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DEFENCE FORCE RETIREMENT BENEFITS LEGISLATION AMENDMENT (FAIR INDEXATION) BILL 2014

 

 

 

2013-2014 

 

The Parliament of the 

Commonwealth of Australia 

 

HOUSE OF REPRESENTATIVES 

 

 

 

 

Presented and read a first time 

 

 

 

 

Defence Force Retirement Benefits 

Legislation Amendment (Fair 

Indexation) Bill 2014 

 

No.      , 2014 

 

(Veterans' Affairs) 

 

 

 

A Bill for an Act to amend the law in relation to 

defence force retirement benefits, and for related 

purposes 

   

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

i 

 

Contents 

Short title ........................................................................................... 1

 

Commencement ................................................................................. 1

 

Schedule(s) ........................................................................................ 2

 

Schedule 1--Amendments

 

3

 

Defence Force Retirement and Death Benefits Act 1973

 

3

 

Defence Forces Retirement Benefits Act 1948

 

13

 

 

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

1 

 

A Bill for an Act to amend the law in relation to 

defence force retirement benefits, and for related 

purposes 

The Parliament of Australia enacts: 

1  Short title 

 

  This Act may be cited as the Defence Force Retirement Benefits 

Legislation Amendment (Fair Indexation) Act 2014

2  Commencement 

 

  This Act commences on the day after this Act receives the Royal 

Assent. 

10 

   

   

 

 

2 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

3  Schedule(s) 

 

  Each Act that is specified in a Schedule to this Act is amended or 

repealed as set out in the applicable items in the Schedule 

concerned, and any other item in a Schedule to this Act has effect 

according to its terms. 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

3 

 

Schedule 1

--Amendments 

   

Defence Force Retirement and Death Benefits Act 1973 

1  Before section 98A 

Insert: 

Division 1--Introduction 

98AA  Simplified outline of this Part 

Certain pension benefits are indexed each 1 January and 1 July. 

For pensioners aged under 55, the indexation is based on positive 

movements in the consumer price index. 

10 

For pensioners aged 55 or older, the indexation is based on the 

11 

more favourable of positive movements in: 

12 

 

(a) 

the consumer price index; and 

13 

 

(b) 

the pensioner and beneficiary living cost index; 

14 

with an adjustment if needed to ensure that affected pension 

15 

benefits are increased by at least the percentage required to 

16 

maintain a hypothetical pension at 27.7% of male total average 

17 

weekly earnings. 

18 

2  Section 98A (heading) 

19 

Repeal the heading, substitute: 

20 

98A  Definitions 

21 

3  Subsection 98A(1) 

22 

Omit "(1)". 

23 

4  Subsection 98A(1) 

24 

Insert: 

25 

Schedule 1  Amendments 

   

 

 

4 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

55-plus percentage has the meaning given by step 7 of the method 

statement in subsection 98GB(2). 

current indicative pension amount has the meaning given by step 

4 of the method statement in subsection 98GB(2). 

December quarter means the quarter ending on 31 December. 

indicative pension amount has the meaning given by 

subsection 98GC(1). 

June quarter means the quarter ending on 30 June. 

LCI percentage (short for living cost index percentage) has the 

meaning given by section 98GD. 

10 

March quarter means the quarter ending on 31 March. 

11 

pensioner means a person to whom a pension benefit is payable. 

12 

prescribed percentage has the meaning given by 

13 

subsection 98B(3). 

14 

relevant rate has the meaning given by subsection 98B(4). 

15 

September quarter means the quarter ending on 30 September. 

16 

5  Subsections 98A(2), (3) and (4) 

17 

Repeal the subsections. 

18 

6  After section 98A 

19 

Insert: 

20 

98AB  Substitutions and changes by Statistician 

21 

 

(1)  Subject to subsection (2), if at any time (whether before or after the 

22 

commencement of this Part) the Statistician publishes: 

23 

 

(a)  an index number of the kind referred to in subsection 98B(3) 

24 

or 98GD(1); or 

25 

 

(b)  an amount of the kind referred to in subsection 98GE(2); 

26 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

5 

 

in substitution for an index number or amount previously published 

by the Statistician, disregard the publication of the later index 

number or amount for the purposes of this Part. 

 

(2)  If at any time (whether before or after the commencement of this 

Part), the Statistician changes the index reference period for: 

 

(a)  the All Groups Consumer Price Index referred to in 

subsection 98B(3); or 

 

(b)  the All Groups Pensioner and Beneficiary Living Cost Index 

referred to in subsection 98GD(1); 

then, for the purposes of applying this Part after the change takes 

10 

place, have regard only to index numbers published in terms of the 

11 

new index reference period. 

12 

 

(3)  If at any time the Statistician changes the reference period for 

13 

amounts of the kind referred to in subsection 98GE(2), then, for the 

14 

purposes of applying this Part after the change takes place, have 

15 

regard only to amounts published in terms of the new reference 

16 

period. 

17 

98AC  Rounding of percentages 

18 

 

  If any of the following is or includes a fraction of one-tenth of 1%: 

19 

 

(a)  the prescribed percentage; 

20 

 

(b)  the LCI percentage; 

21 

 

(c)  the 55-plus percentage; 

22 

then: 

23 

 

(d)  disregard the fraction if it is less than half of one-tenth; and 

24 

 

(e)  otherwise--treat the fraction as if it were one-tenth. 

25 

Division 2--General provisions about pension increases 

26 

98AD  Simplified outline of this Division 

27 

Certain pension benefits are indexed each 1 January and 1 July. 

28 

For pensioners aged under 55, the indexation is based on positive 

29 

movements in the consumer price index. 

30 

Schedule 1  Amendments 

   

 

 

6 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

For pensioners aged 55 or older, movements in the consumer price 

index are relevant, but they are only part of the indexation method. 

For all pensioners, there are rules dealing with special cases 

including pension benefits that have only recently become payable 

and situations involving commutation of a portion of a pension 

benefit. 

7  Subsections 98B(1), (2) and (3) 

Repeal the subsections, substitute: 

Increase 

 

(1)  Subject to this Part, a pensioner is entitled, at the commencement 

10 

of a prescribed half-year, to an increase in the pensioner's relevant 

11 

rate of pension benefit in relation to that half-year. The increase is 

12 

worked out by using: 

13 

 

(a)  if the pensioner is aged 55 or older at the commencement of 

14 

the prescribed half-year--the 55-plus percentage; and 

15 

 

(b)  otherwise--the prescribed percentage. 

16 

Increase by prescribed percentage 

17 

 

(2)  The increase provided for by subsection (1), for a pensioner aged 

18 

under 55 at the commencement of a prescribed half-year (the 

19 

relevant prescribed half-year), is the prescribed percentage of the 

20 

pensioner's relevant rate of pension benefit in relation to the 

21 

relevant prescribed half-year. 

22 

Prescribed percentage 

23 

 

(3)  Subject to subsection (3A), the prescribed percentage for a 

24 

prescribed half-year is: 

25 

 

 

First quarter CPI number

Base quarter CPI number

100

Base quarter CPI number

 

26 

where: 

27 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

7 

 

base quarter CPI number means the CPI number in respect of the 

March quarter or September quarter that: 

 

(a)  is before the first quarter of the half-year immediately before 

the prescribed half-year; and 

 

(b)  has the highest CPI number. 

CPI number, in respect of a quarter, means the All Groups 

Consumer Price Index number that is the weighted average of the 8 

capital cities and is published by the Statistician in respect of the 

quarter. 

first quarter CPI number means the CPI number in respect of the 

10 

first quarter of the half-year immediately before the prescribed 

11 

half-year. 

12 

 

(3A)  If the first quarter CPI number is equal to or less than the base 

13 

quarter CPI number, then, for the relevant prescribed half-year: 

14 

 

(a)  the prescribed percentage is taken to be 0%; and 

15 

 

(b)  subsection (1) does not provide for an increase for a 

16 

pensioner aged under 55 at the commencement of that 

17 

half-year. 

18 

Relevant rate of pension benefit 

19 

8  Subsection 98B(4) 

20 

Omit "For the purpose of subsection (2), the relevant rate of pension 

21 

benefit is", substitute "The relevant rate of a pensioner's pension 

22 

benefit, in relation to a relevant prescribed half-year, is".

 

23 

9  After subsection 98B(4) 

24 

Insert: 

25 

 

(4A)  For the purposes of paragraphs (4)(ab), (c) and (e), in working out 

26 

the rate at which invalidity pay or retirement pay would have been 

27 

payable to a deceased recipient member, work out any increases to 

28 

which the member would have been entitled on or after the later of: 

29 

 

(a)  1 July 2014; and 

30 

 

(b)  the day of the member's death; 

31 

Schedule 1  Amendments 

   

 

 

8 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

using the pensioner's age at the time of the increase (not the age 

that the member would have been at that time, had the member not 

died). 

10  Before subsection 98B(5A) 

Insert: 

Increases in children's pensions 

11  Before subsection 98B(7) 

Insert: 

Death of recipient member on 30 June or 31 December 

12  At the end of Part XA 

10 

Add: 

11 

Division 3--Increase for pensioners aged 55 or older 

12 

98GA  Simplified outline of this Division 

13 

For pensioners aged 55 or older, indexation is based on the more 

14 

favourable of positive movements in: 

15 

 

(a) 

the consumer price index (CPI); and 

16 

 

(b) 

the pensioner and beneficiary living cost index (LCI); 

17 

with an adjustment if needed to ensure that affected pension 

18 

benefits are increased by at least the percentage required to 

19 

maintain a hypothetical pension at 27.7% of male total average 

20 

weekly earnings (MTAWE). 

21 

The hypothetical pension (called the indicative pension amount) is 

22 

part of the method used to work out what the percentage increase 

23 

should be (called the 55-plus percentage). The hypothetical 

24 

pension does not represent the amount of any actual pension 

25 

benefit, or the amount that any actual pension benefit should be. It 

26 

is just a device to work out the percentage by which actual pension 

27 

benefits should be increased. 

28 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

9 

 

Each 1 January and 1 July, the amount of the hypothetical pension, 

as indexed by the higher of CPI and LCI, is compared with what 

the amount of the hypothetical pension should be if it is to continue 

to be at least 27.7% of MTAWE. If the CPI/LCI result is higher 

than the MTAWE result, the 55-plus percentage is the higher of the 

percentage movements in CPI and LCI. If the MTAWE result is 

higher, the 55-plus percentage is the percentage increase needed to 

maintain the hypothetical pension at 27.7% of MTAWE. 

Once the 55-plus percentage has been worked out, affected pension 

benefits are increased by that percentage. 

10 

98GB  Increase for pensioners aged 55 or older 

11 

Increase by 55-plus percentage 

12 

 

(1)  The increase provided for by subsection 98B(1), for a pensioner 

13 

aged 55 or older at the commencement of a prescribed half-year 

14 

(the relevant prescribed half-year), is the 55-plus percentage of the 

15 

pensioner's relevant rate of pension benefit in relation to the 

16 

relevant prescribed half-year. 

17 

55-plus percentage 

18 

 

(2)  This is how to work out the 55-plus percentage for the relevant 

19 

prescribed half-year: 

20 

Method statement 

21 

Step 1.  Work out the prescribed percentage for the prescribed 

22 

half-year. 

23 

Step 2.  Use section 98GD to work out the LCI percentage for the 

24 

prescribed half-year. 

25 

Step 3.  Take the higher of the percentages worked out in steps 1 

26 

and 2. (If they are the same, use the step 1 percentage.) 

27 

This is the CPI/LCI percentage

28 

Schedule 1  Amendments 

   

 

 

10 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

Step 4.  Take the indicative pension amount for the prescribed 

half-year immediately before the relevant prescribed 

half-year. This is the current indicative pension amount

Step 5.  Work out the amount that is the CPI/LCI percentage of 

the current indicative pension amount and add it to the 

current indicative pension amount. This is the CPI/LCI 

result

Step 6.  Use section 98GE to work out the MTAWE result. 

Step 7.  If the CPI/LCI result is the same as or higher than the 

MTAWE result, the 55-plus percentage for the 

10 

prescribed half-year is the CPI/LCI percentage. If the 

11 

CPI/LCI result is lower than the MTAWE result, the 

12 

55-plus percentage for the prescribed half-year is the 

13 

percentage worked out under section 98GF. 

14 

Nil or negative change 

15 

 

(3)  If, for a prescribed half-year: 

16 

 

(a)  the CPI/LCI result in step 5 is the same as the current 

17 

indicative pension amount; and 

18 

 

(b)  the MTAWE result in step 6 is the same as or lower than the 

19 

current indicative pension amount; 

20 

then, for that prescribed half-year: 

21 

 

(c)  the 55-plus percentage is taken to be 0%; and 

22 

 

(d)  subsection 98B(1) does not provide for an increase for a 

23 

pensioner aged 55 or older at the commencement of that 

24 

half-year. 

25 

98GC  Indicative pension amount 

26 

 

(1)  The indicative pension amount is: 

27 

 

(a)  for the prescribed half-year commencing on 1 January 

28 

2014--$19,541.91; and 

29 

 

(b)  for a later prescribed half-year--the amount most recently 

30 

substituted in accordance with subsection (2). 

31 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

11 

 

Note: 

The indicative pension amount is a hypothetical amount that does not 

represent the amount of any actual pension benefit, or the amount that 

any actual pension benefit should be. It is just a device to work out the 

percentage by which actual pension benefits should be increased. 

 

(2)  The indicative pension amount for the prescribed half-year 

commencing on 1 January 2014 is to be increased, on 1 July 2014 

and each later 1 January and 1 July, by the 55-plus percentage, as if 

the amount were a pension benefit payable to a pensioner aged 55 

or older on the day. Immediately after the increase, the increased 

amount is substituted as the indicative pension amount. 

10 

 

(3)  The reference in subsection (2) to the increased amount includes a 

11 

reference to an amount that, because the 55-plus percentage for a 

12 

prescribed half-year was 0%, has not changed. 

13 

98GD  LCI percentage 

14 

LCI percentage 

15 

 

(1)  Subject to subsection (2), the LCI percentage for a prescribed 

16 

half-year is: 

17 

 

 

First quarter LCI number

Base quarter LCI number

100

Base quarter LCI number

 

18 

where: 

19 

base quarter LCI number means the LCI number in respect of the 

20 

March quarter or September quarter that: 

21 

 

(a)  is before the first quarter of the half-year immediately before 

22 

the prescribed half-year; and 

23 

 

(b)  has the highest LCI number. 

24 

first quarter LCI number means the LCI number in respect of the 

25 

first quarter of the half-year immediately before the prescribed 

26 

half-year. 

27 

LCI number, in respect of a quarter, is the All Groups Pensioner 

28 

and Beneficiary Living Cost Index number that is the weighted 

29 

average of the 8 capital cities and is published by the Statistician in 

30 

respect of the quarter. 

31 

Schedule 1  Amendments 

   

 

 

12 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

Nil or negative change 

 

(2)  If the first quarter LCI number is equal to or less than the base 

quarter LCI number, the LCI percentage for the prescribed 

half-year is taken to be 0%. 

98GE  MTAWE result 

 

(1)  For the purposes of step 6 of the method statement in 

subsection 98GB(2), the MTAWE result is the amount that is 

27.7% of the annualised MTAWE figure for the quarter for which 

the Statistician has most recently published the amount referred to 

in subsection (2). 

10 

 

(2)  For the purposes of subsection (1), the annualised MTAWE 

11 

figure, for a quarter, is 52 times the amount set out for the 

12 

reference period in the quarter under the headings "Average 

13 

Weekly Earnings of Employees, Australia--Males--All males--

14 

Total earnings--ORIGINAL" in a document published by the 

15 

Statistician entitled "Average Weekly Earnings, States and 

16 

Australia". 

17 

 

(3)  If at any time (whether before or after the commencement of this 

18 

section), the Statistician publishes the amount referred to in 

19 

subsection (2): 

20 

 

(a)  under differently described headings (the new headings); or 

21 

 

(b)  in a document entitled otherwise than as described in 

22 

subsection (2) (the new document); 

23 

then the annualised MTAWE figure is to be calculated in 

24 

accordance with subsection (2) as if the references to: 

25 

 

(c)  "Average Weekly Earnings of Employees, Australia--

26 

Males--All males--Total earnings--ORIGINAL"; or 

27 

 

(d)  "Average Weekly Earnings, States and Australia"; 

28 

were references to either of the new headings or the new document, 

29 

or both of them, as the case requires. 

30 

 

(4)  For the purposes of this section, the reference period in a particular 

31 

quarter is the period described by the Statistician as the pay period 

32 

ending on or before a specified day that is the third Friday of the 

33 

middle month of that quarter. 

34 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

13 

 

98GF  55-plus percentage if MTAWE result is higher 

 

  For the purposes of step 7 of the method statement in 

subsection 98GB(2), if this section applies then the 55-plus 

percentage, for the prescribed half-year, is: 

 

 

MTAWE result

Current indicative pension amount

100

Current indicative pension result

 

Defence Forces Retirement Benefits Act 1948 

13  Before section 83 

Insert: 

Division 1--Introduction 

83A  Simplified outline of this Part 

10 

Certain pensions are indexed each 1 January and 1 July. 

11 

For pensioners aged under 55, the indexation is based on positive 

12 

movements in the consumer price index. 

13 

For pensioners aged 55 or older, the indexation is based on the 

14 

more favourable of positive movements in: 

15 

 

(a) 

the consumer price index; and 

16 

 

(b) 

the pensioner and beneficiary living cost index; 

17 

with an adjustment if needed to ensure that affected pensions are 

18 

increased by at least the percentage required to maintain a 

19 

hypothetical pension at 27.7% of male total average weekly 

20 

earnings. 

21 

14  Section 83 (heading) 

22 

Repeal the heading, substitute: 

23 

Schedule 1  Amendments 

   

 

 

14 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

83  Definitions 

15  Subsection 83(1) 

Omit "(1)". 

16  Subsection 83(1) 

Insert: 

55-plus percentage has the meaning given by step 7 of the method 

statement in subsection 84H(2). 

current indicative pension amount has the meaning given by step 

4 of the method statement in subsection 84H(2). 

December quarter means the quarter ending on 31 December. 

10 

indicative pension amount has the meaning given by 

11 

subsection 84J(1). 

12 

June quarter means the quarter ending on 30 June. 

13 

LCI percentage (short for living cost index percentage) has the 

14 

meaning given by section 84K. 

15 

March quarter means the quarter ending on 31 March. 

16 

pensioner means a person to whom a pension is payable. 

17 

prescribed percentage has the meaning given by subsection 84(3). 

18 

September quarter means the quarter ending on 30 September. 

19 

17  Subsections 83(2), (3) and (4) 

20 

Repeal the subsections. 

21 

18  After section 83 

22 

Insert: 

23 

83B  Substitutions and changes by Statistician 

24 

 

(1)  Subject to subsection (2), if at any time (whether before or after the 

25 

commencement of this Part) the Statistician publishes: 

26 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

15 

 

 

(a)  an index number of the kind referred to in subsection 84(3) or 

84K(1); or 

 

(b)  an amount of the kind referred to in subsection 84L(2); 

in substitution for an index number or amount previously published 

by the Statistician, disregard the publication of the later index 

number or amount for the purposes of this Part. 

 

(2)  If at any time (whether before or after the commencement of this 

Part), the Statistician changes the index reference period for: 

 

(a)  the All Groups Consumer Price Index referred to in 

subsection 84(3); or 

10 

 

(b)  the All Groups Pensioner and Beneficiary Living Cost Index 

11 

referred to in subsection 84K(1); 

12 

then, for the purposes of applying this Part after the change takes 

13 

place, have regard only to index numbers published in terms of the 

14 

new index reference period. 

15 

 

(3)  If at any time the Statistician changes the reference period for 

16 

amounts of the kind referred to in subsection 84L(2), then, for the 

17 

purposes of applying this Part after the change takes place, have 

18 

regard only to amounts published in terms of the new reference 

19 

period. 

20 

83C  Rounding of percentages 

21 

 

  If any of the following is or includes a fraction of one-tenth of 1%: 

22 

 

(a)  the prescribed percentage; 

23 

 

(b)  the LCI percentage; 

24 

 

(c)  the 55-plus percentage; 

25 

then: 

26 

 

(d)  disregard the fraction if it is less than half of one-tenth; and 

27 

 

(e)  otherwise--treat the fraction as if it were one-tenth. 

28 

Division 2--General provisions about pension increases 

29 

83D  Simplified outline of this Division 

30 

Certain pensions are indexed each 1 January and 1 July. 

31 

Schedule 1  Amendments 

   

 

 

16 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

For pensioners aged under 55, the indexation is based on positive 

movements in the consumer price index. 

For pensioners aged 55 or older, movements in the consumer price 

index are relevant, but they are only part of the indexation method. 

For all pensioners, there are rules dealing with special cases 

including pensions that have only recently become payable and 

situations involving commutation of a portion of a pension. 

19  Subsections 84(1), (2) and (3) 

Repeal the subsections, substitute: 

Increase 

10 

 

(1)  Subject to this Part, a pensioner is entitled, at the commencement 

11 

of a prescribed half-year, to an increase in the rate at which a 

12 

pension was payable to the pensioner immediately before that 

13 

commencement. The increase is worked out by using: 

14 

 

(a)  if the pensioner is aged 55 or older at that commencement--

15 

the 55-plus percentage; and 

16 

 

(b)  otherwise--the prescribed percentage. 

17 

Increase by prescribed percentage 

18 

 

(2)  The increase provided for by subsection (1), for a pensioner aged 

19 

under 55 at the commencement of a prescribed half-year (the 

20 

relevant prescribed half-year), is the prescribed percentage of the 

21 

rate at which a pension was payable to the pensioner immediately 

22 

before the commencement of the relevant prescribed half-year. 

23 

Prescribed percentage 

24 

 

(3)  Subject to subsection (3A), the prescribed percentage for a 

25 

prescribed half-year is: 

26 

 

 

First quarter CPI number

Base quarter CPI number

100

Base quarter CPI number

 

27 

where: 

28 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

17 

 

base quarter CPI number means the CPI number in respect of the 

March quarter or September quarter that: 

 

(a)  is before the first quarter of the half-year immediately before 

the prescribed half-year; and 

 

(b)  has the highest CPI number. 

CPI number, in respect of a quarter, means the All Groups 

Consumer Price Index number that is the weighted average of the 8 

capital cities and is published by the Statistician in respect of the 

quarter. 

first quarter CPI number means the CPI number in respect of the 

10 

first quarter of the half-year immediately before the prescribed 

11 

half-year. 

12 

 

(3A)  If the first quarter CPI number is equal to or less than the base 

13 

quarter CPI number, then, for the relevant prescribed half-year: 

14 

 

(a)  the prescribed percentage is taken to be 0%; and 

15 

 

(b)  subsection (1) does not provide for an increase for a 

16 

pensioner aged under 55 at the commencement of that 

17 

half-year. 

18 

Death of recipient member on 30 June or 31 December 

19 

20  At the end of Part VID 

20 

Add: 

21 

Division 3--Increase for pensioners aged 55 or older 

22 

84G  Simplified outline of this Division 

23 

For pensioners aged 55 or older, indexation is based on the more 

24 

favourable of positive movements in: 

25 

 

(a) 

the consumer price index (CPI); and 

26 

 

(b) 

the pensioner and beneficiary living cost index (LCI); 

27 

with an adjustment if needed to ensure that affected pensions are 

28 

increased by at least the percentage required to maintain a 

29 

hypothetical pension at 27.7% of male total average weekly 

30 

earnings (MTAWE). 

31 

Schedule 1  Amendments 

   

 

 

18 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

The hypothetical pension (called the indicative pension amount) is 

part of the method used to work out what the percentage increase 

should be (called the 55-plus percentage). The hypothetical 

pension does not represent the amount of any actual pension, or the 

amount that any actual pension should be. It is just a device to 

work out the percentage by which actual pensions should be 

increased. 

Each 1 January and 1 July, the amount of the hypothetical pension, 

as indexed by the higher of CPI and LCI, is compared with what 

the amount of the hypothetical pension should be if it is to continue 

10 

to be at least 27.7% of MTAWE. If the CPI/LCI result is higher 

11 

than the MTAWE result, the 55-plus percentage is the higher of the 

12 

percentage movements in CPI and LCI. If the MTAWE result is 

13 

higher, the 55-plus percentage is the percentage increase needed to 

14 

maintain the hypothetical pension at 27.7% of MTAWE. 

15 

Once the 55-plus percentage has been worked out, affected 

16 

pensions are increased by that percentage. 

17 

84H  Increase for pensioners aged 55 or older 

18 

Increase by 55-plus percentage 

19 

 

(1)  The increase provided for by subsection 84(1), for a pensioner 

20 

aged 55 or older at the commencement of a prescribed half-year 

21 

(the relevant prescribed half-year), is the 55-plus percentage of the 

22 

rate at which a pension was payable to the pensioner immediately 

23 

before the commencement of the relevant prescribed half-year. 

24 

55-plus percentage 

25 

 

(2)  This is how to work out the 55-plus percentage for the relevant 

26 

prescribed half-year: 

27 

Method statement 

28 

Step 1.  Work out the prescribed percentage for the prescribed 

29 

half-year. 

30 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

19 

 

Step 2.  Use section 84K to work out the LCI percentage for the 

prescribed half-year. 

Step 3.  Take the higher of the percentages worked out in steps 1 

and 2. (If they are the same, use the step 1 percentage.) 

This is the CPI/LCI percentage

Step 4.  Take the indicative pension amount for the prescribed 

half-year immediately before the relevant prescribed 

half-year. This is the current indicative pension amount

Step 5.  Work out the amount that is the CPI/LCI percentage of 

the current indicative pension amount and add it to the 

10 

current indicative pension amount. This is the CPI/LCI 

11 

result

12 

Step 6.  Use section 84L to work out the MTAWE result. 

13 

Step 7.  If the CPI/LCI result is the same as or higher than the 

14 

MTAWE result, the 55-plus percentage for the 

15 

prescribed half-year is the CPI/LCI percentage. If the 

16 

CPI/LCI result is lower than the MTAWE result, the 

17 

55-plus percentage for the prescribed half-year is the 

18 

percentage worked out under section 84M. 

19 

Nil or negative change 

20 

 

(3)  If, for a prescribed half-year: 

21 

 

(a)  the CPI/LCI result in step 5 is the same as the current 

22 

indicative pension amount; and 

23 

 

(b)  the MTAWE result in step 6 is the same as or lower than the 

24 

current indicative pension amount; 

25 

then, for that prescribed half-year: 

26 

 

(c)  the 55-plus percentage is taken to be 0%; and 

27 

 

(d)  subsection 84(1) does not provide for an increase for a 

28 

pensioner aged 55 or older at the commencement of that 

29 

half-year. 

30 

Schedule 1  Amendments 

   

 

 

20 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

84J  Indicative pension amount 

 

(1)  The indicative pension amount is: 

 

(a)  for the prescribed half-year commencing on 1 January 

2014--$19,541.91; and 

 

(b)  for a later prescribed half-year--the amount most recently 

substituted in accordance with subsection (2). 

Note: 

The indicative pension amount is a hypothetical amount that does not 

represent the amount of any actual pension, or the amount that any 

actual pension should be. It is just a device to work out the percentage 

by which actual pensions should be increased. 

10 

 

(2)  The indicative pension amount for the prescribed half-year 

11 

commencing on 1 January 2014 is to be increased, on 1 July 2014 

12 

and each later 1 January and 1 July, by the 55-plus percentage, as if 

13 

the amount were a pension payable to a pensioner aged 55 or older 

14 

on the day. Immediately after the increase, the increased amount is 

15 

substituted as the indicative pension amount. 

16 

 

(3)  The reference in subsection (2) to the increased amount includes a 

17 

reference to an amount that, because the 55-plus percentage for a 

18 

prescribed half-year was 0%, has not changed. 

19 

84K  LCI percentage 

20 

LCI percentage 

21 

 

(1)  Subject to subsection (2), the LCI percentage for a prescribed 

22 

half-year is: 

23 

 

 

First quarter LCI number

Base quarter LCI number

100

Base quarter LCI number

 

24 

where: 

25 

base quarter LCI number means the LCI number in respect of the 

26 

March quarter or September quarter that: 

27 

 

(a)  is before the first quarter of the half-year immediately before 

28 

the prescribed half-year; and 

29 

 

(b)  has the highest LCI number. 

30 

Amendments  Schedule 1 

   

 

 

No.      , 2014 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

21 

 

first quarter LCI number means the LCI number in respect of the 

first quarter of the half-year immediately before the prescribed 

half-year. 

LCI number, in respect of a quarter, is the All Groups Pensioner 

and Beneficiary Living Cost Index number that is the weighted 

average of the 8 capital cities and is published by the Statistician in 

respect of the quarter. 

Nil or negative change 

 

(2)  If the first quarter LCI number is equal to or less than the base 

quarter LCI number, the LCI percentage for the prescribed 

10 

half-year is taken to be 0%. 

11 

84L  MTAWE result 

12 

 

(1)  For the purposes of step 6 of the method statement in 

13 

subsection 84H(2), the MTAWE result is the amount that is 27.7% 

14 

of the annualised MTAWE figure for the quarter for which the 

15 

Statistician has most recently published the amount referred to in 

16 

subsection (2). 

17 

 

(2)  For the purposes of subsection (1), the annualised MTAWE 

18 

figure, for a quarter, is 52 times the amount set out for the 

19 

reference period in the quarter under the headings "Average 

20 

Weekly Earnings of Employees, Australia--Males--All males--

21 

Total earnings--ORIGINAL" in a document published by the 

22 

Statistician entitled "Average Weekly Earnings, States and 

23 

Australia". 

24 

 

(3)  If at any time (whether before or after the commencement of this 

25 

section), the Statistician publishes the amount referred to in 

26 

subsection (2): 

27 

 

(a)  under differently described headings (the new headings); or 

28 

 

(b)  in a document entitled otherwise than as described in 

29 

subsection (2) (the new document); 

30 

then the annualised MTAWE figure is to be calculated in 

31 

accordance with subsection (2) as if the references to: 

32 

 

(c)  "Average Weekly Earnings of Employees, Australia--

33 

Males--All males--Total earnings--ORIGINAL"; or 

34 

Schedule 1  Amendments 

   

 

 

22 

Defence Force Retirement Benefits Legislation Amendment (Fair 

Indexation) Bill 2014 

No.      , 2014 

 

 

(d)  "Average Weekly Earnings, States and Australia"; 

were references to either of the new headings or the new document, 

or both of them, as the case requires. 

 

(4)  For the purposes of this section, the reference period in a particular 

quarter is the period described by the Statistician as the pay period 

ending on or before a specified day that is the third Friday of the 

middle month of that quarter. 

84M  55-plus percentage if MTAWE result is higher 

 

  For the purposes of step 7 of the method statement in 

subsection 84H(2), if this section applies then the 55-plus 

10 

percentage, for the prescribed half-year, is: 

11 

 

 

MTAWE result

Current indicative pension amount

100

Current indicative pension amount

 

12 

21  Application provision 

13 

The amendments made by this Schedule apply in relation to working 

14 

out increases for: 

15 

 

(a)  the prescribed half-year commencing on 1 July 2014; and 

16 

 

(b)  later prescribed half-years. 

17 

22  Transitional provision

--operation of Division 293 of the 

18 

Income Tax Assessment Act 1997 

19 

In working out the amount of a person's defined benefit contributions 

20 

for the purposes of Division 293 of the Income Tax Assessment Act 

21 

1997, disregard any amount that represents the increase in the value of 

22 

the accrued retirement benefit as at 1 July 2014 (if any) that accrued to 

23 

the person as a result of the amendments made by this Schedule. 

24 

 


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