test for pensioners which was presented to the President on 12 April 1994. With the concurrence of the Senate, the response will be incorporated in Hansard.

  The document read as follows—

Government Response to Report by Senate Committee on Community Affairs: The Effects of the Proposed Treatment of Capital Gains and Losses on Listed Securities under the Income Test for Pensioners

Recommendation 1

That, in the first instance, the implementation of this measure be postponed until June 1994.

Response: The Government does not accept this recommendation. Changes to the shares measure were announced by the Minister for Social Security on 1 September 1993 and given legislative effect by the Social Security Legislation Amendment Act of 1993 which received Royal Assent on 20 September 1993.

Those changes exempted all shares acquired before 19 August 1992 from the measure.

Recommendation 2

That a review of the DVA and DSS income and assets tests be undertaken to identify inconsistencies and inequities.

Any such review should reflect the wide range of opinions from specialist and community organisations.

Recommendation 3

That this review report its findings to Parliament in April 1994 and advise Parliament of the appropriateness of the measure in light of its findings.

Response: The Minister for Social Security announced a review of the income and assets tests on 19 October 1993. The terms of reference for the review are at

Appendix A.

Given the time required for a comprehensive review, it will not be possible to report to Parliament by April 1994. The review's final report is expected by September 1994.

Recommendation 4

That a review be undertaken of the processes of administering social security payments (this includes DVA payments), including an evaluation of the cost effectiveness of minor income adjustments, the benefit to the client, the accuracy of assessments, the cost of inaccuracies (including the cost of review, estimated cost to clients), and whether some elements of administration might not more effectively be provided by other departments.

Response: Some of the matters raised in this recommendation will be examined by the review of the income and assets tests. Issues relating to administration of the income and assets tests are being examined also by an ongoing Department of Social Security and Financial Planning Association Working Group.

The Government does not consider that a need has been established for review of whether some elements of administration might be better provided by other Departments. Administration of social security payments (including veterans' payments) will continue to be undertaken, as is appropriate, by the Departments of Social Security and Veterans' Affairs respectively.

APPENDIX A

STRATEGIC REVIEW OF THE PENSION INCOME AND ASSETS TESTS TERMS OF REFERENCE

THE OBJECTIVES OF THE REVIEW

The consultant is to examine the current income and assets tests applied to social security pensioners, service pensioners and other retirees, to assess these provisions against a set of principles and to provide options for reform to these arrangements where the above suggests that changes are required. Specifically, the consultant should:

Examine the rationale for income and assets testing in the context of the Government's retirement income objectives;

Examine the conceptual framework, design principles and the actual operation of the pensions income and assets tests to, inter alia, minimise perceptions of intrusiveness and complexity on the part of social security and service pensioners;

Examine the relationship between the income and assets tests and the tax system;

Assess current provisions including the treatment of investments against the design principles, and

Identify options for improvement or change to the existing income and assets tests.

THE SCOPE OF THE REVIEW

In undertaking the consultancy, the consultant is to have regard to:

The key objectives of the income and assets test within the context of the Government's retirement incomes policy, including

  targeting expenditures to those most in need;

  ensuring that appropriate incentives exist for self-provision; and

  ensuring an adequate level of retirement income.

  recognising that tensions may exist between these   objectives.

The interrelationship between income tests, assets test and relevant taxation provisions including the use of lump sums to produce adequate retirement incomes;

The Government's commitment to consultations regarding the income taxation treatment of pensions.

Sub-objectives of maximising equity (including the treatment of different types of incomes and assets), simplicity, and efficient, accountable administration;

The Government's need to contain pension outlays in line with the Government's overall fiscal strategy, the need to increase national saving and the ageing of the population;

Other related work being carried out for the Government (eg, Retirement Incomes Modelling Task Force); and

Relevant experiences of overseas Governments with targeting pension payments.

THE FINDINGS OF THE REVIEW

The consultant is to prepare a draft and final report, to include findings and recommendations on:

A set of benchmarks or design principles against which possible means testing provision can be measured;

Any inequities, inconsistencies and inefficiencies in the current methods of means testing pensioners and veterans;

The strengths and weaknesses of the current income and assets tests as well as any possible future means testing arrangements; and

Options for addressing identified inequities, inconsistencies and inefficiencies.

The Consultant will seek Submissions from a wide range of individuals and organisations across Australia. The consultant should submit his or her first report by July 1994.

Following the finalisation of the report, the consultant will be required to assist with consultations on the report involving pensioner, community and investment industry representatives.

The consultant should submit his or her final report by September 1994.

REFERENCE GROUP

The consultant in undertaking the consultancy will be provided with technical and other specialist advice from a "Reference Group" made up of experts from:

Peak retiree and veterans' organisations;

The finance/superannuation industry;

The Commonwealth Public Service

  the Department of Social Security;

  the Department of Veterans' Affairs;

  the Department of Finance;

  Treasury.

The consultant will also have the services of a small project/research team located in DSS, including representatives from DSS and DVA.

  Motion (by Senator Schacht)—by leave—proposed:

  That the Senate take note of the document.

  Debate (on motion by Senator Panizza) adjourned.