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Veterans' Affairs Legislation Amendment Bill (No. 1) 2003

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2002

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

VETERANS’ AFFAIRS LEGISLATION AMENDMENT BILL (No. 3) 2002

 

 

 

 

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by authority of the Minister for Veterans’ Affairs,

The Honourable Danna Vale MP)

 





Table of Contents

 

Outline and Financial Impact ………………………………………………          ii

 

            1          Short Title…………………………………………………….          v

            2          Commencement………………………………………………          v

            3          Schedule(s)…………………………………………………...          v

 

 

 

Schedule 1 -   Amendment of the Veterans’ Entitlements Act 1986

 

 

Part 1 -                        Amendments concerning child-related payments                   1

 

            Part 2 -                        Amendments concerning commutation of

income streams                                                                        4

 

            Part 3 -                        Amendments concerning accrual of certain pension

bonuses unclaimed under social security law                          8

 

            Part 4 -                        Amendments concerning the calculation of pension

bonuses                                                                                   14

 

            Part 5 -                        Amendments concerning the backdating of claims

for partner service pension in certain circumstances               18

 

            Part 6 -                        Amendments to achieve alignment with social security

law concerning the treatment of compensation payable

in lump sums                                                                           21

 

 

 

 



OUTLINE AND FINANCIAL IMPACT

 

SCHEDULE 1

 

 

Part 1 -           Amendments concerning child-related payments

 

Outline

 

These amendments to the VEA will provide for the continued indexation of the “saved” child-related payments being received by a small number of persons in receipt of a service pension or income support supplement.

 

Date of Effect

 

1 July 2000

 

Financial Impact

 

No financial impact.

 

Part 2 -           Amendments concerning the commutation of income streams

 

Outline

 

These amendments to the VEA will prevent the misuse of the commutation provisions relating to income streams.

 

Date of Effect

 

Royal Assent

 

Financial Impact

 

Negligible



Part 3 -           Amendments concerning the accrual of certain pension bonuses

unclaimed under social security law

 

Outline

 

These amendments to the VEA will ensure that, in certain cases, periods of membership of the pension bonus scheme that would have accrued under social security law will contribute towards the calculation of a pension bonus payable under the VEA.

 

Date of Effect

 

Royal Assent

 

Financial Impact

 

Negligible

 

 

Part 4 -           Amendments concerning the calculation of pension bonuses

 

Outline

 

A number of amendments are required as a result of the amendments in Part 3.  At the same time, a number of other technical amendments are being made to ensure that the bonus paid to a person accurately reflects the pension they were deferring and their marital status throughout the period they were accruing the bonus.

 

Date of Effect

 

Royal Assent

 

Financial Impact

 

Negligible



Part 5 -           Amendments concerning the backdating of claims for partner

service pension in certain circumstances

 

Outline

 

These amendments to the VEA will allow, in specified circumstances, a claim for partner service pension to be granted from a date earlier than the date the claim was lodged.

 

 

Date of Effect

 

Royal Assent

 

Financial Impact

 

Negligible

 

Part 6 -           Amendments to achieve alignment with social security law

concerning the treatment of compensation payable in lump sums

 

Outline

 

These amendments to the VEA will align the compensation recovery provisions applicable to multiple lump sums of compensation with those that apply under the Social Security Act 1991 .

 

Date of Effect

 

Royal Assent

 

Financial Impact

 

Negligible

 



Clauses

 

 
Short Title

 

Clause 1 sets out how the Act is to be cited.

 

 
Commencement

 

Clause 2 sets out various commencement dates of the provisions in the Act.

 

 

Schedule(s)

 

Clause 3 provides that the Act specified in a Schedule to this Act is amended as set out in the items of that Schedule.

 



SCHEDULE 1  -  AMENDMENT OF THE VETERANS’ ENTITLEMENTS ACT 1986

 

 

Part 1 -           Amendments concerning child-related payments

 

Overview

 

These amendments to the VEA will provide for the continued indexation of the “saved” child-related payments being received by a small number of persons in receipt of a service pension or income support supplement.

 

Background

 

Until 1 January 1998 all child-related payments to eligible persons receiving a service pension or income support supplement under the VEA were payable under the then relevant provisions of the VEA.  The child-related payment was a component of the service pension or income support supplement and was the equivalent of the family payment, guardian allowance and rent assistance payments that were payable under the Social Security Act 1991 .

 

The amendments made by the Veterans’ Affairs Legislation Amendment (Budget and Simplification Measures) Act 1997 removed the provisions relating to the child related payments from the VEA and transferred responsibility for the payments to the equivalent provisions of the Social Security Act 1991 (SSA).

 

The amending act included a savings provision that preserved the inclusion of the child-related payments in the service pension or income support supplement for a small number of families who would have been financially disadvantaged by a transfer to the SSA.

 

The amendments also saved the indexation provisions applicable to the child-related payments so that the rates of the saved child-related payments would continue to be indexed in line with increases in the equivalent payment types under the SSA.

 

The savings provisions also imposed a test of continued eligibility for the saved child-related payments.  The test provides that a person’s service pension or income support supplement will only include the saved child-related amount until that amount ceases to be greater than the above the minimum family allowance child-related payment that would be payable under the SSA.

 

The application of the test means that the saved child-related payments are payable only until that point is reached and from that time on the payments are to be made under the family assistance provisions of the SSA.

 

The responsibility for the family payments now referred to as the Family Tax Benefit (FTB) was subsequently transferred to the Family Assistance Office from 1 July 2000.  The new system of payments is an amalgamation of a number of payments and rebates that were previously payable and was set out in the A New Tax System (Family Assistance) Act 1999 (FAA).  The provisions relating to family payments were repealed by amendments to the SSA made by the A New Tax System (Family Assistance) (Consequential and Related Measures) Act (No. 1) 1999 .

 

The repeal of the those provisions has meant that the references to the SSA family payments in the saved VEA indexation provisions are obsolete with the effect that the rate of the saved child-related payments has been frozen at the rate payable at the time of the repealed provisions.

 

The other effect of the introduction of the Family Tax Benefit and the repeal of the relevant SSA provisions is that it is no longer possible to impose the test for continued eligibility for the saved child-related payments.  This is because there are no directly equivalent payment types in the FAA that can be used as a reference.

 

Explanation of the Changes

 

The amendments to the VEA will provide for the continued indexation of the saved child-related payments in line with increases in the rate of Family Tax Benefit resulting from indexation.

 

The amendments will also remove those provisions relating to the eligibility for continuation of the saved child-related payments that were based on the now obsolete family payment provisions of the SSA.

 

The amendments will also provide that a person eligible for the saved child-related payments may opt out of receiving them if they elect to receive payments of Family Tax Benefit under the FAA.

 

Explanation of the Items

 

Item 1 repeals subclauses 10(2) and (3) of Schedule 5 and substitutes new subclauses 10(2), (2A) and (3).  Clause 10 of Schedule 5 preserved the inclusion of child-related payments in the service pension or income support supplement of all those pensioners or recipients who would have been disadvantaged by the transfer of the responsibility for all child-related payments to the Social Security Act 1991 (SSA).

 

Repealed subclause 10(2) had provided that a person’s pension or supplement would include the child-related payment until it ceased to be greater than the above the minimum family payment under the SSA.

 

Repealed subclause 10(3) had provided that if the saved status of the child-related payment was lost it could not later be regained.

 

New subclause 10(2) provides that subject to the operation of new subclause 10(2A) the rate of service pension or income support supplement payable to a person will include the saved child-related payment.

 

New subclause 10(2A) provides that a person’s pension or supplement will include the saved child-related payment until:

 

·          for payments made before 1 July 2000, the saved child-related payment ceases to be greater than the above the minimum family payment under the SSA; or

·          for payments made on or after 1 July 2000, the person elects by providing written notice to the Secretary that they no longer wish to receive the saved child-related payment.

 

New subclause 10(3) provides that if at any time before 1 July 2000, the saved status of the child-related payment was lost it could not later be regained.

 

Item 2 amends the subclause 10(4) definition of notional family allowance child-related amount by inserting a reference to the rate of the payment before “1 July 2000”.

 

The notional family allowance child-related amount is defined as being the amount by which the rate of family allowance exceeds the minimum rate of family allowance payable under the SSA.

 

Item 3 repeals and substitutes the definition of notional pension/ supplement child-related amount in subclause 10(4).

 

The definition of notional pension/ supplement child-related amount provides a definition for the saved child-related payment.  The notional pension/ supplement child-related amount is defined as being the total of the pension supplement child-related amounts that would have been included in the rate of service pension or income support supplement payable to a person in respect of any child or children if the amendments made by Schedule 1 to the Veterans’ Affairs Legislation Amendment (Budget and Simplification Measures) Act 1997 had not been made.

 

Paragraph (a) of the amended definition retains the existing definition for those saved child-related payments made prior to 1 July 2000.

 

Paragraph (b) provides that the amount of any child-related payments made from the 1 July 2000 will be determined by the Commission in a disallowable instrument that refers to the indexation of the Part A rate of family tax benefit under the A New Tax system (Family Assistance) Act 1999 .

 

Commencement

 

Clause 2 provides that items 1 to 3 of Schedule 1 commence on Royal Assent.



Part 2 -           Amendments concerning the commutation of income streams

 

Overview

 

These amendments to the VEA will prevent the misuse of the commutation provisions relating to income streams.

 

Background

 

A number of changes were made to the means testing of income streams by amendments to the Veterans’ Entitlements Act 1986 (VEA) contained in the Social Security and Veterans’ Affairs Legislation Amendment (Budget and Other Measures) Act 1997 .

 

A complete definition of the term income stream is found in subsection 5J(1) but it basically applies to superannuation, roll over annuities, ordinary annuities, allocated pensions and allocated annuities.

 

Subsequent to the 1997 amendments it became apparent that further amendments were necessary because of the development of new products and the need to clarify some areas of the legislation.

 

Those amendments were made by the Veterans’ Affairs Legislation Amendment (Further Budget 2000 and Other Measures) Act 2002 .  The amendments were also intended to streamline the operation of the income streams rules and to limit the abuse of the rules applicable to asset-test exempt income streams.  Similar amendments had been made to the Social Security law in the Family and Community Services Legislation (Simplification and Other Measures) Bill 2001 .

 

The amendments included the insertion of new provisions restricting the reasons for which an asset-test exempt income stream could be commuted and still retain its asset-test exempt status.  These amendments were intended to prevent the misuse of the existing commutation provisions.

 

The commutation provisions allow for the commutation of an income stream in the circumstances where the payment resulting from the commutation is used to purchase another income stream.

 

Section 52ZMA was inserted by the most recent amendments to provide 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 where there has been the commutation of an asset-test exempt income stream that contravenes the provisions of the contract or the governing rules under which the income stream was provided, that would allow for the commutation.

 

Subsection 52ZMA(2) provides that the debt 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.

 

Subsection 52ZMA(3) provides that the relevant period will be the later period beginning either:

 

·          5 years before the income stream was commuted; or

·          the commencement day of the income stream; or

·          the period commencing 20 September 2001.

 

Advice has been provided by the Department of Family and Community Services that both section 52ZMA and the SSA equivalent are ineffective in particular circumstances in preventing the misuse of the commutation provisions.

 

The scenario put forward is that a pensioner has an asset-test exempt income stream that he or she has held for a period of four years.  The pensioner commutes the income stream and transfers part or all of the proceeds to another asset-test exempt income stream as is allowed under the existing commutation provisions.

 

The pensioner subsequently commutes the income stream within a short period of the commencement of the new income stream and the commutation is not in accordance with the current commutation rules.  Under the existing provisions of section 52ZMA the recoverable amount will be the overpayment of pension for the short period for which the new income stream has been payable.

 

Explanation of the Changes

 

These amendments to the VEA are to provide for a determination that an asset-test exempt income stream has an earlier commencement day.  The earlier commencement day will enable the determination of the overpayment of pension benefits in cases where there has been a misuse of the commutation provisions.

 

The amendments are applicable in those cases where a person has commuted an asset-test exempt income stream in certain circumstances that are outside the criteria that would allow the income stream to retain its asset-test exempt status.

 

The amendments to section 52ZMA have the effect of removing the asset-test exempt status of the previous income stream or of a succession of income streams.  The asset test would then apply for any part of that period in which the person was eligible for a service pension or income support supplement.

 

Explanation of the Items

 

Item 4 repeals and substitutes subsection 52ZMA(3).  Subsection 52ZMA(3) defines for the purposes of subsection 52ZMA(2) the relevant period being the period for which the overpayment of service pension or income support supplement is to be determined.

 

New subsection 52ZMA(3) defines the relevant period for the purposes of subsection 52ZMA(2) as the latest of the periods that began:

 

·          the day 5 years before the day on which the income stream was commuted; or

·          the commencement day of the income stream; or

·          20 September 2001; and

 

ending when the income stream was commuted.

 

Item 5 repeals subsection 52ZMA(5) and substitutes subsections 52ZMA(5), (6), (7), (8), (9), (10) and (11).  Subsection 52ZMA(5) currently provides that section 52ZMA is not applicable to income streams to which a determination under subsection 5JA(5) or 5JB(4) is in force.

 

New subsection 52ZMA(5) is applicable in the circumstances where an asset-test exempt income stream has been commuted and part of the proceeds have been used to purchase another asset-test exempt income stream.

 

The new income stream will be regarded as having the same commencement day as either the old income stream or the first of a succession of asset-test exempt income streams.

 

Income stream payments made under the old income stream or under any of the income streams in the succession of income streams will be regarded as having been made under the new income stream.

 

New subsection 52ZMA(6) provides that subsection 52ZMA(5) will not be applicable where the amount used in the purchase of the new income stream represents the balance of a commutation used for the payment of either a hardship amount or a superannuation contributions surcharge liability.

 

New subsection 52ZMA(7) is applicable in the circumstances where the whole of an asset-test exempt income stream is commuted and no part of the proceeds is used to purchase another asset-test exempt income stream.

 

The commuted income stream will be regarded as having the same commencement day as first of a succession of asset-test exempt income streams.

 

Income stream payments made under any of the income streams in the succession of income streams will be regarded as having been made under the commuted income stream.

 

New subsection 52ZMA(8) provides that subsection 52ZMA(7) will not be applicable where the whole of the payment resulting from the commutation of the old income stream is used for either the payment of a hardship amount or a superannuation contributions surcharge liability.

 

New subsection 52ZMA(9) defines in paragraph (a), a succession of asset-test exempt income streams as comprising 2 or more asset-test exempt income streams which (other than the first to be provided) have been funded by means of the payment, or part of the payment, resulting from the commutation of another of the succession of income streams.

 

Paragraph 52ZMA(9)(b) defines an income stream as the first income stream in a succession of income streams if it is the first income stream to be provided.

 

Subsection 52ZMA(10) refers to subsection 5JA(7) for the definition of hardship amount .

 

Subsection 52ZMA(11) provides that section 52ZMA is not applicable to income streams to which a determination under subsection 5JA(5) or 5JB(4) is in force.

 

Commencement

 

Clause 2 provides that items 4 and 5 of Schedule 1 commence on Royal Assent.

 



 

Part 3 - Amendments concerning accrual of certain pension bonuses unclaimed under social security law

 

Overview

 

These amendments to the VEA will ensure that, in certain cases, periods of membership of the pension bonus scheme that would have accrued under social security law will contribute towards the calculation of a pension bonus payable under the VEA.

 

Background

 

Under the VEA, the pension bonus scheme enables a person who is eligible for an age service pension, partner service pension or income support supplement to receive a lump sum ‘pension bonus’ if they defer claiming the pension.  A similar scheme operates under the social security law in relation to age pension.  Part IIIAB of the VEA contains the provisions for the pension bonus scheme.

 

An anomaly arises in relation to a person who has deferred an age pension under social security law but who subsequently becomes a war widow/war widower-pensioner.  Under subsection 47(3) of the Social Security Act 1991 (SSA), a war widow/war widower-pensioner is no longer qualified for age pension and would therefore lose any bonus period/s or part thereof that they had accrued as a result of deferring age pension under social security law.

 

To be eligible for income support supplement a person must be a war widow or war widower.  So for the period between the person’s registration for age pension bonus under social security law and the granting of a war widow/war widower pension, the person is eligible for age pension but not income support supplement.  After the granting of the war widow/ war widower pension, the person is eligible for income support supplement but not age pension.  Under the current legislation, it is not possible to ‘transfer’ the bonus period that they accrued under the social security law to the VEA pension bonus scheme. This is because, under the existing provisions, a person is only able to accrue bonus periods from the date they became eligible for a VEA pension.

 

As a result, whatever bonus periods they have accrued for age pension under social security law are lost and they have to start accruing again in relation to income support supplement under the VEA.

 

Explanation of the Changes

 

These amendments to the VEA will enable a person who was registered or was eligible to be registered for the Pension Bonus Scheme under social security law, and who subsequently becomes a war widow/war widower-pensioner, to have any bonus periods they would have accrued under the social security law in respect of age pension to be treated as if they were bonus periods accrued under the VEA.

 

 

 

Explanation of the Items

 

Item 6 inserts a new dot point at the end of the simplified outline in section 45T.  The new dot point provides a brief summary of new Division 12.

 

Item 7 adds a new Division 12 at the end of Part IIIAB.  New Division 12 will modify the application of relevant provisions in Part IIIAB so that certain persons previously eligible for a pension bonus under social security law, may have any bonus periods that would have accrued to them under social security law, treated as a bonus period under the VEA. 

 

Division 12 - Modification of this Part in relation to certain persons previously qualified for age pension under social security law

 

45UV  Persons to whom this Division applies .

 

New section 45UV specifies the criteria that a person must meet for the new Division to apply to that person. 

 

The criteria are:

 

·          a person must be a war widow/war widower-pensioner.  This term is defined in section 5Q(1) of the VEA as:

 

a person who is receiving a pension under Part II or IV at a rate determined under or by reference to subsection 30(1); and

 

·          a person must register as a member of the pension bonus scheme under the VEA in respect of income support supplement; and

 

·          a person must either:

 

 

·          have been registered as a member of the pension bonus scheme under Part 2.2A of the Social Security Act 1991 with effect from a date that is earlier than the date that the person became a war widow/war widower-pensioner;  or

 

·          have been, in the opinion of the Commission, eligible for registration as a member of the pension bonus scheme under Part 2.2A of the Social Security Act 1991 (the SSA pension bonus scheme ) before the person became a war widow/war widower-pensioner; and

 

·          the person cannot have started to receive age pension under the social security law; and

 

·          the person cannot have claimed a pension bonus under the social security law before becoming a war widow/war widower-pensioner.



 

45UW Commission may request the provision of information

 

New section 45UW provides that the Commission may request information from a person for the purpose of determining whether the person was registered as a member of the SSA pension bonus scheme, or whether, in the opinion of the Commission, the person could have been registered as a member of the SSA pension bonus scheme had the person applied for registration of the scheme.

 

New subsection 45UW also provides that the Commission may request information from a person for the purpose of working out the bonus periods that a person to whom this Division applies would have accrued under the social security law if they had made a claim for a pension bonus under that law immediately before becoming a war widow/war widower-pensioner.

 

Any request for information from the Commission must be in writing and may specify a time period within which the person should respond.

 

45UX  Commission may determine whether periods occurring before becoming a war widow/war widower-pensioner are bonus periods under the social security law

 

New section 45UX provides that the Commission may determine:

 

·          the bonus periods that would have resulted from a person’s period of accruing membership under the social security; or

 

·          if a person was not a registered member of the scheme under the social security law, but was eligible for membership of the scheme under the social security law, the bonus periods that would have resulted from the period of eligible membership under the social security law if the person had been registered from the earliest possible date.

 

New subsection 45UX(1) provides that the Commission may, subject to new subsection (3), determine that a period of accruing membership of the SSA pension bonus scheme would have accrued to a person as a bonus period under social security law if the person meets the following criteria:

 

·          the person is a person to whom new Division 12 applies; and

 

·          the person was registered as a member of the SSA pension bonus scheme; and

 

·          had the person made a claim for a pension bonus under the social security law immediately before becoming a war widow/war widower- pensioner, in respect of a period, Commission would have determined that that period or part of that period would have been a period of accruing membership of the SSA pension bonus scheme. 

 

The Commission in making this determination may have regard to information supplied under the VEA or the social security law.

 

New subsection 45UX(2) provides that the Commission may, subject to new subsection (3), determine that a period of accruing membership of the SSA pension bonus scheme would have accrued to a person as a bonus period under social security law if the person meets the following criteria:

 

·          the person is a person to whom new Division 12 applies; and

 

·          even though the person was not registered as a member of the SSA pension bonus scheme, the person could in the opinion of the Commission, have been registered before becoming a war widow/war widower-pensioner had the person applied for that registration; and

 

·          if the person had been registered from the earliest possible date and had the person made a claim for a pension bonus under the social security law immediately before becoming a war widow/war widower-pensioner, in respect of a period, Commission would have determined that that period or part of that period would have been a period of accruing membership of the SSA pension bonus scheme.

 

The Commission in making this determination may have regard to information supplied under the VEA or the social security law.

 

New subsection 45UX(3) relates to a period that Commission determines:

 

·          would have been a period of accruing membership under social security law in respect of a person who was or could have been registered under that law; and

 

·          would have been a part-year period of accruing membership under that law.

 

If that period was not immediately preceded by another period that would have accrued to the person as a bonus period under the social security law, but the person met the work test for the period, the Commission may, despite the terms of subsection 92T(3) of the Social Security Act 1991 , treat the part-year period as a bonus period under the social security law.

 

This provision, in conjunction with subsection 45UY(2) ensures that, where a person has accrued only a part-year period of membership under the social security law, that period can be included in the calculation of the bonus under the VEA, where a minimum of one year has been accrued.

 

45UY  Modification of provisions of this Part in respect of persons to whom this Division applies

 

New section 45UY modifies the provisions of Part IIIAB of the VEA so that certain persons may carry over, to the VEA Pension Bonus Scheme, bonus periods that would have accrued to the person under social security law had the person not become a war widow/war widower-pensioner.

 

New subsection 45UY(1) provides that, subject to subsection (2), for the purposes of working out the amount of pension bonus payable to a person to whom this Division applies, if the Commission determines under section 45UX, that a period would have accrued to a person as a bonus period under the social security law then the bonus period is to be treated as if it were a bonus period that had accrued to the person under the VEA.

 

New subsection 45UY(1) also provides that if such a bonus period or in the case of more than one bonus period, the last such bonus period, is to be treated as a bonus period that accrued to the person under this Act, then the bonus period is also to be treated as if it were continuous with the first bonus period (if any) that accrues to the person under the VEA after the person becomes a war widow/war widower-pensioner.

 

New subsection 45UY(2) provides that a part-year period that the Commission determines is a bonus period that would have accrued under the social security law to a person to whom this Division applies may only be treated as a bonus period under the VEA and may only be treated as continuous with any other bonus periods that the person accrues under the VEA if:

 

·          the bonus period is immediately preceded by a period that the Commission determines would have been another bonus period that accrued to the person under the social security law; or

 

·          the bonus period, when added to any bonus period or bonus periods that the person accrues under the VEA after becoming a war widow/war widower-pensioner, would amount to at least a year.

 

This is because under the requirements of the Pension Bonus Scheme under both the social security law and the VEA a person must have at least one bonus period before they can claim a pension bonus. If the bonus period is a person’s last bonus period it may be less than 12 months duration but it must be preceded by a bonus period of at least 12 months and the person must have been an accruing member of the scheme and have passed the work test for that period.  If it is not preceded by a bonus period of 12 months, it must, when added to a bonus period accrued under the VEA, add up to a bonus period of at least 12 months.

 

New subsection 45UY(3) relates to the application of subsection 45TR(3) of the VEA to a part-year period that may accrue, under the VEA, to a person to whom this Division applies.  If such a part-year period is not preceded by a bonus period accruing under this Act, the Commission may treat the part-year period as if it was preceded by a part-year period accrued under the VEA.  However, this will only occur if:

 

·          the person passes the work test for the period; and

 

·          the person specifies the period in the claim for pension bonus; and

 

·          the period is the person’s last bonus period.

 

This will mean that, if the period is a period of less than twelve months accrued since the person became a war widow/war widow-pensioner, and is preceded by a period accrued under the social security law that combines to at least a 12 month bonus period, that period can be counted as a bonus period.

 

Item 8 provides that the amendments to the VEA contained in this Part apply to any claim for pension bonus made under the VEA, on or after the day on which this Act receives the Royal Assent.

 

C ommencement

 

Clause 2 provides that items 6 to 8 commence on Royal Assent.

Part 4 - Amendments concerning the calculation of pension bonuses

 

Overview

 

A number of amendments are required as a result of the amendments in Part 3.  At the same time, a number of other technical amendments are being made to ensure that the bonus paid to the person accurately reflects the pension they were deferring and their marital status through the period they were accruing the bonus.

 

Background

 

A number of different formulas are provided for the calculation of pension bonus to cater for the various circumstances that may apply to a person and affect the amount of their pension bonus.  The pension bonus is calculated based on the rate of the deferred pension or pensions as at the time of grant of pension.  The types of personal circumstances that can vary include a change in marital status and a change in pension deferred. 

 

Explanation of the Changes

 

Items 10 to 13 amend section 45UG to provide for a circumstance where a person’s marital status does not change, but their pension eligibility does change.  This could occur if a person is a widow/widower who has registered as a member of the pension bonus scheme and is thus deferring partner service pension and during their membership of the scheme the person becomes a war widow/war widower-pensioner. As a war widow/war widower-pensioner the person is no longer eligible for partner service pension but is eligible for and may defer income support supplement.  Under the current provisions, this change in pension eligibility with no change in marital status was not suitably catered for.

 

Items 14 to 19 amend section 45UH.  These amendments correct a number of minor errors in the formulas and cater for the new category of persons provided for in Part 3 of this Act; persons who are carrying over pension bonus periods that would have accrued to them under the social security law.

 

Items 20 to 26 amend section 45UI.  These amendments correct a number of minor errors in the formulas and cater for the new category of persons provided for in Part 3 of this Act; persons who are carrying over pension bonus periods that would have accrued to them under the social security law.

 

Item 27 provides a definition for the new term “ apportioned amount ” which appears in new subsection 45UG(1A).

 

Item 28 is an application provision.

 

Explanation of the Items

 

Item 9 amends the definition of pension in subsection 5Q(1) by inserting “IIIAB” after “Parts IIIA,”.

 

Item 10 amends paragraphs 45UG(1)(a) and (b) by repealing the paragraphs and substituting new paragraphs (a), (b) and (c).

 

New paragraphs 45UG(1)(a), (b) and (c) provide that the formula at the end of subsection 45UG(1) applies to a person who either:

 

·          was a member of couple throughout the person’s overall qualifying period and who remained eligible for the same pension throughout the person’s overall qualifying period and who, if  the person is a war widow/war widower-pensioner, was a war widow/war widower-pensioner throughout the whole of the person’s overall qualifying period; or

 

·          was not a member of a couple at any time during the person’s overall qualifying period and remained eligible for the same pension throughout the person’s overall qualifying period and if the person is a war widow/war widower-pensioner, the person was a war widow/war widower-pensioner throughout the whole of the person’s overall qualifying period.

 

Item 11 inserts a new subsection 45UG(1A) after subsection 45UG(1). 

 

New subsection 45UG(1A) provides for a new formula to apply when calculating the pension bonus for persons who meet certain criteria.  The criteria that a person must meet to be subject to the new formula are:

 

·          the person was a member of a couple throughout the person’s overall qualifying period and the person is a war widow/war widower-pensioner but the person was not a war widow/war widower-pensioner for some or all of the person’s overall qualifying period; or

 

·          the person was not a member of a couple at any time during the person’s overall qualifying period and the person is a war widow/war widower-pensioner but the person was not a war widow/war widower-pensioner for some or all of the person’s overall qualifying period.

 

If a person meets either of the above criteria then the formula at the end of new subsection 45UG(1A) is to be used to calculate the amount of the person’s pension bonus.  The formula calculates the pension bonus by taking the apportioned amount, times the pension multiple, times the number of years in the person’s overall qualifying period.

 

The new term “apportioned amount” is defined in new section 45UIA.

 

Item 12 amends subsection 45UG(2) by omitting the words “subsection (1) does not apply” and substituting “neither subsection (1) nor (1A) applies”.

 

Item 13 amends subsection 45UG(4) by inserting “, (1A)” after “subsection (1)”.

 

Items 14 - 16 amend the table in subsection 45UH(1). 

 

Item 14 amends the cell at column 3 of item 1 in the table in subsection 45UH(1) by repealing it and substituting a new cell.  The new cell provides that the annual notional single pension rate for a person who is not permanently blind and is not a war widow/war widower-pensioner is “the sum of the adjusted percentage of the person’s maximum basic rate under point SCH6-B1 and the person’s pension supplement under Module BA, worked out, in each case, as at the date of grant of the designated pension if it were assumed that the person were not a member of a couple at that date”. 

 

Item 15 amends the cell at column 3 of item 3 in the table in subsection 45UH(1) by repealing it and substituting a new cell.  The new cell provides that the annual notional single pension rate for a person who is a war widow/war widower-pensioner and was a war widow/war widower-pensioner throughout so much of the overall qualifying period as occurred when the person was not a member of a couple is “the person’s annual pension rate worked out as at the date of grant of the designated pension”.

 

Item 16 amends the cell at column 2 of item 4 in the table in subsection 45UH(1) by repealing it and substituting a new cell.  The new cell provides that for this item to apply to a person, the person must be a war widow/war widower-pensioner, who was not a war widow/war widower-pensioner for some or all of the overall qualifying period occurring while the person was not a member of a couple.

 

Item 17 repeals the definition of annual pension rate in subsection 45UH(2) and substitutes a new definition.  The new definition for “annual pension rate” provides that it is the person’s annual pension rate, worked out as at the date of grant of the designated pension.

 

Item 18 adds a note at the end of subsection 45UH(2).  The note advises that there may be circumstances where one or other of the bracketed parts of the formula will have a nil value.

 

Item 19 repeals the definition of provisional payment rate in subsection 45UH(2) and substitutes a new definition. The new definition provides new provisional payment rates for persons who are carrying over bonus periods that they would have accrued under the social security law and new provisional payment rates for persons who are blind in accordance with the method statements in SCH6-A1.  It also omits the references to the type of pension that a person is granted as this is not relevant to the person’s circumstances during the relevant part of their overall qualifying period.  Instead it details the person’s circumstances which are relevant to that part of their overall qualifying period.

 

Item 20 amends the cell at column 3 of item 1 in the table in subsection 45UI(1) by repealing the cell and substituting a new cell.  The new cell provides that the annual notional partnered pension rate for a person to whom this item applies is the sum of the adjusted percentage of the person’s maximum basic rate under point SCH6-B1 and the person’s pension supplement under Module BA, worked out, in each case, as at the date of grant of the designated pension if it were assumed that the person were a member of a couple at that date.

 

Item 21 amends the cell at column 3 of item 3 in the table in subsection 45UI(1) by repealing the cell and substituting a new cell.  The new cell provides that the annual notional partnered pension rate for a person to whom this item applies is the person’s annual pension rate worked out as at the date of grant of the designated pension.

 

Item 22 amends the cell at column 2 of item 4 in the table in subsection 45UI(1) by repealing it and substituting a new cell.  The new cell provides that for this item to apply to a person, the person must be a war widow/war widower-pensioner, who was not a war widow/war widower- pensioner for some or all of the overall qualifying period occurring while the person was a member of a couple.

 

Item 23 amends the formula in subsection 45UI(2) by replacing the incorrect term “annual payment rate” in the second bracketed part of the formula with the correct term “annual pension rate”.

 

Item 24 amends the definition of annual pension rate in subsection 45UI(2) by repealing the definition and substituting a new definition.  The new definition provides that the “annual pension rate” is the person’s annual pension rate, worked out as at the date of grant of the designated pension.

 

Item 25 adds a note to the end of subsection 45UI(2).  The note advises that there may be circumstances where one or other of the bracketed parts of the formula will have a nil value.

 

Item 26 amends the definition of provisional payment rate in subsection 45UI(2) by repealing the definition and substituting a new definition. The new definition provides new provisional payment rates for persons who are carrying over bonus periods that they would have accrued under the social security law and new provisional payment rates for persons who are blind in accordance with the method statements in SCH6-A1. The new definition also omits the references to the type of pension that a person is granted as this is not relevant to the person’s circumstances during the relevant part of their overall qualifying period.  Instead it details the person’s circumstances which are relevant to that part of their overall qualifying period.

 

Item 27   inserts a new section 45UIA after section 45UI.  New section 45UIA provides a formula for working out a person’s ‘apportioned amount’ for the purposes of the formula in new subsection 45UG(1A).

 

The new section also provides definitions for each of the terms used in the formula for ‘apportioned amount’. 

 

Item 28 provides that the amendments in this Part of this Act apply to any claim for pension bonus that is made under the VEA on or after the day on which this Act receives the Royal Assent.

 

C ommencement

 

Clause 2 provides that items 9 to 28 commence on Royal Assent.



Part 5 -           Amendments concerning the backdating of claims for partner

service pension in certain circumstances

 

Overview

 

These changes to the Veterans' Entitlements Act 1986 (VEA) provide for the payment of certain partner service pensions from a date earlier than the date the claims are lodged.

 

Background

 

A veteran with qualifying service may make a claim for an age or invalidity service pension.  As a consequence the veteran's partner may claim for a partner service pension.  Both of these pensions provide income support for veterans and their partners.

 

It is often the inability of a disabled veteran to continue employment that triggers these applications for income support.  In many cases the disabled veteran will also be applying for either a disability pension or an increase in the rate of disability pension in those instances where the veteran is already receiving a disability pension.

 

The applications are normally lodged concurrently or within a short time of each other.  Priority is given to determining the application for service pension to ensure that the veteran has access to income support payments as soon as possible.

 

The disability pension is paid at the special rate, also referred to as the Totally and Permanently Incapacitated (TPI) rate, in those cases where due to the total and permanent incapacity of the veteran resulting from war service, the veteran is unable to resume or to continue in their employment.

 

The various factors relating to the investigation of an application for the payment of disability pension at the special rate and the pursuance of appeal rights mean that it can take months or even years (in a small number of cases) to resolve the claim.

 

If the outcome of the claim is that the person is granted a special rate of disability pension, then that rate of pension may, for a person making an initial claim for a disability pension, be backdated 3 months prior to the date of lodgement of the application.

 

The issue to be addressed by the proposed amendments relates to the changes to the partner service pension provisions made by the Veterans' Affairs (1995-96 Budget Measures) Legislation Amendment Act 1995 .  Those amendments provide that a person will not be eligible to receive a partner service pension unless the person has reached 50 years of age or has a dependent child when the claim is made.  However, an exception was provided where a person is the partner of a veteran receiving a special rate of disability pension.

 

The issue that arises relates to the exception providing for the payment of a partner service pension to the partner of a veteran who is eligible for a disability pension at the special rate.  The initial claim for the special rate of disability pension may not be granted for a number of reasons and therefore the claim of the partner of the veteran for a partner service pension will be refused.

 

Subsequently, the disability pension is assessed as being payable at the special rate with the date of effect being either the date the claim was lodged or a date 3 months prior to the lodgement of the application.

 

The partner will then need to make a second claim for a partner service pension but the payment of the pension can only be granted from the date of the later claim.  The current legislation does not allow for the backdating of the second claim to the date of the first.

 

Explanation of the Changes

 

The proposed amendments are applicable to the partner of a veteran in the circumstances where the veteran has had a claim for payment of the disability pension at the special rate rejected initially but has subsequently had the claim accepted.

 

The proposed amendments provide that in the circumstances where the veteran partner is subsequently granted a disability pension at the special rate, the payment of a partner service pension to the partner of the veteran may be backdated to the date that the veteran becomes eligible for the special rate of disability pension.

 

The amendments also include an amendment to provide for the disclosure of personal information concerning the payment of the special rate of disability pension to the partner of the veteran.

 

Explanation of the Items

 

Item 29 inserts new section 38AA to allow for the disclosure of personal information concerning the veteran to the partner of the veteran.  New section 38AA is required because of the operation of the Privacy Act 1988 and the limits placed by it on the disclosure of personal information to a third party.

 

New section 38AA will allow the Department of Veterans’ Affairs to inform the partner of a veteran about the grant of a special rate of disability pension to the veteran for the purpose of the partner of that veteran making a claim for a partner service pension.

 

Principle 11 of the Information Privacy Principles as set out in section 14 of the Privacy Act 1988 provides for the disclosure (at paragraph 1(d)) of personal information in those circumstances where the disclosure “is required or authorised by or under law”.

 

Item 30 inserts a reference to new subsection 38B(3) into subsection 38B(1A).  Subsection 38B(1A) currently provides, subject to subsection 38B(2), that a person’s provisional commencement day is the day on which the person claims the partner service pension.

 

The amendment makes the provision also subject to subsection 38B(3).

 

Item 31 inserts new subsection 38B(3).  New subsection 38B(3) is applicable in the circumstances where the veteran partner has become eligible for the special rate of disability pension after the partner of the veteran has made a claim for partner service pension.

 

New subsection 38B(3) provides that where:

 

·            a claim for partner service pension by the partner of a veteran has been refused; and

·            that claim would not have been refused if the veteran was receiving a special rate disability pension; and

·      the veteran has subsequently been notified that he or she has been granted a disability pension at the special rate; and

·            the partner of the veteran makes another claim for partner service pension within 3 months of the notification to the veteran;

 

then the provisional commencement day for the payment of partner service pension will be the later of:

 

·            the day that the original claim for partner service pension was made; or

·            the day that the veteran became eligible for the special rate of disability pension.

 

Item 32 provides that the amendments made by items 29, 30 and 31 are to apply to claims for partner service pension that are lodged on or after the commencement of the items.

 

C ommencement

 

Clause 2 provides that items 29 to 32 commence on Royal Assent.



 

Part 6 -           Amendments to achieve alignment with social security law

concerning the treatment of compensation payable in lump sums

 

Overview

 

These amendments to the Veterans' Entitlements Act 1986 (VEA) will align the compensation recovery provisions applicable to multiple lump sums of compensation with those that apply under the Social Security Act 1991 .

 

Background

 

The amendments to the VEA made as part of the Veterans’ Affairs (1994-95 Budget Measures) Legislation Amendment Act (No. 2) 1994 aligned the VEA with the Social Security Act 1991 (SSA) in relation to the way in which compensation payments received by some pensioners were treated.

 

The VEA had previously provided that all periodic payments of compensation were treated as income for the purposes of the ordinary income test while all lump sum compensation payments were to be held as an asset of the person.

 

The 1994 amendments inserted new Part IIIC into the VEA to contain the compensation recovery provisions to mirror those found in Part 3.14 of the SSA.

 

Included in Part IIIC is section 59Q which is applicable to a person who receives a lump sum compensation payment while receiving a pension which is subject to the compensation recovery provisions.  In those circumstances part or all of the person’s pension will not be payable for a period known as the “lump sum preclusion period”.  The length of that period being determined by the amount and the nature of the lump sum payment.

 

Subsection 59Q(5) is the equivalent of subsection 1165(3B) of the SSA as it was at that time.  The subsection provides for the calculation of the lump sum preclusion period where a person receives compensation in the form of two separate lump sums.  The lump sum preclusion period for the second lump sum is taken to commence on the day after the last day of the lump sum preclusion period for the first payment.

 

The compensation recovery provisions of the VEA were not subsequently amended to include similar amendments to those made to the SSA made by Social Security Legislation Amendment Act (No. 1) 1995 .  The amendments to section 17 of the SSA made by that Act were intended to prevent the circumvention of the compensation recovery provisions by the payment of compensation in more than two lump sums.

 

Later amendments to the SSA by the Family and Community Services Legislation (Simplification and Other Measures) Act 2001 repealed the section 17 provisions relating to the payment of multiple lump sums and included the provisions in new section 1171 as part of the rewrite of Part 3.14.



 

Explanation of the Changes

 

It is proposed to amend the relative provisions of Part IIIC of the VEA applying to the treatment of multiple lump sums of compensation so that they will align more closely with the provisions that apply under the SSA following the rewrite of Part 3.14.

 

As a consequence subsection 59Q(5) relating to the receipt of two payments of lump sum compensation will be repealed and a separate provision applicable where two or more lump sums are received will be inserted as new section 59QA.

 

Explanation of the Items

 

Item 33 repeals subsection 59Q(5) which provides for the calculation of the lump sum preclusion period where a person receives compensation in the form of 2 separate lump sums.

 

Item 34 inserts new section 59QA.  New section 59QA provides for the determination of the deemed lump sum that arises from two or more separate payments.

 

New section 59QA will be applicable in the circumstances in which a person has received two or more lump sum payments of compensation relating to the same event that gave rise to an entitlement to compensation and at least one of the payments has been made wholly or partly in respect of lost earnings or lost capacity to earn.

 

In such circumstances the person will be taken to have received a single lump sum compensation payment equal to the sum of the multiple payments.  The single payment will be taken to have been received by the person, on either the day on which he or she received the last of the multiple payments or if the multiple payments were all received on the same day, that day.

 

Subsection 59QA(2) provides that a payment is not to be regarded as a lump sum payment if it relates exclusively to the payment of arrears of periodic compensation.

 

Item 35 provides that the amendments made by items 33 and 34 are to apply to multiple compensation payments in relation to the same event if at least one of the payments is received after the commencement of the items.

 

C ommencement

 

Clause 2 provides that items 33 to 35 commence on Royal Assent.