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SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION AMENDMENT ACT 1995 No. 1, 1996 - SCHEDULE 16
SCHEDULE 16 Section 3
AMENDMENTS OF THE VETERANS' ENTITLEMENTS ACT 1986 RELATING TO
EXTENDED DEEMING
PART 1-AMENDMENTS COMMENCING ON ROYAL ASSENT 1. Paragraph 46AA(1)(a): Omit the
paragraph, substitute:
"(a) an accruing return investment that was made or acquired before 1 January
1988; or". 2. Sections 46B and 46J: Repeal the sections. 3. Schedule 5: Add at
the end: Provisions regarding the treatment of returns from the realisation of
certain investments
"5.(1) If:
(a) before the commencement of this section, a person realised an
investment; and
(b) section 46B of this Act, as in force immediately before the
commencement of this section, applied to the person as a result of the
realisation of the investment; and
(c) the period of 12 months commencing on the day on which the investment
was realised had not expired when this section commenced; section 46B
of this Act, as in force immediately before the commencement of this
section, is taken to continue to apply to the person in relation to
the realisation of the investment until:
(d) the end of the period referred to in paragraph (c); or
(e) the end of 30 June 1996; whichever is the earlier.
"(2) If:
(a) before the commencement of this section, a person realised an
investment; and
(b) section 46J of this Act, as in force immediately before the
commencement of this section, applied to the person as a result of the
realisation of the investment; and
(c) the period of 12 months commencing on the day on which the investment
was realised had not expired when this section commenced; section 46J
of this Act, as in force immediately before the commencement of this
section, is taken to continue to apply to the person in relation to
the realisation of the investment until:
(d) the end of the period referred to in paragraph (c); or
(e) the end of 30 June 1996; whichever is the earlier.".
PART 2-AMENDMENTS COMMENCING ON 1 JULY 1996 4. Section 5 (Index): Omit the
following entries:
"accruing return investment 5J(1)
"annual rate of return 5J(2)
"eligible investment 5J(1)
"investment product 5J(1)
"market-linked investment 5J(1)".
5. Section 5 (Index): Insert the following entries in the Index in their
appropriate alphabetical positions, determined on a letter-by-letter basis:
"deprived asset 5J(2B)
"financial asset 5J(1)
"financial investment 5J(1)
"loan 5J(2), (2A)
"money that attracts interest 46G
"unlisted public security 5J(1)".
6. Subsection 5H(1) (definition of available money): Omit paragraph (c),
substitute:
"(c) is not the subject of a loan made by the person;". 7. Subsection 5H(1)
(definition of income): Omit Notes 1, 2 and 3, substitute:
"Note 1: See also sections 46B and 46C (business income), sections 46D to 46L
(deemed income from financial assets) and sections 46Q to 46U (income from
retirement funds and annuities).". 8. Subsection 5H(1) (definition of income)
(Note 4): Omit "Note 4", substitute "Note 2". 9. Subsection 5H(1) (definition
of income) (Note 5): Omit "Note 5", substitute "Note 3". 10. Subsection 5H(1)
(definition of ordinary income): Omit "Note", substitute "Note 1". 11.
Subsection 5H(1) (definition of ordinary income): Add at the end:
"Note 2: The receipt of a series of periodic compensation payments may result
in reduction of the person's rate of service pension or income support
supplement under Part IIIC. If this happens, the payments are not treated as
ordinary income (see section 59X).
"Note 3: For provisions affecting the amount of a person's ordinary income see
sections 46 and 46A (ordinary income concept), sections 46B and 46C (business
income), sections 46D to 46L (deemed income from financial assets) and
sections 46Q to 46U (income from retirement funds and annuities).". 12.
Subsection 5J(1) (definition of friendly society): Omit all words after
paragraph (a), substitute:
"(b) a society that had, before 13 December 1987, been approved for the
purpose of the definition of friendly society in subsection 115(1) of the
Social Security Act 1947.". 13. Subsection 5J(1) (definition of listed
security): Omit "in Australia". 14. Subsection 5J(1) (definition of return):
Omit "investment (including an investment in the nature of superannuation)",
substitute "investment in the nature of superannuation". 15. Subsection 5J(1)
(definitions of accruing return investment, annual rate of return, eligible
investment, investment product, market-linked investment): Omit the
definitions. 16. Subsection 5J(1): Insert:
"financial asset means:
(a) a financial investment; or
(b) a deprived asset. Note: For deprived asset see subsection 5J(2B).
financial investment means:
(a) available money; or
(b) deposit money; or
(c) a managed investment; or
(d) a listed security; or
(e) a loan that has not been repaid in full; or
(f) an unlisted public security; or
(g) gold, silver or platinum bullion. Note: For loan see subsections (2)
and (2A). unlisted public security means:
(a) a share in a public company; or
(b) another security; that is not listed on a stock exchange.". 17.
Paragraph 5J(1C)(e): Omit the paragraph, substitute:
"(e) a loan;
(f) an immediate annuity;
(g) a superannuation pension.". 18. Subsection 5J(1C) (Note 3): Omit the
Note, substitute:
"Note 3: For provisions relating to when a loan is taken to be made see
subsection (2).
"Note 4: An immediate annuity is dealt with under section 46T.
"Note 5: A superannuation pension is dealt with under section 46U.". 19.
Subsection 5J(2): Omit the subsection, substitute:
"(2) The following rules apply for the purposes of this Act:
(a) the acquisition by a person of debentures, bonds or other securities
is treated as the making of a loan by the person;
(b) a person is not treated as having made a loan merely because:
(i) the person has an account with a financial institution; or
(ii) the person has paid an entry contribution. Note: For entry
contribution see section 52M.
"(2A) Subsection (2) does not limit the meaning of the word loan in this Act.
"(2B) For the purposes of this Act, an asset is a deprived asset if:
(a) a person has disposed of the asset; and
(b) the value of the asset is included in the value of the person's assets
by section 52FA, 52G, 52GA or 52H. Note: For circumstances in which a
person is taken to dispose of assets see section 52E.". 20. Paragraph
5J(7)(b): Omit the paragraph. 21. Section 41 (Service Pension Rate
Calculator Where There Are No Dependent Children-point 41-D1-Note 2):
Omit ". investment income (sections 46 to 46U);", substitute:
". the general concept of ordinary income (sections 46 and 46A);
". business income (sections 46B and 46C);
". deemed income from financial assets (sections 46D to 46L);
". income from retirement funds and annuities (sections 46Q to
46U);". 22. Section 42 (Service Pension Rate Calculator Where There Are
Dependent Children-point 42-E1-Note 2): Omit ". investment income (sections 46
to 46U);", substitute:
". the general concept of ordinary income (sections 46 and 46A);
". business income (sections 46B and 46C);
". deemed income from financial assets (sections 46D to 46L);
". income from retirement funds and annuities (sections 46Q to
46U);". 23. Section 45X (Income Support Supplement Pension Rate Calculator
Where There Are No Dependent Children-point 45X-E1-Note 2): Omit ". investment
income (sections 46 to 46U);", substitute:
". the general concept of ordinary income (sections 46 and 46A);
". business income (sections 46B and 46C);
". deemed income from financial assets (sections 46D to 46L);
". income from retirement funds and annuities (sections 46Q to
46U);". 24. Section 45Y (Income Support Supplement Rate Calculator Where There
Are Dependent Children-point 45Y-D1-Note 2): Omit ". investment income
(sections 46 to 46U);", substitute:
". the general concept of ordinary income (sections 46 and 46A);
". business income (sections 46B and 46C);
". deemed income from financial assets (sections 46D to 46L);
". income from retirement funds and annuities (sections 46Q to
46U);". 25. Division 1 of Part IIIB: Repeal the Division, substitute:
"Division 1-Ordinary income concept General meaning of ordinary income
"46. A reference in this Act to a person's ordinary income for a period is a
reference to the person's gross ordinary income from all sources for the
period calculated without any reduction, other than a reduction under Division
2. Note 1: For ordinary income see subsection 5H(1). Note 2: For other
provisions affecting the amount of a person's ordinary income see sections 46B
and 46C (business income), sections 46D to 46L (deemed income from financial
assets) and sections 46Q to 46U (income from retirement funds and annuities).
Certain amounts taken to be received over 12 months
"46A. If a person receives, whether before or after the commencement of this
section, an amount that:
(a) is not income within the meaning of Division 3 or 4 of this Part; and
(b) is not:
(i) income in the form of periodic payments; or
(ii) ordinary income from remunerative work undertaken by the
person; the person is, for the purposes of this Act, taken to
receive one fifty-second of that amount as ordinary income of
the person during each week in the 12 months commencing on the
day on which the person becomes entitled to receive that
amount.
"Division 2-Business income Ordinary income from a business-treatment of
trading stock
"46B.(1) If:
(a) a person carries on a business; and
(b) the value of all the trading stock on hand at the end of a tax year is
greater than the value of all the trading stock on hand at the
beginning of that tax year; the person's ordinary income for that tax
year in the form of profits from the business is to include the amount
of the difference in values.
"(2) If:
(a) a person carries on a business; and
(b) the value of all the trading stock on hand at the end of a tax year is
less than the value of all the trading stock on hand at the beginning
of that tax year; the person's ordinary income for that tax year in
the form of profits from the business is to be reduced by the amount
of the difference in values. Permissible reductions of business income
"46C.(1) Subject to subsection (2), if a person carries on a business, the
person's ordinary income from the business is to be reduced by:
(a) losses and outgoings that relate to the business and are allowable
deductions for the purposes of section 51 of the Income Tax
Assessment Act ; and
(b) depreciation that relates to the business and is an allowable
deduction for the purposes of subsection 54(1) of that Act; and
(c) amounts that relate to the business and are allowable deductions under
subsection 82AAC(1) of that Act.
"(2) If, under Division 3, a person is taken to receive ordinary income on a
financial investment, that ordinary income is not to be reduced by the amount
of any expenses incurred by the person because of that investment.
"Note: For financial investment see subsection 5J(1).". 26. Heading to
Division 2 of Part IIIB: Omit the heading, substitute:
"Division 3-Deemed income from financial assets". 27. Subdivisions A, AA, B
and C of Division 2 of Part IIIB: Repeal the Subdivisions, substitute: Deemed
income from financial assets-persons other than members of couples
"46D.(1) This section applies to a person who is not a member of a couple.
"(2) A person who has financial assets is taken, for the purposes of this Act,
to receive ordinary income on those assets in accordance with this section.
"(3) This is how to work out the ordinary income the person is taken to
receive: Method statement Step 1. If any part of the person's deposit
concession money attracts interest, multiply the amount of each such part by
the rate of interest and add together the amounts so worked out. Note: For
deposit concession money see section 46F. Step 2. Subtract the total amount of
the person's deposit concession money from the person's deeming threshold or,
if the total value of the person's financial assets is less than that
threshold, from that total value. Note: For deeming threshold see subsection
46H(1). Step 3. Multiply the remainder (if any) worked out at Step 2 by the
below threshold rate. Note: For below threshold rate see subsection 46J(1).
Step 4. If the total value of the person's financial assets exceeds the
person's deeming threshold, subtract the person's deeming threshold from the
total value of those assets. Step 5. Multiply the remainder (if any) worked
out at Step 4 by the above threshold rate. Note: For above threshold rate see
subsection 46J(2). Step 6. The total of the amounts worked out at Steps 1, 3
and 5 represents the ordinary income the person is taken to receive per year
on the financial assets. EXAMPLE OF HOW DEEMED INCOME OF A PERSON WHO IS NOT A
MEMBER OF A COUPLE IS WORKED OUT (using rates in force on 1 July 1996) Facts:
Elaine, a single pensioner, has $36,500 worth of financial assets. $1,500 is
in a cheque account not earning any interest. $25,000 is earning 6% in
interest and $10,000 is earning 8% in interest. The below threshold rate is
5%. The above threshold rate is 7%. Application:
Step 1. Elaine's deposit concession money amounts to $1,500 (see
section 46F) which earns no interest. Under this Step, $1,500 is multiplied by
0%, giving a nil amount.
Step 2. Elaine's deeming threshold is $30,000 (see subsection
46H(1)). Her deposit concession money totals $1,500. The difference is
$28,500.
Step 3. The amount of $28,500 is multiplied by the below
threshold rate (5%):
$28,500 x 5 = $1,425.
100
Step 4. Elaine's deeming threshold of $30,000 is subtracted from
the total value of her financial assets ($36,500). The remainder is $6,500.
Step 5. The amount of $6,500 is multiplied by the above
threshold rate (7%):
$6,500 x 7 = $455.
100
Step 6. The amounts worked out at Steps 1, 3 and 5 are added
together:
$
Step 1 0
Step 3 1,425
Step 5 455
1,880 The ordinary income Elaine is deemed to receive per year from her
financial assets is $1,880.
"(4) The person is taken, for the purposes of this Act, to receive one
fifty-second of the amount calculated under subsection (3) as ordinary income
of the person during each week. Deemed income from financial assets-members of
a couple
"46E.(1) This section applies to the members of a couple.
"(2) If one or both of the members of a couple have financial assets, the
members of the couple are taken, for the purposes of this Act, to receive
together ordinary income on those assets in accordance with this section.
"(3) This is how to work out the ordinary income the couple is taken to
receive: Method statement Step 1. If any part of the couple's deposit
concession money attracts interest, multiply the amount of each such part by
the rate of interest and add together the amounts so worked out. Note: For
deposit concession money see section 46F. Step 2. Subtract the total amount of
the couple's deposit concession money from the couple's deeming threshold or,
if the total value of the couple's financial assets is less than that
threshold, from that total value. Note: For deeming threshold see subsection
46H(2). Step 3. Multiply the remainder (if any) worked out at Step 2 by the
below threshold rate. Note: For below threshold rate see subsection 46J(1).
Step 4. If the total value of the couple's financial assets exceeds the
couple's deeming threshold, subtract the couple's deeming threshold from the
total value of those assets. Step 5. Multiply the remainder (if any) worked
out at Step 4 by the above threshold rate. Note: For above threshold rate see
subsection 46J(2). Step 6. The total of the amounts worked out at Steps 1, 3
and 5 represents the ordinary income the members of the couple are taken to
receive per year on the financial assets. EXAMPLE OF HOW DEEMED INCOME OF A
COUPLE IS WORKED OUT (using rates in force on 1 July 1996) Facts: Maree and
Peter, a couple, have $68,500 worth of financial assets. They have $3,500 in a
savings account earning interest at 2.8% and deposits of $25,000 and $40,000
earning 5% p.a. and 8% p.a. in interest respectively. The below threshold rate
is 5%. The above threshold rate is 7%. Application:
Step 1. The couple's deposit concession money amounts to $3,500
(see section 46F) earning interest at 2.8%. The interest amounts to $98.
Step 2. The couple's deeming threshold is $50,000 (see
subsection 46H(2)). Their deposit concession money amounts to $3,500. The
remainder is $46,500.
Step 3. The amount of $46,500 is multiplied by the below
threshold rate (5%):
$46,500 x 5 = $2,325.
100
Step 4. The couple's deeming threshold of $50,000 is subtracted
from the total value of their financial assets ($68,500). The remainder is
$18,500.
Step 5. The amount of $18,500 is multiplied by the above
threshold rate (7%):
$18,500 x 7 = $1,295.
100
Step 6. The amounts worked out at Steps 1, 3 and 5 are added
together:
$
Step 1 98
Step 3 2,325
Step 5 1,295
3,718 The ordinary income Maree and Peter are deemed to receive per year from
their financial assets is $3,718. (Subsection (4) shows how this amount is
divided between Maree and Peter.)
"(4) Each member of the couple is taken, for the purposes of this Act, to
receive, as ordinary income during each week, an amount calculated according
to the formula:
Amount calculated under subsection (3) x 1
52 2
Deposit concession money
"46F.(1) This is how to work out which money constitutes, at a particular
time, the deposit concession money of a person who is not a member of a
couple: Method statement Step 1. Start with the amount of $2,000. Step 2. Set
off against this amount any available money of the person. Step 3. Set off
against the remainder any deposit money of the person that does not attract
interest. Step 4. Set off against the remainder any deposit money of the
person that attracts interest at a rate lower than the below threshold rate:
this money is to be set off in ascending order of interest rate. Note: For
below threshold rate see subsection 46J(1). Step 5. The total of the available
money or deposit money that can be set off under Steps 2 to 4 is the deposit
concession money of the person at that time. Note: Because of subsection (4),
the total worked out under this Step cannot exceed $2,000.
"(2) This is how to work out which money constitutes, at a particular time,
the deposit concession money of a couple: Method statement Step 1. Start with
the amount of $4,000. Step 2. Set off against this amount any available money
of the couple. Step 3. Set off against the remainder any deposit money of the
couple that does not attract interest. Step 4. Set off against the remainder
any deposit money of the couple that attracts interest at a rate lower than
the below threshold rate: this money is to be set off in ascending order of
interest rate. Note: For below threshold rate see subsection 46J(1). Step 5.
The total of the available money or deposit money that can be set off under
Steps 2 to 4 is the deposit concession money of the couple at that time. Note:
Because of subsection (4), the total worked out under this Step cannot exceed
$4,000.
"(3) For the purposes of this section:
(a) the available money of a couple is the total of the available money of
the members of the couple; and
(b) the deposit money of a couple that does not attract interest is the
total of the deposit money of the members of the couple that does not
attract interest; and
(c) the deposit money of a couple that attracts interest at a particular
rate is the total of the deposit money of the members of the couple
that attracts interest at that rate.
"(4) For the purposes of subsections (1) and (2), if available money or
deposit money is to be set off against an amount, only so much of the money as
does not exceed the amount can be set off against the amount.
"(5) In this section: available money does not include money specified in a
determination under subsection 46L(1). Note: For available money see
subsection 5H(1). deposit money does not include money specified in a
determination under subsection 46L(1). Note: For deposit money see subsection
5H(1). Meaning of money that attracts interest
"46G. A reference in any of sections 46D to 46F to money that attracts
interest is a reference to money on which interest accrues, whenever the
interest is paid. Deeming threshold
"46H.(1) The deeming threshold for a person who is not a member of a couple is
$30,000.
"(2) The deeming threshold for a couple is $50,000. Note: The amounts fixed by
subsections (1) and (2) are indexed every 1 July. See sections 59A to 59C.
Below threshold rate, above threshold rate
"46J.(1) For the purposes of this Division, the below threshold rate is the
rate that is the below threshold rate for the purposes of Division 1B of Part
3.10 of the Social Security Act.
"(2) For the purposes of this Division, the above threshold rate is the rate
that is the above threshold rate for the purposes of Division 1B of Part 3.10
of the Social Security Act. Actual return on financial assets not treated as
ordinary income
"46K.(1) Subject to subsection (2), any return on a financial asset that a
person actually receives is taken, for the purposes of this Act, not to be
ordinary income of the person.
"(2) If, because of a determination under subsection 46L(1), a financial
investment is not to be regarded as a financial asset for the purposes of
section 46D or 46E, subsection (1) does not apply to any return on the
investment that the person actually receives. Certain money and financial
investments not taken into account
"46L.(1) The Minister may determine that:
(a) specified financial investments; or
(b) a specified class of financial investments; are not to be regarded as
financial assets for the purposes of section 46D or 46E.
"(2) Money that constitutes a financial investment to which a determination
under subsection (1) applies is not to be taken into account under section
46F.
"(3) A determination under subsection (1) must be in writing.
"(4) A determination under subsection (1) takes effect on the day on which it
is made or on such other day (whether earlier or later) as is specified in the
determination. Valuation and revaluation of certain financial investments
"46M. The total value of a person's listed securities and managed investments
(being listed securities and managed investments that fluctuate depending on
the market) (the relevant investments) is determined in accordance with the
following:
(a) an initial total valuation is to be given to the relevant investments
on 1 July 1996, or when a new claim is determined, by the method set
out in departmental guidelines;
(b) that total valuation continues in effect until the relevant
investments are revalued by the method set out in departmental
guidelines, and that revaluation must occur:
(i) on 20 March in each calendar year after 1996; and
(ii) on 20 September in each calendar year after 1996; and
(iii) when the person requests a revaluation of one or more of the
person's listed securities and managed investments; and
(iv) following an event that affects the relevant investments and is
the subject of a recipient notification notice.". 28.
Subdivision D of Division 2 of Part IIIB: Omit the Subdivision,
substitute:
"Division 4-Income from retirement funds and annuities
"Subdivision A-Investments taken into account on realisation Treatment of
superannuation fund investments before pension age
"46Q. If:
(a) a person has an investment in:
(i) a superannuation fund; or
(ii) an approved deposit fund; or
(iii) a deferred annuity; and
(b) the person has not reached pension age; and
(c) the person has not commenced to receive a pension or annuity from the
investment; the investment is treated as follows:
(d) the return on the investment is not treated as ordinary income (see
paragraph 5H(8)(i)); Note: The investment is also disregarded for the
purposes of the assets test (see paragraph 52(1)(f)).
(e) if the investment is realised, the return is spread across the
following 12 months (see section 46R). Early withdrawal from
superannuation fund
"46R. If:
(a) a person realises an investment in a superannuation fund, approved
deposit fund or deferred annuity before the person reaches pension
age; and
(b) the amount is not rolled over into:
(i) a superannuation fund; or
(ii) an approved deposit fund; or
(iii) a deferred annuity; or
(iv) an immediate annuity; the person is taken to receive one
fifty-second of the assessable growth component of that amount
as ordinary income of the person during each week in the period
of 12 months commencing on the day on which the person realises
the investment. Note: For assessable growth component see
subsection 5J(1). Adjustment of ordinary income for investment
losses
"46S.(1) If:
(a) a person realises an investment to which section 46R applies; and
(b) the investment is realised at a loss; the person's ordinary income is
taken to be reduced during each week in the 12 months commencing on
the day on which the person realises the investment by the amount
worked out using the formula: assessable loss 52 where: assessable
loss is so much (if any) of the amount of the loss as is attributable
to the person's assessable period. Note: For assessable period see
subsection 5J(1).
"(2) The reduction under subsection (1) in a person's rate as at a particular
day is not to exceed the increase to be made under section 46R in working out
the person's rate as at that day.". 29. Heading to Subdivision E of Division 2
of Part IIIB: Omit "Subdivision E", substitute "Subdivision B". 30. Divisions
3, 4 and 5 of Part IIIB: Repeal the Divisions. 31. Section 59A (Indexed and
Adjusted Amounts Table): Add at the end the following heading and items:
"Deeming thresholds 20. Deeming threshold for a person who is not a member of
a couple
Deeming threshold individual
Subsection 46H(1) 21. Deeming threshold for a couple
Deeming threshold couple
Subsection 46H(2)". 32. Subsection 59B(1) (CPI Indexation Table): Add at the
end the following heading and items:
"Deeming thresholds 11. Deeming threshold individual
1 July
March
highest March quarter before
reference quarter (but not
earlier than March 1994 quarter)
$200.00 12. Deeming threshold couple
1 July
March
highest March quarter before
reference quarter (but not
earlier than March 1994 quarter)
$200.00". 33. Section 59C: Add at the end:
"(3) The first indexation of amounts under items 11 and 12 of the CPI
Indexation Table in subsection 59B(1) is to take place on 1 July 1997.". 34.
Section 118ZAA (Seniors Health Card Ordinary Income Test Calculator-point
118ZAA-1-Note 2): Omit the Note, substitute:
"Note 2: The application of the ordinary income test is affected by the
following provisions: . sections 46 and 46A (the general concept of ordinary
income); . sections 46B and 46C (business income); . sections 46D to 46L
(deemed income from financial assets); . sections 46Q to 46U (income from
retirement funds and annuities); . sections 48 to 48E (disposal of ordinary
income).". 35. Schedule 5: Add at the end: Saving: Determinations under
repealed sections 46Z and 46ZF
"7. A determination in force under section 46Z or 46ZF immediately before the
commencement of this section continues to have effect after that commencement
as if:
(a) section 46L of this Act, as in force immediately after the
commencement of this section, had been in force when the determination
was made; and
(b) the determination had been made under that section as so in force; and
(c) any reference in the determination to section 46W, 46ZD or 46ZE were a
reference to sections 46D to 46F of this Act.".
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