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Veterans' Affairs Legislation Amendment (Statements of Principles and Other Measures) Bill 2007

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2004 - 2005 - 2006

 

 

 

 

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

 

 

 

 

 Veterans’ Affairs Legislation Amendment (Statements of Principles and Other Measures) Bill 2006

 

 

 

 

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

 

 

 

 

 

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

The Honourable Bruce Billson MP)





VETERANS’ AFFAIRS LEGISLATION AMENDMENT (STATEMENTS OF PRINCIPLES AND OTHER MEASURES) BILL 2006

 

 

OUTLINE AND FINANCIAL IMPACT

This Bill gives effect to a number of minor measures that will correct anomalies and improve administrative procedures in the Veterans’ Affairs portfolio.  The proposed changes will have a negligible financial impact.

 

Statements of Principles

 

These amendments to the Veterans’ Entitlements Act 1986 (VEA) made by Schedule 1 provide for the review of a single factor or multiple factors within a Statement of Principles (SoP) by the Repatriation Medical Authority, rather than the entire contents of the SoP.

 

This measure has no financial implications.

 

Appropriation

 

These amendments to the Veterans’ Entitlements Act 1986 (VEA), made by Schedule 2, provide authority to fund, from the Consolidated Revenue Fund, benefits and allowances, the rates or amounts, or maximum rates or amounts of which, are fixed by, or calculated under VEA regulations or any other legislative instrument made under the VEA.

 

This measure has no financial implications.

 

Income streams (veterans)

 

These amendments to the Veterans’ Entitlements Act 1986 (VEA) made by Schedule 3 are intended to improve or enhance the operation of existing income streams rules and to clarify existing policy in relation to these products.  They also include consequential amendments, in response to changes in the family law, to allow the means test to be applied to certain non-superannuation annuities that are split pursuant to a divorce property settlement.

 

These measures have a negligible financial impact.

 

Other amendments

 

These amendments to the Military Rehabilitation and Compensation Act 2004 and the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 made by Schedule 4 will correct some minor errors and anomalies in those Acts.

 

Also included is a consequential amendment to the Veterans’ Entitlements Act 1986 associated with the amendment to the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 .

 

These measures have a negligible financial impact.



VETERANS’ AFFAIRS LEGISLATION AMENDMENT (STATEMENTS OF PRINCIPLES AND OTHER MEASURES) BILL 2006

 

 

 

 

NOTES ON CLAUSES

 

 

Clause 1 sets out how the Act is to be cited, that is, the Veterans’ Affairs Legislation Amendment (Statements of Principles and Other Measures) Act 2006 .

 

Clause 2 provides a table that sets out the commencement dates of the various sections in, and Schedules to, the Act.

 

Clause 3 provides that each Act that is specified in a Schedule is amended or repealed as set out in that Schedule.



 

Schedule 1 - Statements of principles

 

Overview

 

This Schedule makes amendments to the Veterans’ Entitlements Act 1986 (VEA) to provide for the review of a single factor or multiple factors within a Statement of Principles (SoP) by the Repatriation Medical Authority, rather than the entire contents of the SoP.

 

Background

 

The Repatriation Medical Authority (RMA) is a body of eminent medical-scientific experts who formulate Statements of Principles (SoP) for use in determining issues of medical causation for claims for compensation and treatment under the VEA.

 

The SoPs outline factors considered to be the causes of certain diseases, illnesses and injuries. SoPs are used to determine issues of causation in relation to claims for the acceptance of injury, disease or death as being service-related.  They are based on sound scientific evidence derived from the medical literature and other research findings.  The SoPs identify factors that must exist to cause a particular disease, injury or death.

 

Decision makers must decide if any of the factors in the SoPs for the condition being investigated apply to the claim, and, if so, whether that factor is connected to the service of the person.

 

There are two SoPs for each condition.  One is claims determined using the reverse criminal standard of proof (reasonable hypothesis); the other is for claims determined using the civil standard of proof (balance of probabilities).

 

The SoPs are disallowable instruments that are binding on decision makers.  The medical content of a SoP is binding on all decision makers at all levels, including the Repatriation Commission, the Veterans’ Review Board and the Administrative Appeal Tribunal and the courts.

 

Section 196E permits the Repatriation Commission, veterans, their dependants or organisations representing veterans or their dependants to request the RMA to review a SoP that is already in force.  Paragraph 196B(7)(b) enables the RMA to initiate a review of a SoP that is already in force.

 

The RMA in reviewing a SoP is required to review the medical-scientific evidence in relation to the entire SoP.  This is the case even where the request for review focuses on a single factor or several factors rather than the entire SoP.  This interpretation results from the words used in the relevant legislation that refers to reviews of the “contents of a Statement of Principles”.

 

Subsections 196B(7), (8), (9) and (10) provide for a review of a SoP to be carried out by the RMA.

 

The relevant provisions of the VEA referring to the RMA are found in Part XIA.

 

The Specialist Medical Review Council (SMRC) is an independent statutory body that reviews the contents of a SoP or a decision of the RMA not to issue a SoP. The SMRC consists of eminent medical practitioners and medical scientists who are selected by the Convenor of the SMRC on the basis of their expertise in the injury or disease relevant to the SoP subject to review.

 

Under subsections 196W(3) and (4) the SMRC may review the contents of a SoP and require the RMA to amend a SoP.

 

The relevant provisions of the VEA referring to the SMRC are found in Part XIB.

 

Explanation of the changes

 

The amendments being made to Parts XIA will allow the RMA to review a factor or multiple factors within a SoP, rather than having to review the whole of the SoP.

 

Consequential amendments to Part XIB will limit the SoP review powers of the SMRC to the factor or factors that were the subject of the review by the RMA.

 

Explanation of the items

 

Item 2 inserts new subsection 196B(7A).   Section 196B sets out the functions of the Repatriation Medical Authority.  Subsection 196B(7) refers to the review and investigation of a Statement of Principles following a request made under section 196E.  The amendments made by this Schedule provide for the review of “some or all of the contents” of a Statement of Principles (SoP).

 

New subsection 196B(7A) refers to the investigation made by the RMA in relation to either a request to the RMA under section 196E to review some of the contents of a Statement of Principles or a direction made by the Specialist Medical Review Council to the RMA to review a decision of the RMA to refuse to carry out an investigation.  The new subsection also refers to investigations resulting from a decision by the RMA to undertake a review of some or all of the contents of a SoP under paragraph 196B(7)(b).

 

Subsection 196B(7A) provides that the RMA may limit its investigation to matters that relate to those contents of the SoP that were the subject of the request or decision to review.  However, the RMA retains the discretion not to limit the investigation to only those matters that were the subject of the request or decision.

 

Item 1 and Items 3 to 5 amend the following provisions of Part XIA of the VEA to include the words “some or all of” before the words “the contents of a Statement of Principles”.  The provisions being amended are:

 

·          Subparagraph 196B(7)(a)(i);

·          Subparagraph 196C(4)(b)(iii);

·          Paragraph 196E(1)(f);

·          Subparagraph 196G(1)(a)(iii);

 

Items 6 to 11 amend the following provisions of Part XIB of the VEA.  The amendments made by Items 6, 8 and 10 include the words “some or all of” before the words “the contents of a Statement of Principles”.  The provisions being amended are:

 

·          Paragraph 196W(2)(a);

·          Paragraph 196Y(1)(d); and

·          Subparagraph 196Z(1)(a)(i).

 

The amendments made by Items 7, 9 and 11 include the words “some or all of” before the words “to review the contents of a Statement of Principles”.  The provisions being amended are:

 

·          Subsection 196W(3);

·          Paragraph 196Y(2)(a); and

·          Paragraph 196ZB(1)(b).

 

Commencement

 

The day after Royal Assent.



 

Schedule 2 - Appropriation

 

Overview

 

These amendments to the VEA, made by Schedule 2, provide authority to fund, from the Consolidated Revenue Fund, benefits and allowances, the rates or amounts, or maximum rates or amounts of which, are fixed by, or calculated under VEA regulations or any other legislative instrument made under the VEA.

 

Background

 

The current appropriation provision currently provides for funding, from the Consolidated Revenue Fund, of benefits and allowances, the rate or amounts, or maximum rates or amounts of which are fixed by  the VEA. 

 

A number of benefits and allowances provided under the VEA use rates or amounts that are fixed or calculated under either regulations or other legislative instruments authorised under the VEA.  These benefits and allowances include travelling allowance, Veterans’ Children Education Scheme allowances and payments under the Vehicle Assistance Scheme. 

 

Explanation of the changes

 

The Repatriation Act 1920 made provision for the payment of allowances and other pecuniary benefits, the rate or amount, or the maximum rate or amount of which was fixed by regulation or by refer to the Repatriation Act 1920 .  This inclusion of regulations in paragraph 199(c) of the VEA was inadvertently omitted.  The amendments, including the extension of paragraph 199(c) to include legislative instruments, reflect longstanding practice and correct a legislative oversight.  The nature of the benefits and allowances, the rates or amount, or maximum rates or amounts of which are fixed or calculated by regulation or other legislative instrument are demand driven and it is therefore difficult to predict the level of expenditure with a high degree of accuracy.  It is important that funding arrangements do not limit or delay eligible persons’ access to entitlements.

 

Explanation of the items

 

Item 1 amends paragraph 199(c) of the VEA.  The item omits the words “by this Act” and substitutes the words “by, or calculated under:

(i)                  this Act; or

(ii)                the regulations; or

(iii)              any other legislative instrument made under this Act;

and”.

 

Commencement

 

The day after Royal Assent.



 

Schedule 3 - Income streams (veterans)

 

Overview

 

The amendments made by Schedule 3 are intended to improve or enhance the operation of existing income streams rules and to clarify existing policy in relation to these products.  They also include consequential amendments, in response to changes in the family law, to allow the means test to be applied to certain non-superannuation annuities that are split pursuant to a divorce property settlement.

 

Items 1 to 4 amend references located in the section 5 - index of definitions.  The location of the definitions of the terms “family law affected income stream’, “original family law affected income stream”, “primary FLA income stream” and “secondary FLA income stream” are corrected by replacing references to subsection “5JC(1)” with references to section “5JC”.

 

Items 5 and 6 replace references to section “46Y” with references to new section “46YA” in notes 1 and 3 respectively of the definitions of “income” and “ordinary income” in subsection 5H(1).

 

Items 7 to 10 omit references to subsection 5JC(1) and replace them with references to section 5JC in regard to the definitions of “family law affected income stream”, “original family law affected income stream”, “primary FLA income stream”, and “secondary FLA income stream” in subsection 5J(1).  These changes take account of the repeal of subsection 5JC(2) and the reformatting of subsection 5JC(1) as section 5JC.

 

Item 11 amends note 5 in subsection 5J(1C).  Subsection 5J(1C) lists various investments that are not to be regarded as “managed investments” for the purposes of the VEA.  Note 5 refers to asset-tested income streams (long term) and states that they are “dealt with under sections 46W to 46Y”.  The amendment replaces the reference to section “46Y” with a reference to section “46YA”.

 

Item 12 replaces subsection 5J(1E).  In effect, this replaces the definition of a “defined benefit income stream”.  An income stream will be a “defined benefit income stream” if it meets the definition of a “pension” in regulation 1.06 of the Superannuation Industry (Supervision) Regulations 1994 (the SIS Regs), including the requirement that it be paid for life, and if the income stream results from a “defined benefit interest”, which is defined at regulation 1.03AA of the SIS Regs.

 

For the purposes of the “defined benefit income stream” definition, subparagraph 1.03AA(1)(b)(ii) needs to be disregarded, ie. the benefit that becomes payable under the income stream cannot be determined wholly from a specified amount, but must, at least in part, be defined by the factors listed at subparagraphs 1.03AA(1)(b)(i) or (iii).

 

This definition is intended to capture income streams provided by public sector (eg. Public Sector Superannuation Scheme) and corporate defined benefit superannuation schemes.  It is not intended to apply to income streams purchased from retail providers (eg AMP, AXA), or to income streams provided from self-managed superannuation funds and small APRA funds.

 

Item 13 inserts new subparagraph 5JA(2)(h)(ivb), which allows a lifetime income stream to be commuted, or split, to give effect to an order of the Family Court under Part VIIIAA of the Family Law Act 1975 .

 

Item 14 replaces the definition of “life expectancy period” in subsection5JA(7).  This definition is relevant for working out the guarantee period for a lifetime income stream (ie. the period during which the income stream will continue to be paid, or commuted to a lump sum, even if the primary beneficiary passes away).  In the case of a lifetime income stream owned by one person, the income stream must provide an income stream for a period equal to the primary beneficiary’s life expectancy or 20 years, whichever is the shorter.

 

For the purposes of this definition, the primary beneficiary has the option of whether or not to round his or her life expectancy up to the next whole number.  In the case of a lifetime income stream that is jointly owned, the income stream must provide an income stream for a period equal to the longer of the primary beneficiaries’ life expectancies or 20 years, whichever is the shorter.

 

Item 15 amends paragraph 5JB(2)(a).  Section 5JB defines for the purposes of the VEA the meaning of “asset-test exempt income stream - life expectancy income streams”.  The amendment includes a reference to new subsection 5JB(2E), ie. a life expectancy income stream’s term must now comply with any of subsections 5JB(2B), (2C) or (2E).

 

Item 16 inserts new subparagraph 5JB(2)(h)(ivb), which allows a life expectancy income stream to be commuted, or split, to give effect to an order of the Family Court under Part VIIIAA of the Family Law Act 1975 .

 

Items 17 and 18 amend subsections 5JB(2B) and 5JB(2C) so that these provisions now only apply in the case of a life expectancy income stream that was owned by one person on its commencement day.

 

Item 19 inserts new subsections 5JB(2E) and (2F). New subsection 5JB(2E) provides the allowable term for a jointly owned life expectancy income stream.  To qualify for asset-test exempt status, the term of a jointly owned life expectancy income stream must be no shorter than the lesser of the primary beneficiaries’ life expectancies, rounded up, and no longer than the period worked out under subsection 5JB(2F).

 

New subsection 5JB(2F) sets out the maximum allowable term for a jointly owned life expectancy income stream for the purposes of the VEA.  The maximum allowable term is the greater of the maximum allowable terms specified in new paragraphs 5JB(2F)(a) and (b).  New paragraph 5JB(2F)(a) provides that the maximum allowable term is the greater of:

 

·          the primary beneficiary’s life expectancy at an age five years younger; and

·          the reversionary partner’s life expectancy at an age five years younger.

 

New paragraph 5JB(2F)(b) provides that the maximum allowable term is equal to the greater of the number of years between the commencement of the income stream and when the primary beneficiary, or the reversionary partner, turns 100 years old.  These maximum allowable terms are to be rounded up to the nearest whole number.

 

As well as extending the maximum allowable term, these new rules allow customers who are very close to turning 100 years old, or already have turned 100, to still purchase these products and receive the same means test concessions as younger customers.

 

This change provides members of a couple who are both reversionary partners, and who want to purchase a joint asset test exempt income stream, with greater flexibility in selecting a term that best suits their individual and joint requirements.

 

Item 20 is a format change to provide for the content of subsection 5JC(1) to be correctly identified as section 5JC, as subsection 5JC(2) is being repealed by Item 22, below.

 

Item 21 repeals paragraphs 5JC(1)(a) and (b) and replaces them with paragraphs 5JC(1)(a) and (b).  These new paragraphs define the term “family law affected income stream”.  These changes recognise that due to amendments to the Family Law Act 1975 , income streams can now also be the subject of a payment split under Part VIIIAA of that Act.

 

Item 22 repeals subsection 5JC(2), which defines terms that are no longer used in new section 5JC.

 

Item 23 amends Note 2 to section 46.  Section 46 defines for the purposes of the VEA the general meaning of a person’s ordinary income.  Note 2 to section 46 refers to other provisions of the VEA which affect the amount of a person’s ordinary income.  The Note is amended by replacing a reference to section “46Y” with a reference to new section “46YA”.

 

Item 24 makes a formatting amendment to section 46W.  Section 46W provides that for the purposes of working out the annual rate of ordinary income of an asset-tested income stream the person is taken to receive from the income stream the amount worked out under section 46X or 46Y.  The section is amended by inserting a reference to subsection “(1)” as a consequence of the insertion of new subsection 46W(2) at Item 25 below.

 

Item 25 inserts new subsection 46W(2).  New subsection 46W(2) provides that sections 46X and 46Y will not apply where new section 46YA is applicable.

 

Item 26 inserts new section 46YA.  New  section 46YA applies to an asset-tested income stream (long term), which is not a “family law affected income stream”. The income stream will either be an “allocated pension”, as defined in subregulation 1.03(1) of the SIS Regs, or an annuity, as defined in subsection 10(1) of the Superannuation Industry (Supervision) Act 1993 , which is provided under a contract that meets the requirements of subregulation 1.05(4) of the SIS Regs.

 

For this section to apply, the income stream must make, or be going to make, payments during the financial year, or during that part of a financial year after the income stream’s commencement where the income stream commences partway through a financial year.  This period during which these payments are made, or are to be made, is defined as the “payment period”.

 

The payment period refers to a whole financial year, or where the income stream is purchased during that financial year, the period from the income stream's commencement date to the end of that financial year.   Where, on a day in the payment period, the amount worked out under the formula in new subsection 46YA(2) is less than the amount worked out under the formula in new subsection 46YA(3) then the person is taken to have an annual rate of ordinary income on that day equal to the amount worked out under the formula in new subsection 46YA(3).

 

Where the amount worked out under the formula in new subsection 46YA(2) is not less than the amount worked out under the formula in new subsection 46YA(3) then new section 46YA will not apply, and either section 46X or 46Y should be applied.

 

New subsection 46YA(4), in effect, provides that new section 46YA will not apply to an income stream purchased in June of any year (ie. the last month of the financial year) for the balance of that financial year, if no payment is to be made from the income stream until the following financial year.  This means that, where section 46YA applies to a person who purchases an income stream in June and the person does not receive a payment for June, the person will not be assessed with any income from the income stream until the following financial year (ie. the person would not be assessed as receiving any income from the income stream during the month of June in which the income stream is purchased).

 

Example 1

 

Mary Jones, who turned 57 on 5 September 2005, invests $200,000 in an allocated pension fund on 1 June 2006.  While the commencement day of the income stream is 1 June 2006, the date of the first payment to Ms Jones is    1 July 2006.  Consequently, the payment period is the 12-month period from 1 July 2006 to 30 June 2007.  No income is assessed from the income stream for June 2006.

 

Example 2

 

John Barry, who turns 60 on 1 July 2006, commences an allocated income stream from that date based on an initial account balance of $200,000.

 

Mr Barry elects initially to draw down an annual amount of $15,000 for 2006-07.  (This amount is between the minimum and maximum payment limits of $11,560 and $20,200 respectively.)  He elects to receive 12 monthly payments of $1,250 on the first of each month.

Under the formula in subsection 46YA(2), the annual rate of income assessed for the purposes of the VEA is as follows:

 

= {($15,000/365) - $200,000/(17.70 x 365)} x 365

= $3,700.56

 

After 9 months, Mr Barry has received 9 monthly payments of $1,250 totalling $11,250.

On 31 March, Mr Barry elects to reduce his annual payment from $15,000 to $12,000 with the remaining $750 to be paid on in equal instalments of $250 on the 1st of each three remaining months.  The elected amount is above the minimum payment limit of $11,560.

 

While the income stream only pays $750 in gross income during the final three months of the financial year, the total payments for the payment period, being the financial year 2006-07, is $12,000.  Assessable income under the formula in subsection 46YA(2) would be:

 

= {($12,000/365) - $200,000/(17.70 x 365)} x 365

= $700.56

 

Item 27 repeals and replaces sections 46ZA, 46ZB and 46ZC.  These new provisions make it clear that in the case of “family law affected income streams” which are either an asset-test exempt income stream or an asset-tested income stream (long term), the Commission is to determine the annual rate of ordinary income that a person is taken to receive from one of these income streams.  In making such a determination the Commission must comply with any decision-making principles that it has made for this purpose.

 

Item 28 repeals and replaces subsection 52BA(2), (3) and (4) and inserts new subsection 52BA(5).  These new provisions make it clear that in the case of “family law affected income streams” the Commission is to determine the asset value of those income streams for assets-testing purposes.  In making such a determination the Commission must comply with any decision-making principles that it has made for this purpose.

 

Item 29 inserts new subsection 52C(3B).  This new subsection provides that a partially asset-test exempt income stream (defined in section 52 of the VEA) will not be subject to the general rule that, where a person’s asset is subject to a charge or encumbrance then the value of that asset, for the purposes of the VEA, will be reduced by the value of the charge or encumbrance.

 

Item 30 amends point SCH6-E2 of Schedule 6.  Point SCH6-E2 contains the Method Statement for working out the effect of a person’s ordinary/ adjusted income on their maximum payment rate of service pension or income support supplement.  The reference in paragraph (d) of Note 2 to Step 6 is amended to replace the reference to section “46Y” with a reference to new section “46YA”.

 

Item 31 provides for the application of the amendments made in Schedule 3.

 

Commencement

 

The day after Royal Assent.



 

Schedule 4 - Other amendments

 

Overview

 

The amendments to the Military Rehabilitation and Compensation Act 2004 and the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 made by this Schedule will correct some minor errors and anomalies in those Acts.

 

Also included is a consequential amendment to the Veterans’ Entitlements Act 1986 associated with the amendment to the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 .

 

Background

 

The Military Rehabilitation and Compensation Act (MRCA) commenced on

1 July 2004.   The new Act provides compensation and other benefits for current and former members of the Defence Force and their dependants.

 

The MRCA combines elements of the Veterans’ Entitlements Act 1986 (VEA) and the Safety, Rehabilitation and Compensation Act 1988 (SRCA).

 

Transitional provisions and consequential amendments were made by the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 .

 

The Act covers all permanent and reserve members of the Australian Defence Force, cadets and cadet instructors who have warlike, non-warlike and peacetime service.  It provides treatment, rehabilitation and compensation for those members who suffer a mental or physical injury, or contract a disease, as a result of service after 30 June 2004.

 

Benefits provided by the new Act match and in many cases, enhance those provided under previous arrangements.

 

Military Rehabilitation and Compensation Act 2004

 

Explanation of the changes

 

Liability for self-inflicted disease

 

The amendments made by Items 1 and 2 relate to the acceptance of liability by the Military Rehabilitation and Compensation Commission (the Commission) for diseases contracted by service personnel.  There are some service injuries and diseases for which liability may not be accepted by the Commission.

 

Even if the Commission decides that an injury, disease or death is a service injury, disease or death, the Commission may be prevented from accepting liability for that injury, disease or death because of the exclusion provisions referred to in sections 32 to 36 of the MRCA.

 

One of the exclusion provisions excludes the Commission from liability in the circumstances where “the injury was intentionally self-inflicted” (paragraph 32(1)(c)).

 

The effect of this provision is that while the Commission cannot accept liability where a material contribution to or aggravation of a disease or a sign or symptom of a disease is self-inflicted, it is able to accept liability for a self-inflicted disease (unless one of the other exclusions applies).

 

The discrepancy appears to be unintended as it was intended that these provisions would closely follow similar provisions in the Safety, Rehabilitation and Compensation Act 1988 (SRCA).  Subsection 14(2) of that Act provides that “compensation is not payable in respect of any injury that is intentionally self-inflicted”.  Although the reference is to an “injury” the definition of that term in the Act includes “diseases”.

 

Incapacity payments

 

The amendments made by Items 3 and 4 and Items 7 to 12 concern the determination of the amount of incapacity payments payable to members of the Defence Force who suffer injury or disease during initial training.

 

The amount of incapacity payment to which a person is entitled is based on the difference between their normal earnings and their actual earnings, where they are less because of their service injury or disease.

 

Section 91 contains the formula for calculating the normal earnings of a Permanent Forces member, or a continuous full-time Reservist who is incapacitated for service.  The amendment to the definition of “compensable pay-related allowance” in subsection 91(5) by Item 3 is being made as a consequence of the proposed amendments to section 189 being made by Items 9 to 12.  Those amendments will include, in the calculation of a person’s normal earnings under section 91, the amount of pay and pay-related allowances that the person would have earned if the person had completed their initial training, rather than being incapacitated for service during that training.

 

Section 96 contains the formula for calculating the ADF component of incapacitated Reservist’s normal earnings.  The amendment to the definition of “compensable pay-related allowance” in subsection 96(3) by Item 4 is being made as a consequence of the proposed amendments to section 189 being made by Items 9 to 12.  Those amendments will include in the calculation of an incapacitated Reservist’s ADF component of their normal earnings under section 96, the amount of pay and pay-related allowances that the person would have earned if the person had completed their initial training, rather than being incapacitated for service during that training..

 

Section 154 provides the formula for working out of the ADF Component of normal earnings for a former part-time Reservist who was engaged in civilian work before leaving the Defence Force.  The ADF component is based on how much the person would have earned as a part-time Reservist if the person was still a part-time Reservist and was not incapacitated for service.

 

Item 7 repeals the definition of “compensable pay-related allowance” in subsection 154(3) and substitutes a new definition.  The new definition provides that a “compensable pay-related allowance” for an incapacitated person is a pay-related allowance payable immediately before the person last ceased to be a member of the Defence Force or a pay-related allowance the person would have been paid after completing initial training as referred to in section 189.

 

Section 161 provides the formula for the working out of the normal earnings for an incapacitated person who was a part-time Reservist when the service injury or disease occurred.  It is applicable in the circumstances where the person remained a part-time Reservist until leaving the Defence Force and was not working in the civilian workforce before leaving the Defence Force.

 

Under section 161 the normal earnings are determined using a formula that refers to the person’s rate of pay and the rate of pay-related allowances payable to the person.

 

Item 8 repeals the definition of “compensable pay-related allowance” in subsection 161(3) and substitutes a new definition.  The new definition provides that a “compensable pay-related allowance” for an incapacitated person is a pay-related allowance payable immediately before the person last ceased to be a member of the Defence Force or a pay-related allowance the person would have been paid after completing initial training as referred to in section 189.

 

Under section 189 the normal earnings used to calculate incapacity payments for members of the Defence Force who suffer injury or disease during initial training before completing their last period of full-time service or last ceasing to be a member of the Defence Force are increased to reflect what the rate of normal earnings would have been but for the person’s incapacity for service.

 

Section 189 was intended to reflect a similar provision at paragraph 8(6)(b) of the Safety, Rehabilitation and Compensation Act 1988 .

 

Section 189 is applicable where the normal earnings of the Defence Force member are calculated under sections 104, 109, 141, 144, 164 and 168.  The amendments made by Items 9 to 12 will ensure that section 189 also applies to members whose normal earnings are calculated under sections 91, 96, 154 and 161.

 

Because section 189 does not include references to those sections there are no provisions in the MRCA to adjust the normal earnings of:

 

·          members who are incapacitated for service during recruit training or officer cadet training who remain in the Defence Force;

·          part-time Reservists who are incapacitated for service during initial training but who continue to serve as part-time Reservists;

·          former part-time reservist members who are incapacitated for work during initial training and who were engaged in civilian work before last ceasing to be a member of the Defence Force; and

·          former part-time reservists who are incapacitated for work during initial training but who were not engaged in civilian work before last ceasing to be a member of the Defence Force;

 

The amendments will rectify the failure to include the references to the relevant sections in section 189.  The unintended omission of the references from the provision as it was originally drafted has resulted in some members and former members who have been incapacitated for service not having their levels of normal earnings calculated as they should have been.

 

These amendments will provide that all members and former members who are injured or contract a disease whilst undergoing initial training, whose normal earnings in the Defence Force are at the trainee level, and whose final Defence Force income has not been attained, will be paid at the same progression rate as his or her classmates during the training period until completion of that training.

 

The person will be deemed to have graduated from the initial training at the same time as his or her classmates.  Once the person is deemed to have graduated, the person’s normal earnings will be calculated against the rank, and employment category the relevant Service chief advises the person would have held on completion of the initial training program.

 

Item 11 inserts new subparagraph 189(1)(a)(ia).  The new subparagraph refers to the “onset date for the person’s incapacity for service” where sections 91 or 96 are applicable.  This is required in order to ensure that where section 189 applies to members, its application is limited to members  who were undertaking initial training immediately before the onset of their incapacity for service.

 

Removal of the age 65 age limit for payment of the Special Rate Disability Pension

 

The payment of a Special Rate Disability Pension (SRDP) was included in the Military Rehabilitation and Compensation Act 2004 (MRCA) to ensure that the equivalent of the Special Rate pension payable under the VEA was a part of the new Act.

 

The MRCA provides that the SRDP will be payable to claimants instead of incapacity payments where they meet certain criteria. While generally incapacity payments will cease at age 65, it was intended that payment of the SRDP would be for life, consistent with payments of the Special Rate pension under the VEA.

 

Section 120 provides that all compensation payable under section 118, including both SRDP and incapacity payments (other than compensation referred to in section 121) will cease at age 65. 

Section 121 provides that compensation will be payable for a maximum of 104 weeks for persons aged 63 or over.

 

Items 5 and 6 amend sections 120 and 121 to exclude the payment of SRDP from the list of compensation payments that will cease payment at age 65 or after 104 weeks.

 

Determination of the treatment path

 

Before determining a claim made under section 319 for compensation under the MRCA, the Commission must conduct a needs assessment in respect of the person with the service injury or disease.  Sections 325 and 326 set out the requirements for the needs assessment.

 

Having undertaken such an assessment, the Commission is required under section 327 to determine a treatment path for the person by deciding which of either sections 271 or 280 is applicable.

 

If the decision is that section 271 applies, treatment of the injury or disease is provided by reimbursing the reasonable costs of treatment.

 

If the decision is that section 280 applies, the person is provided with treatment for the accepted condition..

 

As it is presently set out section 327 assumes that all persons with a service injury or disease will be entitled to treatment under MRCA.  However, with the exception of those persons eligible under sections 272 and 279 continuing members of the Defence Force are not entitled to treatment under MRCA.  This is because they are entitled to treatment under regulation 58F of the Defence Force Regulations.

 

Section 327 also ignores the fact that a person with 60 or more impairment points or a person who is eligible for SRDP is entitled to a gold card without the need for the making of any determination.

 

The amendments to section 327 made by Items 22 to 24 provide that a determination by the Commission concerning the appropriate treatment path is only required where the person is entitled to treatment under MRCA; and no determination is required if the person meets the criteria in section 281 for treatment for all conditions.

 

Travel expenses to attend hearings of the Veterans’ Review Board

 

While the MRCA was primarily modelled on the Safety, Rehabilitation and Compensation Act 1988 , it did also incorporate some of the features of the VEA.  One of these was the right to appeal certain decisions of the Commission, to the Veterans’ Review Board (VRB).  The VRB is established under Part IX of the VEA.

 

Section 353 of the MRCA sets out in a table the provisions of the VEA that are to apply for the purposes of a review of MRCA decisions by the VRB.  In restricting the list of VEA provisions that are to apply to those listed in subsection 353(1), no provision was made for the payment of travelling expenses for:

 

·          an applicant to the VRB and that person’s attendant where they travel for the purpose of attending the Board’s hearings as is provided for under the VEA in subsections 132(5)and (6); or

·          a person making a claim on behalf of the claimant who travels with the Commission’s approval to attend a hearing by the Veterans’ Review Board as is provided for under the VEA in subsection 132(9).

 

The amendments to section 353 made by Items 25 to 27 include references to subsections 132(5), (6), (9), (10), (11), (11A), (11B) and (11C) of the VEA in the list of provisions of the VEA that will be applicable for the purposes of attending a review by the Veterans’ Review Board.  The amendments also modify subsections 132(5), (6), (9), (11A) and (11C) for the purpose of their application to MRCA clients.

 

A consequential amendment to the appropriation provision in section 423 is made by Item 29 to include travelling expenses payable under section 353 because of the application of subsections 132(5), (6), (9), (10), (11), (11A), (11B) or (11C) of the VEA.  This amendment has the effect of appropriating the Consolidated Revenue Fund for the purpose of paying travelling expenses incurred by those travelling for the purpose of attending VRB hearings.

 

Extend the Military Rehabilitation and CompensationCommission’s delegation powers to regulations and other legislative instruments

 

Section 384 allows the Military Rehabilitation and Compensation Commission to delegate any of the functions or powers given to it under a provision of the MRCA.

 

That section of MRCA is equivalent of section 213 of the VEA.

 

The delegation power given under section 384 does not specifically provide for the Military Rehabilitation and Compensation Commission to delegate any of the powers or functions given to it under the regulations or instruments that are raised under the MRCA.

 

The amendment to section 384 made by Item 28 provides that the Military Rehabilitation and Compensation Commission will be able to delegate any of the functions or powers given to it under the regulations or instruments made under the MRCA except the power of delegation.

 

Minor and technical amendments

 

Section 204 provides for the rate of Special Rate Disability Pension (SRDP) that is payable under the MRCA to be offset by the receipt of permanent impairment payments made under the MRCA or  Commonwealth superannuation scheme payments made after a person’s retirement.

 

Subsection 204(6) provides that the rate of reduction in SRDP for any superannuation received by the person under a Commonwealth superannuation scheme is 60% of the reduction that would apply if the person were receiving incapacity payments under the MRCA.

 

The reference in subsection 204(6) to the reduction in SRDP is to superannuation received by the person as provided for in subsection 204(4).

 

The reference is incorrect as the reference to superannuation is in subsection 204(5).

 

The reference to subsection 204(4) in subsection 204(6) is amended by Item 13 to refer to subsection 204(5).

 

Section 226 provides that the Commonwealth is liable for compensation for any loss of or damage to medical aids that occurs while the Defence Force member is rendering service.

 

Section 228 provides that compensation will not be payable in certain circumstances.  Those circumstances include loss or damage that occurs during a journey that has been substantially delayed or that has been undertaken by an indirect route.

 

Section 228 incorrectly refers to the “Commission” as not being liable for the relevant compensation.  The reference in order to be consistent with section 226 should have referred to the “Commonwealth”.

 

The amendments made by Items 14 to 16 replace references to the “Commission” in subsections 228(1), (2) and (3) with references to the “Commonwealth”.

 

Section 234 sets out the amount of compensation payable to the wholly dependant partner of a deceased member of the Defence Forces.

 

Section 237 provides that after a period of 6 months the Commonwealth is liable to pay a weekly amount of compensation in the circumstances where the dependant has not made a choice under section 236 as to whether to receive compensation in a lump sum or as a weekly amount.

 

In the circumstances where the dependant subsequently accepts a lump sum after receiving payments under section 237, a formula set out in subsection 237(2) provides for the lump sum to be reduced by the total amount of the weekly compensation payments received by the dependant.

 

The formula incorrectly refers to the amount of the lump sum being payable under subsection 237(4).  The correct reference is subsection 234(4).

 

The formula in subsection 237(2) is repealed and substituted by Item 17 which replaces the reference to “subsection 237(4)” with a reference to “subsection 234(4)”.

 

Section 253 provides that the Commonwealth is liable to pay a weekly amount of compensation to certain children and young people who were wholly or mainly dependent on deceased members.

 

Section 254 provides that the amount of weekly compensation payable under section 253 is $66 per week.  The section incorrectly refers to the “Commission” as being liable for the payment.

 

The amendment to section 254 made by Item 18 omits the reference to the “Commission” and replaces it with the correct reference to the “Commonwealth”.

 

Section 257 specifies who is to receive payments of compensation  to eligible young persons entitled under Divisions 2 to 4 of Part 3 of the MRCA.

 

Subsection 257(2) provides that if 2 eligible young persons are entitled to compensation under section 255 because of the same deceased member's death, then compensation under that section is payable in accordance with the directions of the Commission.

 

Subsection 257(2) should have referred to “2 or more” eligible young persons.

 

The amendment to subsection 257(2) by Item 19 inserts the words “or more” to ensure that eligibility can be extended to all eligible young persons.

 

Most benefits provided under the MRCA require a claim to have been made under section 319 in respect of a person.  The claim can be made by a current or former member who suffered a service injury or disease, a dependant of a deceased member, or a person who is entitled to compensation.  A claim can also be made on behalf of such a person.

 

Section 320 sets out in subsection (1) who is able to make a claim under section 319.  Subsection 320(2) provides for a claim to be made on behalf of the eligible person referred to in subsection 320(1) by a person who has the person’s approval, by a person’s legal personal representative or another person approved by the Commission where the person is unable, because of physical or mental incapacity to approve a person to make a claim on his or her behalf.

 

Section 320 does not make an unambiguous provision for a parent or guardian, a person approved by a parent or guardian or the Commission to lodge a claim on behalf of a member or a dependant who is under the age of 18.

 

The amendments to subsection 320(2) made by Items 20 and 21 provide for various parties to lodge a claim on behalf of a dependant, member or a former member who is under the age of 18 years.

 

Explanation of the items

 

Item 1 amends paragraph 32(1)(c) to include a reference to a disease being “intentionally self-inflicted”.

 

Item 2 is an application provision.  It provides that the amendment to section 32 made by Item 1 applies in respect of claims for acceptance of liability that are made under section 319 of the MRCA on or after the commencement of the item, including any claims made after that date in respect of diseases that are intentionally self-inflicted before that date.

 

Item 3 amends the definition of “compensable pay-related allowance” in subsection 91(5) by inserting new paragraph (c).  New paragraph 91(5)(c) includes any pay-related allowance that the member would have been paid after the completion of initial training as referred to in section 189.

 

Item 4 amends the definition of “compensable pay-related allowance” in subsection 96(3) by inserting new paragraph (c).  New paragraph 96(3)(c) includes any pay-related allowance that the incapacitated Reservist would have been paid after the completion of initial training as referred to in section 189.

 

Item 5 amends section 120 by replacing the reference to “section 118” with a reference to  “paragraph 118(2)(b)”.

 

Item 6 amends paragraph 121(1)(a) by replacing the reference to “section 118” with a reference to “paragraph 118(2)(b)”.

 

Item 7 repeals and substitutes the definition of “compensable pay-related allowance” in subsection 154(3).

 

Item 8 repeals and substitutes the definition of “compensable pay-related allowance” in subsection 161(3).

 

Items 9 to 12 amend section 189.  The amendments insert references to sections 91, 96, 154 and 161 in subsection 189(1) and insert new paragraph 189(1)(a)(ia).  New paragraph 189(1)(a)(ia) provides that if either section 91 or 96 is applicable the relevant date is the onset date for the person’s incapacity.

 

Item 13 omits the reference to “subsection (4)” in subsection 204(6) and inserts a reference to “subsection (5)”.

 

Items 14 to 16 replace references to the “Commission” and insert references to the “Commonwealth” in subsections 228(1), (2) and (3).

 

Item 17 repeals and substitutes the formula in subsection 237(2).

 

Item 18 replaces the reference in section 254 to the “Commission” with a reference to the “Commonwealth”.

 

Item 19 inserts the words “or more” before the word “eligible” in subsection 257(2).

 

Items 20 and 21 insert new paragraph 320(2)(d) and amend subsection 320(3).  New paragraph 320(2)(d) provides that either the parent or guardian, another person approved by the parent or guardian or another person approved by the Commission may make a claim for compensation on behalf of a dependant under the age of 18.  Subsection 320(3) is amended to include a reference to subparagraph 320(2)(d)(iii).

 

Items 22 and 23 amend section 327.  The text of section 327 is reformatted as subsection (1) and a reference to it being subject to new subsections (2) and (3) is inserted.  New subsections 327(2) and (3) are inserted.

 

Item 24 is an application provision.  It provides that the amendments to section 327 made by Items 22 and 23 apply in respect of claims for acceptance of liability that are made under section 319 of the MRCA on or after the commencement of the item.

 

Items 25 and 26 amend section 353.  The amendments include a reference to subsections 132(5), (6), (9), (10), (11), (11A), (11B) and (11C) of the VEA being included in subsection 353(1) and the inclusion of Items 7A to 7D in the table in subsection 353(2) referring to the application of those subsections of the VEA.

 

Item 27 is an application provision.  It provides that the amendments made by Items 25 and 26 apply in respect of applications for review that are made under section 352 of the MRCA on or after the commencement of the item.

 

Item 28 amends section 384 by omitting the words “a provision of this Act” and inserting the words “this Act, under the regulations or under any other legislative instrument made under this Act (other than this power of delegation)”.

 

Item 29 is a consequential amendment to the appropriation provision in section 423 to include travelling expenses payable under section 353 (amended by Items 25 and 26 ) because of the application of subsections 132(5), (6), (9), (10), (11), (11A), (11B) or (11C) of the VEA.

 

Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004

 

Explanation of the changes

 

Prior the introduction of the MRCA there was an intention that certain aspects of the VEA were to be included in the new Act, to ensure that the scheme did not disadvantage those who would, in the absence of the MRCA, have been able to access VEA benefits.

 

In practice a different approach was adopted with the retention of the relevant provisions in the VEA which ensured continued access to those provisions by ADF personnel with post 1 July 2004 service.

 

It was intended that section 88A of the VEA was to continue its operation beyond 1 July as it provides for access to specified treatment by certain veterans and dependants under a determination by the Repatriation Commission.

 

However, section 88A was amended by the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 (the Act) to insert new subsection (1A) so that it was closed to service after 1 July 2004.

 

The amendment to the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 made by Item 30 will repeal Item 28 of Schedule 1 of the Act.  This means that MRCA clients who are veterans and dependants of MRCA clients who are veterans within the meaning of that term in the VEA may be entitled to certain types of treatment under the VEA.

 

Explanation of the items

 

Item 30 repeals Item 28 of Schedule 1 of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 .

 

Veterans’ Entitlements Act 1986

 

Explanation of the changes

 

The amendment to the VEA made by Item 31 is associated with the amendment to the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 made by Item 30.

 

Explanation of the items

 

Item 31 amends section 88A of the VEA to repeal new subsection (1A) inserted by Item 28 of Part 1 of Schedule 1 of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004 .

 

Commencement

 

Items 1, 2, 5, 6, and 13 to 31

 

The day after Royal Assent.

 

Items 3, 4, and 7 to 12

 

Immediately after the commencement of section 189 of the Military Rehabilitation and Compensation Act 2004 .