Item
5
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Item
5 makes a technical
amendment to subsection 5NB(7) so that it is clear that it will
operate subject to subsection 5NB(8). Subsection 5NB(7)
determines, for the purposes of Part IIIC, the method of
calculating the amount of the compensation part of a lump sum
compensation payment .
Subsection 5NB(8) provides for a determination of the
amount of the lump sum compensation payment in circumstances where
both periodic compensation payments and a lump sum compensation
payment are received from which the amount of periodic compensation
payments are to be repaid.
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Item
6
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Item
6 is a technical
amendment to paragraph 5NB(7)(c) which provides the Commission with
the discretion to determine the amount of the compensation
part of a lump sum compensation payment representing lost
earnings or lost capacity to earn. The discretion applies in
the circumstances where the provisions of paragraphs 5NB(7)(a) and
(b) do not apply.
Paragraph 5NB(7)(c) has been amended so that the Commission
has the discretion to determine that an amount of compensation
represents both lost earnings and a lost capacity to
earn.
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Items 7 and 8 amend subsection 59N. Section 59N provides that
certain lump sum payments of periodic compensation will be treated
as though they were received as periodic payments.
Paragraph 59N(d) provides that a series of these lump sum
payments will only be regarded as periodic payments where they are
paid to the person in 2 or more instalments. This is not always the
case. The requirement for there to be 2 or more instalments
is to be removed with paragraph 59N(d) being repealed. The
repeal of paragraph (d) will result in a consequential amendment to
paragraph 59N(c).
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Items 9, 10, 11 and 12 make a technical amendment to subsections 59Q(1)
and 59Q(2A) and paragraphs 59Q(2)(d) and (e) by inserting a
reference to the non-payment of a compensation affected pension for
“any day or days in” the lump sum preclusion
period. The amended reference is a consequence of previous
amendments providing for pensions to be paid at a daily
rate.
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Item
13
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Item 13 replaces paragraph 59Q(3)(a) which provided that
where a person has received both periodic compensation payments and
a lump sum, that the lump sum preclusion period commenced after the
last day of the periodic payments period. To remove any
ambiguity, new paragraph 59Q(3)(a) provides that where there is
more than one periodic payments period the lump sum preclusion
period will begin on the day after the last day of the last
periodic payments period.
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Item
14
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Item 14 repeals the section 59Q example of how a lump
sum preclusion period is worked out. The formula in the
repealed example was amended by the Veterans’ Affairs
Legislation Amendment Act (No. 1) 2000 (No. 141 of
2000).
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Items 15 and
16
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Items 15 and 16
make a technical amendment to
paragraphs 59R(1)(b) and 59R(5)(b) by inserting a reference to the
non-payment of a compensation affected pension for “any day
or days in” the lump sum preclusion period. The amended
reference is a consequence of previous amendments providing for
pensions to be paid at a daily rate.
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Item
17
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Item 17 repeals the section 59R example of how the lump
sum recoverable amount is worked out. The example refers to
the example in section 59Q repealed by Item 14 which uses the
formula amended by the Veterans’ Affairs Legislation
Amendment Act (No. 1) 2000 (No. 141 of 2000).
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Item
18
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Item 18 omits the words “per fortnight of
pension” from section 59S and substitutes the words “of
compensation affected pension”. The amendment is a
consequence of the change to pensions being payable at a daily
rate.
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Item
19
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Item 19 repeals section 59T and substitutes new sections
59T and 59TA.
Section 59T previously provided for
a reduction in the amounts of compensation affected pension payable
to a person or the person’s partner where either person was
in receipt of a series of periodic compensation
payments.
New section 59T maintains the
existing policy, but only for the compensation recipient and
provides for a reduction in the rate of a person’s
compensation affected pension for those days of the periodic
payments period for which the person is eligible for a compensation
affected pension.
New subsection 59T(1) provides that
the reduction is applicable only to those persons in receipt of
periodic compensation payments who were not, at the time of the
event that gave rise to the entitlement to compensation, in receipt
of a compensation affected pension.
New subsection 59T(2) provides that
the person’s daily rate of compensation affected pension is
reduced by the amount of the person’s daily rate of periodic
compensation. The person’s daily rate of periodic
compensation is calculated in new subsection 59T(3).
New
subsection 59T(4) is applicable to those persons who were in
receipt of a compensation affected pension at the time of the event
that gave rise to the entitlement of the person to
compensation. The subsection provides that the periodic
compensation payments will be treated as the person’s
ordinary income for the purposes of the Act. This continues
an existing policy.
New section 59TA is applicable only
to the partner of a compensation recipient. Section 59TA
provides that the amount by which a compensation recipient’s
periodic compensation payment exceeds the rate of the compensation
recipient’s compensation affected pension is to be regarded
as the ordinary income of the compensation recipient’s
partner.
The excess amount will only be
regarded as the ordinary income of the compensation
recipient’s partner for those days of the periodic payments
period for which the compensation recipient’s partner is
eligible for either a compensation affected pension or a
compensation affected payment under the Social Security Act
1991 .
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Item 19
(Continued)
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Subsection 59TA(1) provides that the
excess will be treated as ordinary income only in the circumstances
where the person receiving periodic compensation payments was not,
at the time of the event that gave rise to the entitlement to
compensation, in receipt of a compensation affected
pension.
Subsection 59TA(2) provides that the
person’s daily rate of compensation affected pension is
worked out by dividing the total amount of the periodic
compensation payments by the number of days in the periodic
payments period.
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Item
20
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Item 20 amends section 59V which provides that the rate
reductions in Part IIIC apply regardless of whether the rate of
pension is determined by the income test or the assets test.
The amendment repeals paragraph 59V(a) containing an obsolete
reference to the “compensation affected component of a
person’s pension”. The new paragraph refers only
to the “rate of a person’s compensation affected
pension” reduced under Part IIIC.
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Item 21
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Item
21 amends the Note
to subsection 59W(1) by replacing the inappropriate reference to
“subsections 56H(7) and (8)” with a reference to the
more appropriate “point SCH6-E4”.
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Items 22 and
23
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Item 22 amends section 59W by repealing and replacing
paragraph 59W(3)(d). Section 59W provides that a person is
liable to pay the Commonwealth for the amount of compensation
affected pension received by that person in circumstances where a
person has been paid both periodic compensation payments and
payments of a compensation affected pension during the periodic
payments period.
Subsection 59W(1) provides that a
person will not be liable where the payments of compensation
affected pension have been reduced by the operation of section
59T. Subsection 59W(1) also provides that the section is
applicable only to those persons in receipt of periodic
compensation payments who were not, at the time of the event that
gave rise to the entitlement to compensation, in receipt of a
compensation affected pension.
Subsection 59W(2) provides that the
recoverable amount is determined by the operation of subsections
59W(3) and (4).
Subsection 59W(3) applies to a
person who is not a member of a couple or whose partner is not
eligible for a compensation affected pension under the VEA or is
not qualified for a compensation affected payment under the Social
Security Act. Subsection 59W(3) provides that the recoverable
amount is the smaller of, the sum of the periodic compensation
payments as in paragraph 59W(3)(c), and the amount determined by
the operation of new paragraph 59W(3)(d).
New paragraph 59W(3)(d) reduces the
comparative amount to the difference between the sum of the
payments of compensation affected pension made to the person for a
day or days in the periodic payments period (which is the existing
provision) and the sum of the payments of compensation affected
pension that would have been made to the person had those payments
been reduced as a result of the operation of section
59T.
Subsection 59W(4) applies to a
person who is a member of a couple and whose partner is eligible
for a compensation affected pension under the VEA or is qualified
for a compensation affected payment under the Social Security
Act. Subsection 59W(4) provides that the recoverable amount
is equal to the smaller of the sum of the periodic compensation
payments, as in paragraph 59W(4)(c) or the amount determined by the
operation of paragraph 59W(4)(d) - this paragraph is affected
by the operation of new section 59TA (Item 19).
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Items 22 and
23 (Continued)
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Item
23 repeals and
replaces paragraph 59W(4)(d). New paragraph 59W(4)(d)
provides for an amount to be determined as the difference between
the sum of the payments of compensation affected pension, and of
compensation affected payments made under the Social Security Act,
made to the person and the person’s partner for a day or days
in the periodic payments period, and the sum of the payments of
compensation affected pension, and of compensation affected
payments under the Social Security Act, that would have been made
to the person and the person’s partner had those payments
been reduced as a result of the operation of sections 59T and
59TA.
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Item
24
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Item 24 repeals the section 59W examples of how the
recoverable amounts are worked out. The repealed examples are
obsolete with the changes made to section 59T and the addition of
new section 59TA.
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Item
25
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Item 25 repeals and replaces section 59X. Section
59X had provided that where the rate of a person’s pension or
compensation affected pension was reduced under section 59T because
of the receipt of periodic compensation payments, the periodic
compensation payments were not to be regarded as ordinary income
for either the compensation recipient or the compensation
recipient’s partner.
New section 59X maintains that
provision in relation to a person whose rate of compensation
affected pension has been reduced under section 59T because of the
receipt of a series of compensation affected payments but removes
the reference to the person’s partner who benefits from the
new provisions of section 59TA.
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Item
26
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Item 26 repeals and replaces paragraph 59Y(1)(b).
Section 59Y provides that the Commission may give written notice to
a person’s potential compensation payer that the Commission
may wish to recover an amount from the insurer. The notice
may be issued in circumstances where a person has received or
claimed a compensation affected pension for a period for which a
person has sought compensation for lost earnings or lost capacity
to earn.
New paragraph 59Y(1)(b) is a
technical amendment to refer to the person receiving or claiming a
compensation affected pension for “a day or days” in
the period to which the compensation relates.
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Item
27
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Item 27 amends paragraph 59ZA(1)(b). Section 59ZA
provides that the Commission may give written notice to a
person’s compensation payer in circumstances where a person
has received or claimed a compensation affected pension for a
period for which a person is to be paid compensation for a disease,
injury or condition of the person.
The technical amendment to paragraph
59ZA(1)(b) refers to the person receiving or claiming a
compensation affected pension for “any day or days” in
the periodic payments period or the lump sum preclusion
period.
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Item
28
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Item 28 adds to subsection 59ZA(3) a reference to new
subsection 59ZA(5A) that is being inserted Item 33.
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Item 29 amends paragraph 59ZA(4)(b). Subsection
59ZA(4) applies to a person who is not a member of a couple or
whose partner neither receives nor claims a compensation affected
pension or a compensation affected payment under the Social
Security Act, for the periodic payments period or the lump sum
preclusion period.
A technical amendment to paragraph
59ZA(4)(b) has been made to refer to a person’s partner not
receiving nor claiming a compensation affected pension or a
compensation affected payment under the Social Security Act, for
“any day or days in” the periodic payments period or
the lump sum preclusion period.
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Item
30
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Item 30 amends paragraph 59ZA(4)(c).
Subsection 59ZA(4) provides that the recoverable amount will be the
smaller of, the amount determined by the operation of paragraph
59ZA(4)(c), the compensation part of the lump sum payment or the
sum of the amounts of the periodic compensation payments (paragraph
59ZA(4)(d)), or the maximum amount that the compensation payer is
liable to pay to the person at any time after receiving the
preliminary notice under section 59Y or the recovery notice under
section 59ZA (paragraph 59ZA(4)(e) refers).
New paragraph 59ZA(4)(c) reduces the
amount to one that is the difference between the sum of the
payments of compensation affected pension made to the person for a
day or days in the periodic payments period or the lump sum
preclusion period and the sum of the payments of compensation
affected pension that would have been made to the person for any
such day or days had those payments been reduced as a result of the
operation of subsection 59T(1).
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Item
31
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Item 31 makes a technical amendment to paragraph
59ZA(5)(b). Subsection 59ZA(5) applies to a person who is a
member of a couple and whose partner receives or claims a
compensation affected pension or a compensation affected payment
under the Social Security Act, for the periodic payments period or
the lump sum preclusion period.
Paragraph 59ZA(5)(b) has been
amended to refer to a person’s partner receiving or claiming
a compensation affected pension or a compensation affected payment
under the Social Security Act for “any day or days in”
the periodic payments period or the lump sum preclusion
period.
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Item 32 amends paragraph 59ZA(5)(c).
Subsection 59ZA(5) provides that the recoverable amount will be
equal to either, the amount determined by the operation of
paragraph 59ZA(5)(c), the compensation part of the lump sum payment
or the sum of the amounts of the periodic compensation payments
(paragraph 59ZA(5)(d)), or the maximum amount that the compensation
payer is liable to pay to the person at any time after receiving
the preliminary notice under section 59Y or the recovery notice
under section 59ZA (paragraph 59ZA(5)(e) refers).
New paragraph 59ZA(5)(c) reduces the
amount to one that is the difference between the sum of the
payments of compensation affected pension, and of compensation
affected payments under the Social Security Act, made to the person
and the person’s partner for a day or days in the periodic
payments period or the lump sum preclusion period and the sum of
the payments of compensation affected pension, and of compensation
affected payments under the Social Security Act, that would have
been made to the person and the person’s partner for any such
day or days had those payments been reduced as a result of the
operation of subsection 59T(1) and section 59TA.
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Item
33
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Item 33 amends section 59ZA by inserting new subsection
(5A). New subsection 59ZA(5A) will apply as a result of the
operation of subsection 59T(4) and will enable the Commission to
directly recover certain overpayments of compensation affected
pension from compensation payers under the provisions of section
59ZA.
New subsection 59ZA(5A) applies
where a person was in receipt of a compensation affected pension at
the time of the event that gave rise to the entitlement of the
person to compensation and the person or the person’s partner
is eligible for compensation affected pension for a day or days in
the periodic payments period. In such circumstances an
arrears payment of periodic compensation payments will be treated
as being ordinary income of the person or the person’s
partner for the periodic payments period.
The
recoverable amount will be the amount determined by the Commission
to be the total amount by which the person’s, or the
person’s partner’s, compensation affected pension for a
day or days in the periodic payments period would have been reduced
because of the operation of point SCH6-E4 (which provides for an
arrears payment of periodic compensation to be treated as being
ordinary income for the period represented by the payment), if a
determination had been made under sections 56D, 56E, 56EA or
56EB.
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Item
34
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Item 34 repeals and replaces paragraph 59ZE(1)(b).
Section 59ZE provides that the Commission may give written notice
to a person’s insurer that the Commission may wish to recover
an amount from the insurer. The notice may be issued where a
person has received or claimed a compensation affected pension for
a period for which a person has sought compensation for lost
earnings or lost capacity to earn.
A technical amendment to paragraph
59ZE(1)(b) refers to the person receiving or claiming a
compensation affected pension “for a day or days” in
the period to which the compensation relates.
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Item
35
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Item 35 amends paragraph 59ZG(1)(b). Section 59ZG
provides that the Commission may give written notice to a
person’s insurer where a person has received or claimed a
compensation affected pension for a period for which a person is to
be paid compensation in respect of lost earnings or lost capacity
to earn. A technical amendment to paragraph 59ZG(1)(b) refers
to the person receiving or claiming a compensation affected pension
for “a day or days” in the periodic payments period or
the lump sum preclusion period.
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Item
36
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Item 36 adds to subsection 59ZG(3) a reference to new
subsection 59ZG(5A) that is being inserted Item 41.
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Item 37 amends paragraph 59ZG(4)(b). Subsection
59ZG(4) applies to a person who is not a member of a couple or
whose partner neither receives nor claims a compensation affected
pension or a compensation affected payment under the Social
Security Act, for the periodic payments period or the lump sum
preclusion period.
A technical amendment to paragraph
59ZG(4)(b) refers to a person’s partner not receiving nor
claiming a compensation affected pension or a compensation affected
payment under the Social Security Act, for “any day or days
in” the periodic payments period or the lump sum preclusion
period.
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Item
38
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Item 38 amends paragraph 59ZG(4)(c).
Subsection 59ZG(4) provides that the recoverable amount will be the
smallest of, the amount determined by the operation of paragraph
59ZG(4)(c), or the compensation part of the lump sum payment or the
sum of the amounts of the periodic compensation payments (paragraph
59ZG(4)(d)), or the maximum amount that the compensation payer is
liable to pay to the person at any time after receiving the
preliminary notice under section 59ZE or the recovery notice under
section 59ZG (paragraph 59ZG(4)(e) refers).
New
paragraph 59ZG(4)(c) reduces the amount to one that is the
difference between the sum of the payments of compensation affected
pension made to the person for a day or days in the periodic
payments period or the lump sum preclusion period, and the sum of
the payments of compensation affected pension that would have been
made to the person for any such day or days had those payments been
reduced as a result of the operation of subsection
59T(1).
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Item
39
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Item 39 amends paragraph 59ZG(5)(b). Subsection
59ZG(5) applies to a person who is a member of a couple and whose
partner receives or claims a compensation affected pension or a
compensation affected payment under the Social Security Act, for
the periodic payments period or the lump sum preclusion
period.
A technical amendment to paragraph
59ZG(5)(b) refers to a person’s partner receiving or claiming
a compensation affected pension or a compensation affected payment
under the Social Security Act for “any day or days in”
the periodic payments period or the lump sum preclusion
period.
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Item
40
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Item 40 amends paragraph 59ZG(5)(c).
Subsection 59ZG(5) provides that the recoverable amount will be the
smallest of, the amount determined by the operation of new
paragraph 59ZG(5)(c), or the compensation part of the lump sum
payment or the sum of the amounts of the periodic compensation
payments (paragraph 59ZG(5)(d)), or the maximum amount that the
compensation payer is liable to pay to the person at any time after
receiving the preliminary notice under section 59ZE or the recovery
notice under section 59ZG (59ZG(5)(e) refers).
New paragraph 59ZG(5)(c) reduces the
amount to one that is the difference between the sum of the
payments of compensation affected pension, and of compensation
affected payments under the Social Security Act, made to the person
and the person’s partner for a day or days in the periodic
payments period or the lump sum preclusion period, and the sum of
the payments of compensation affected pension, and of compensation
affected payments under the Social Security Act, that would have
been made to the person and the person’s partner for any such
day or days had those payments been reduced as a result of the
operation of subsection 59T(1) and section 59TA.
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Item
41
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Item 41 amends section 59ZG by inserting new subsection
(5A). New subsection 59ZA(5A) will apply as a result of the
operation of subsection 59T(4) and will enable the Commission to
directly recover certain overpayments of compensation affected
pension from insurers under the provisions of section
59ZG.
New subsection 59ZG(5A) applies
where a person was in receipt of a compensation affected pension at
the time of the event that gave rise to the entitlement of the
person to compensation and the person or the person’s partner
is eligible for compensation affected pension for a day or days in
the periodic payments period. In such circumstances an
arrears payment of periodic compensation payments will be treated
as being ordinary income of the person or the person’s
partner for the periodic payments period.
The recoverable amount will be the
amount determined by the Commission to be the total amount by which
the person’s, or the person’s partner’s,
compensation affected pension for a day or days in the periodic
payments period would have been reduced because of the operation of
point SCH6-E4 (which provides for an arrears payment of periodic
compensation to be treated as being ordinary income for the period
represented by the payment), if a determination had been made under
sections 56D, 56E, 56EA or 56EB.
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Item
42
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Item 42 amends point SCH6-E3 which provides that the
ordinary/ adjusted income for each member of a couple is determined
by adding both individual’s annual rates of ordinary/
adjusted income and dividing by 2. The amendment provides
that the calculation should disregard any amount that has been
taken to be the ordinary income of either partner because of the
operation of either section 59TA or section 1174 of the Social
Security Act 1991 .
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Item
43
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Item 43 inserts new point SCH6-E3A. New point
SCH6-E3A provides for an additional amount of ordinary income to be
added to the income of a person that has been derived under point
SCH6-E3. The additional amount will be any amount that has
been derived by the operation of either section 59TA or section
1174 of the Social Security Act 1991 .
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Item
1
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Item 1 inserts a reference to the
definition of “ATO small superannuation account” into
the general index in section 5.
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Item 2 amends the index listing of the definition of
“investment” by adding a reference to new subsection
“(6A)” (to be inserted by Item 11).
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Item
3
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Item 3 inserts a reference to the definition of
“investor”” into the general index in section
5.
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Item
4
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Item 4 inserts a definition for the term ATO
small superannuation account into the financial
assets and income streams definitions in
subsection 5J(1). The term is defined to mean an account kept
in the name of an individual under the Small Superannuation
Accounts Act 1995 .
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Item
5
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Item 5 repeals and replaces the definition of
investment in subsection 5J(1). The amended
definition retains the current definition in subsection 5J(6) in
relation to a superannuation fund, approved deposit fund or
deferred annuity, and adds a new definition for an ATO small
superannuation account as defined in new subsection 5J(6A) (to be
inserted by Item 11).
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Item
6
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Item 6 inserts a definition of the term
investor into subsection 5J(1). The term is
defined to mean the person in whose name an ATO small
superannuation account is kept.
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Item
7
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Item 7 repeals and replaces the definition of
return in subsection 5J(1). The amended
provision adds a definition relating to that part of the balance of
an ATO small superannuation account that is attributable to
interest. The existing provision, in relation to any other
investment, to include any increase in the value or amount of the
investment, whether of a capital or income nature and whether or
not it is distributed, is continued.
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Item
8
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Item 8 repeals and replaces the definition of
superannuation benefit in subsection 5J(1). The
amended definition retains the existing provisions of a benefit
arising directly or indirectly from amount contributed (whether by
the person or another person) to superannuation fund. The
definition has been expanded to include a payment made under Part 7
of the Small Superannuation Accounts Act 1995 , which deals
with the withdrawal of account balances.
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Item
9
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Item 9 amends subsection 5J(1B) by inserting new
paragraph (g). Subsection 5J(1B) provides a list of
investments regarded as being “managed investments” for
the purposes of the VEA. New paragraph 5J(1B)(g) will include
an investment in an ATO small superannuation account in that
list. A note directs the reader to new paragraph 5J(1)(ca)
which excludes the investment if a person has not reached pension
age.
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Item
10
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Item 10 amends subsection 5J(1C) by inserting new
paragraph (ca). Subsection 5J(1C) provides a list of
investments which are not regarded as being “managed
investments for the purposes of the VEA. New paragraph
5J(1C)(ca) will include an investment in an ATO small
superannuation account, if the investor has not yet turned pension
age, in that list. This ensures these investments are treated
the same as other, similar funds held by those under pension
age.
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Item
11
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Item 11 amends section 5J by inserting new subsection
(6A). New subsection 5J(6A) provides that for the
purposes of the VEA, a person will have an “investment”
equal to the balance of an ATO small superannuation account that is
kept in their name. This ensures these investments are
treated the same as other, similar funds.
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Item
12
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Item 12 amends subsection 5J(7) by inserting new
paragraph (b). Subsection 5J(7) defines for the purposes of
the VEA the circumstances in which a person “realises an
investment”. New paragraph (b) includes the
circumstances where, for the purposes of the Small
Superannuation Accounts Act 1995 , the balance of an ATO small
superannuation account has been taken to have been
withdrawn.
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Item
13
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Item 13 is a technical amendment to the subsection 5J(1)
definition of “income stream”. Paragraph (b) had
referred to a “public sector scheme”, the definition
has been corrected to refer to a “public sector
superannuation scheme”.
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Item
14
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Item 14 repeals subsection 5JA(1) and inserts
subsections 5JA(1), (1A), (1B) and (1C). The repealed
subsection 5JA(1) listed the requirements which must be met for a
lifetime income stream to be regarded as being asset-test exempt
for the purposes of the VEA.
New subsection 5JA(1) provides that
an income stream will be asset-test exempt if the requirements of
paragraphs 5JA(1)(a), (b) and (c) are met.
New paragraph 5JA(1)(a) provides,
subject to subsection (4), that an income stream is asset-test
exempt if it arises under a contract, or governing rules, that meet
the requirements of subsection 5JA(2).
New paragraph 5JA(1)(b) provides,
subject to subsections (1B) and (1C), that the Repatriation
Commission (the Commission) must be satisfied that for certain
classes of providers that there is in force a current actuarial
certificate.
New paragraph 5JA(1)(c) provides
that the Commission must be satisfied that the requirements of
subsection 5JA(2) are being given effect from the commencement day
of the income stream.
New subsection 5JA(1A) provides that
an income stream will be asset-test exempt for the purposes of the
VEA, if the Commission has made a determination under subsection
5JA(5). Subsection 5JA(5) provides that the Commission may
determine, having regard to the guidelines determined under
subsection (6), that an income stream that does not meet the
requirements of subsection (2), is an asset-test exempt income
stream for the purposes of the VEA.
New subsection 5JA(1B) provides for
the issue of the guidelines required by the Commission for
determining whether an actuarial certificate is in force for the
purposes of paragraph 5JA(1)(b). The determination of the
guidelines will be a disallowable instrument for the purposes of
section 46A of the Acts Interpretation Act 1901 .
New subsection 5JA(1C) provides for
the requirements of paragraph 5JA(1)(b) not to apply during a
period of not more than 26 weeks which begins immediately after an
actuarial certificate ceases to be in force. The provision
will allow a fund that is unable to meet the requirements for
actuarial certification (for example, because of poor returns), a
period of time to regain certification.
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Item
15
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Item 15 repeals and replaces subparagraph
5JA(2)(h)(i). Subsection 5JA(2) lists the requirements that
must be satisfied by a contract or by the governing rules for the
provision of an income stream.
Paragraph 5JA(2)(h) lists the
circumstances in which an income stream can be commuted. New
subparagraph 5JA(2)(h)(i) allows for the commutation of a
“non-commutation funded income stream” within six
months of the commencement day of the income stream.
The new subparagraph allows only for
the commutation of an income stream that was not funded from the
commutation of an earlier income stream. The amended
subparagraph removes the ability to misuse the commutation
provisions.
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Item
16
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Item 16 repeals subparagraph 5JA(2)(h)(iv). It is
replaced by subparagraphs 5JA(2)(h)(iv) and (v). New
subparagraph 5JA(2)(iv) allows for the commutation of an income
stream to the extent necessary to cover the superannuation
contributions surcharge that a person becomes liable for because of
the purchase of the income stream.
New subparagraph 5JA(2)(h)(v) allows
for the commutation of an income stream to the extent necessary to
pay a “hardship amount” as defined (to be inserted by
Item 19) in subsection 5JA(7).
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Item
17
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Item 17 repeals and replaces paragraph 5JA(2)(i).
The new paragraph provides at subparagraph 5JA(2)(i)(i), that an
income stream may only be transferred on the death of the primary
beneficiary to a reversionary beneficiary.
Subparagraph 5JA(2)(i)(ii) provides
that the income stream may, on the death of the reversionary
beneficiary be transferred to another reversionary
beneficiary.
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Item
18
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Item 18 inserts new subsection 5JA(2A). New
subsection 5JA(2A) provides for an exception to be made to the
requirements of paragraph 5JA(2)(c). Paragraph 5JA(2)(c)
provides that the total amount of payments of an income stream in
any year other than the first year may not fall below or exceed the
total amount of the payments made under the income stream in the
immediately preceding year. Paragraph 5JA(2)(c) does make an
allowance for increases due to indexation and for reductions due to
certain allowable commutations.
The exception provided for in
subsection 5JA(2A) will allow for a joint lifetime annuity which
pays a single income stream into a joint account to retain its
asset-test exempt status when the level of payments is reduced
following the death of one of the partners.
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Item
19
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Item 19 inserts new subsection 5JA(7). New
subsection 5JA(7) defines for the purposes of subparagraph
5JA(2)(h)(iv) what is meant by a “hardship amount” and
related definitions.
A commutation from an
“asset-test exempt income stream” will be a
“hardship amount” where:
·
the person has applied in writing to
the Commission to be allowed to commute the whole or part of an
income stream because of extreme financial hardship; and the
Commission is satisfied that:
·
the person’s circumstances are
exceptional and could not be reasonably foreseen at the time the
person purchased the income stream; and
·
the person has insufficient
“liquid assets” or other assets (excluding the
person’s principal home) that could be realised to avoid the
extreme financial hardship; and
·
the amount commuted is required to
meet “unavoidable expenditure”.
The term “liquid assets”
is defined to mean the person’s cash and readily realisable
assets and will include:
·
the person’s shares or
debentures in a public company; and
·
managed investments; and
·
insurance policies that may be
surrendered for money; and
·
amounts deposited with, or lent to,
a bank or other financial institution by the person (whether or not
the amount can be withdrawn or repaid immediately); and
·
amounts due, and able to be paid, to
the person by, or on behalf of, a former employer of the
person.
The term “non-commutation
funded income stream” is referred to in subparagraph
5JA(2)(h)(i) in relation to the type of income stream which may be
commuted within six months of its commencement day and retain its
asset-test exempt status. A “non-commutation funded
income stream” is defined to mean an income stream that has
not been purchased by transferring directly to the purchase of the
income stream a payment resulting from the commutation of another
asset-test exempt income stream.
The term “unavoidable
expenditure” is referred to in the definition of
“hardship amount” and is defined in relation to a
person as being one or more of the following:
·
essential medical expenses of the
person, or the person’s partner, to the extent that the
expenses are not covered by health insurance or other contracts or
arrangemnts
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Item 19
(Continued)
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·
the cost of replacing or repairing
the person’s principal home to the extent that the cost of
replacement or repairs is not covered by an insurance
policy;
·
expenditure to buy replacement
essential household goods because of the loss of those goods to the
extent that the cost of replacement is not covered by an insurance
policy.
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Item
20
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Item 20 repeals subsection 5JB(1) and inserts
subsections 5JB(1), (1A), (1B), (1C) and (1D). The repealed
subsection 5JB(1) listed the requirements which must be met for a
life expectancy or 15 year minimum term income stream to be
regarded as being asset-test exempt for the purposes of the
VEA.
New subsection 5JB(1) provides that
an income stream will be asset-test exempt if the person has
reached pension age before or on the day that the income stream is
purchased or acquired and either subsection 5JB(1A) or (1B) is
applicable.
New subsection 5JB(1A) provides that
an income stream will be asset-test exempt if the requirements of
paragraphs 5JB(1A)(a), (b) and (c) are met.
New paragraph 5JB(1A)(a) provides,
subject to subsection (3), that an income stream is asset-test
exempt if it arises under a contract, or governing rules, that meet
the requirements of subsection 5JB(2).
New paragraph 5JB(1A)(b) provides,
subject to subsection (1D), that the Commission must be satisfied
that for certain classes of providers that there is in force a
current actuarial certificate.
New paragraph 5JB(1A)(c) provides
that the Commission must be satisfied that the requirements of
subsection 5JB(2) are being given effect from the commencement day
of the income stream.
New subsection 5JB(1B) provides that
an income stream will be asset-test exempt for the purposes of the
VEA, if the Commission has made a determination under subsection
5JB(4). Subsection 5JB(4) provides that the Commission may
determine, having regard to the guidelines determined under
subsection (5), that an income stream that does not meet the
requirements of subsection (2), is an asset-test exempt income
stream for the purposes of the VEA.
New subsection 5JB(1C) provides for
the issue of the guidelines required by the Commission for
determining whether an actuarial certificate is in force for the
purposes of paragraph 5JB(1A)(b). The determination of the
guidelines will be a disallowable instrument for the purposes of
section 46A of the Acts Interpretation Act 1901 .
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Item 20
(Continued)
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New subsection 5JB(1D) provides for
the requirements of paragraph 5JB(1A)(b) not to apply during a
period of not more than 26 weeks which begins immediately after an
actuarial certificate ceases to be in force. The provision will
allow a fund that is unable to meet the requirements for actuarial
certification (for example, because of poor returns), a period of
time to regain certification.
New subsection 5JB(1A) provides that
an income stream will be asset-test exempt if the requirements of
paragraphs 5JB(1A)(a), (b) and (c) are met.
New paragraph 5JB(1A)(a) provides,
subject to subsection (3), that an income stream is asset-test
exempt if it arises under a contract, or governing rules, that meet
the requirements of subsection 5JB(2).
New paragraph 5JB(1A)(b) provides,
subject to subsection (1D), that the Commission must be satisfied
that for certain classes of providers that there is in force a
current actuarial certificate.
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Item
21
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Item 21 repeals and replaces paragraph
5JB(2)(a)(i). Subsection 5JB(2)(a) provides that a contract,
or the governing rules, for the provision of an income stream must
specify that the payments under the income stream are to be made at
least annually.
New subparagraph 5JB(2)(a)(i)
provides that the term of an income stream for a person with a life
expectancy of less than 15 years, if the life expectancy does not
consist of a whole number of years, may be rounded up to the next
whole number of years.
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Item
22
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Item 22 repeals and replaces subparagraph
5JB(2)(h)(i). Subsection 5JB(2) lists the requirements that
must be satisfied by a contract or by the governing rules for the
provision of an income stream.
Paragraph 5JB(2)(h) lists the
circumstances in which an income stream can be commuted. New
subparagraph 5JB(2)(h)(i) allows for the commutation of a
“non-commutation funded income stream” within six
months of the commencement day of the income stream.
The new subparagraph allows only for
the commutation of an income stream that was not funded from the
commutation of an earlier income stream. The amended
subparagraph removes the ability to misuse the commutation
provisions.
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Item
23
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Item 23 repeals subparagraphs 5JB(2)(h)(iii) and (iv)
and replaces them with subparagraphs 5JB(2)(h)(iii), (iv), (v) and
(vi).
New subparagraph 5JB(2)(h)(iii)
allows for the commutation of an income stream in the circumstances
where the legal or equitable interest is transferred on the death
of a person to the benefit of a reversionary beneficiary. The
legal or equitable interest may also be transferred on the death of
the reversionary beneficiary to the benefit of another reversionary
beneficiary. If there is no other beneficiary the interest may be
transferred to the estate of the reversionary
beneficiary.
New subparagraph 5JB(2)(h)(iv)
allows for the commutation of an income stream to provide for the
transfer of the legal or equitable interest in the payment to the
estate of person where there is no reversionary
beneficiary.
New subparagraph 5JB(2)(v) allows
for the commutation of an income stream to the extent necessary to
cover the superannuation contributions surcharge that a person
becomes liable for because of the purchase of the income
stream.
New subparagraph 5JB(2)(h)(vi)
allows for the commutation of an income stream to the extent
necessary to pay a “hardship amount” as defined (to be
inserted by Item 26) in subsection 5JB(7).
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Item
24
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Item 24 repeals and replaces paragraph 5JB(2)(i).
The new paragraph provides at subparagraph 5JB(2)(i)(i), that an
income stream may only be transferred on the death of the primary
beneficiary to a reversionary beneficiary, or if there is no
reversionary beneficiary, to the estate of the primary
beneficiary.
Subparagraph 5JB(2)(i)(ii) provides
that the income stream may, on the death of the reversionary
beneficiary be transferred to another reversionary beneficiary, or
if there is no other reversionary beneficiary, to the estate of the
reversionary beneficiary.
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Item
25
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Item 25 inserts new subsection 5JB(2A). New
subsection 5JB(2A) provides for an exception to be made to the
requirements of paragraph 5JB(2)(c). Paragraph 5JB(2)(c)
provides that the total amount of payments of an income stream in
any year other than the first year may not fall below or exceed the
total amount of the payments made under the income stream in the
immediately preceding year. Paragraph 5JB(2)(c) does make an
allowance for increases due to indexation and for reductions due to
certain allowable commutations.
The exception provided for in
subsection 5JB(2A) will allow for a joint lifetime annuity which
pays a single income stream into a joint account to retain its
asset-test exempt status when the level of payments is reduced
following the death of one of the partners.
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Item
26
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Item 26 inserts new subsection 5JB(7). New
subsection 5JB(7) defines for the purposes of subparagraph
5JB(2)(h)(vi) what is meant by a “hardship
amount”. The definition refers to the definition
provided in new subsection 5JA(7).
The term “non-commutation
funded income stream” is referred to in subparagraph
5JB(2)(h)(i) in relation to the type of income stream which may be
commuted within six months of its commencement day and retain its
asset-test exempt status. A “non-commutation funded
income stream” is defined to mean an income stream that has
not been purchased by transferring directly to the purchase of the
income stream a payment resulting from the commutation of another
asset-test exempt income stream.
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Item
27
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Item 27 inserts new section 52C(3A). Section 52C
refers to the effect of a charge or encumbrance on the value of an
asset. Subsection 52C(1) provides that in calculating the
value of a person’s assets the value of any charge or
encumbrance is to be used to reduce the value of the assets.
New subsection 52C(3A) provides that subsection 52C(1) will not
apply to an asset-tested income stream (long term).
The insertion of the exception will
prevent the application of subsection 52C(1) to asset-tested income
streams (long term) purchased using borrowed funds.
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Item 28
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Item 28 inserts new section 52ZMA. New section
52ZMA provides for the calculation of the debt that arises from the
overpayment of a service pension or income support supplement while
a person is in receipt of an income stream. The overpayment
arises from a commutation of an asset-test exempt income stream
that is a contravention of the contract or the governing rules
under which the income stream was provided.
Subsection 52ZMA(1) provides that in
the circumstances where a person has been provided with an
asset-test exempt income stream for a period; and:
·
is paid an amount of service pension
or income support supplement during the whole or any part of that
period; and
·
the whole or any part of the income
stream is commuted contrary to the contract or governing rules
under which the income stream was originally provided;
and
·
the amount of service pension or
income support supplement that has been paid to the person for the
period is more than the amount that would have been paid had the
income stream not been an asset-test exempt income
stream;
that an amount worked out under
subsection 52ZMA(2) will be a debt due to the
Commonwealth.
Subsection 52ZMA(2) provides that
the debt due to the Commonwealth will be an amount equal to the
difference between the amount of service pension or income support
supplement that was paid to the person during the relevant period
and the amount that would have been paid had the income stream not
been asset-test exempt for that period. The relevant period
is worked out in subsection 52ZMA(3).
Subsection 52ZMA(3) provides that
the relevant period is the period beginning on:
·
the day 5 years before the day the
income stream was commuted; or
·
either the commencement day of the
income stream or 20 September 2001;
whichever occurs later.
Subsection 52ZMA(4) provides that in
working out the asset value of the income stream as if it had not
been asset-test exempt it should be assumed that the income stream
was asset tested from the commencement day and that the asset value
of the income stream is to be depleted in accordance with the
formula in subsection 52A(4).
Subsection 52ZMA(5) provides that
section 52ZMA is not applicable to income streams to which a
determination under subsection 5JA(5) or 5JB(4) is in
force.
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Item
29
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Item 29 repeals and replaces the definition of
binding arrangement in subclause 12(4) of Schedule
5. Clause 12 of Schedule 5 gives the Minister the power to
exempt specified financial investments for particular individuals
from amendments to the means test treatment of income
streams. The exemption will only be granted in cases likely
to cause severe detriment to a person who has entered into a
binding arrangement prior to the commencement of the
amendments made by Part 2 of Schedule 3 of the Social Security
and Veterans’ Affairs Legislation Amendment (Budget and Other
Measures) Act 1998 (No. 93 of 1998).
The definition has been amended so
that it will be limited to the circumstances specified in the
administrative guidelines where:
·
the arrangement with the provider of
the income stream product does not allow the person to commute the
income stream; or
·
the arrangement may only be
terminated on terms that are, in the opinion of the Commission,
likely to cause severe detriment to the person.
The amendment will limit
applications to those that fit within the intended scope of the
legislation.
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