House of Representatives

Explanatory Memorandum

(Circulated by authority of the Minister for Social Security Senator the Hon. Graham Richardson)

OUTLINE AND FINANCIAL IMPACT STATEMENT

This Bill would give effect to a number of measures announced in the 1990-91 Budget.

The legislation involved is the Social Security Act 1947, the Veterans' Entitlements Act 1986, the Seamen's War Pensions and Allowances Act 1940, the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953.

INCOME

The following changes would affect the Social Security Act 1947 and the Veterans' Entitlements Act 1986.

•

After 21 August 1990, a minimum interest rate would be deemed on new loans (including debentures and bonds) made or acquired by pensioners and beneficiaries after that date, for the purposes of the income test. An initial interest rate would be set at 10% per annum. Thereafter the Minister for Social Security would be entitled, from time to time, to set a lower minimum interest rate. The rate set by the Minister for Social Security would apply equally to the relevant Veterans' Affairs provisions.

•

The annual gifting limit would be increased to $10,000 (single or married combined) before the deprivation provisions would apply. This measure would apply from 1 March 1991.

•

After 21 August 1990, income would be deemed on deprived assets for income test purposes at an initial rate of 10% per annum. Thereafter the Minister for Social Security would be entitled, from time to time, to set a lower minimum interest rate. This deeming rule would not apply to new cases of acquired or retained rights to accommodation for life, the value of which would be deemed to be the amount to be paid for the right. The rate set by the Minister for Social Security would apply equally to the relevant Veterans' Affairs provisions.

•

From 1 March 1991, deprived assets would be maintained at full value for 5 years only instead of, as at present, progressively reducing to nil value over 10 years.

Estimated program savings from these measures are $0.52m in 1990-91 and $9.75m in 1991-92.

SOCIAL SECURITY AND VETERANS' AFFAIRS AMNESTY

The social security and veterans' affairs amnesty would provide that a person receiving a social security or veterans' affairs payment could voluntarily inform the Department of Social Security or the Department of Veterans' Affairs respectively, during the six week period from 22 August 1990 to 2 October 1990 inclusive, of the person's circumstances and be protected against criminal or civil liability arising from the application of the Social Security Act 1947, the Veterans' Entitlements Act 1986 or the Seamen's War Pensions and Allowances Act 1940.

Estimated net savings from this measure are $54.3m in 1990-91.

TAX FILE NUMBERS

The following changes would affect the Social Security Act 1947, the Veterans' Entitlements Act 1986, the Seamen's War Pensions and Allowances Act 1940, the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953.

From 1 October 1990, persons who claim or are in receipt of sole parent's pension, family allowance or family allowance supplement under the Social Security Act 1947 would be required to supply a tax file number as a precondition to receiving or continuing to receive payment.

Estimated program savings from this measure are $8.9m in 1990-91 and $11.1m in 1991-92.

In respect of payments under the Veterans' Entitlements Act 1986, from the day of Royal Assent, the Secretary may require persons who claim, or are in receipt of, the following payments:

•

pensions under Part II, III or IV;

•

temporary incapacity allowance;

•

loss of earnings allowance;

•

allowances under the Veterans' Children Education Scheme; and

•

linked allowances and pensions;

to provide a tax file number as a prerequisite to the payment of that pension or allowance.

From the day of Royal Assent, persons who claim, or are in receipt of, payments under the Seamen's War Pensions and Allowances Act 1940 would be required to supply a tax file number as a precondition to receiving, or continuing to receive, a payment.

Estimated program savings from these measures are $5.85m in 1990-91 and $27.0m in 1991-92.

Other amendments would be made to the Income Tax Assessment Act 1936 and the Taxation Administration Act 1953 which would facilitate the abovementioned tax file number changes.