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Tuesday, 23 August 1994
Page: 155

(Question No. 1469)

Senator Watson asked the Minister representing the Minister for Social Security, upon notice, on 10 June 1994:

  (1) Is the Minister aware that, in the absence of new guidelines arising from income tax changes operating from 1 July 1994, the amount assessed for social security income test purposes on a post 1 July 1994 pension and annuity will rise dramatically and may be up to three times the amount assessed for a pension or annuity purchased before that date, thereby disadvantaging pensioners.

  (2) Will the Minister review the social security guidelines to ensure that there is no injustice for those with a large pre-1983 component in their eligible termination payment associated with the 1 July 1994 tax changes.

Senator Crowley —The Minister for Social Security has provided the following answer to the honourable senator's questions:

  (1) I am aware of the changes to the taxation treatment of pensions and annuities from 1 July 1994 and have carefully considered their impact on the social security system.

  (2) Pending the outcome of the Strategic Review of the Income and Assets Tests, social security clients purchasing pensions and annuities after 1 July 1994 will be treated in exactly the same way as clients who purchase those products before that date.

  Despite the taxation changes, the Undeducted Purchase Price (UPP) for social security purposes will not change. The current definition of UPP, which includes both the pre-1983 component and post-1983 personal contributions that have not received concessional tax assistance, will continue to be used to calculate the deduction allowed from the amount of pension or annuity received for the purposes of assessing social security income for such products.