Explanatory Memorandum
Circulated By the Authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MPSchedule 10 - Other amendments
Summary
This Schedule will amend certain Acts to provide further consequential amendments relating to the various clean energy payments provided for in this Bill. Notably, the amendments ensure that the payments will not count as income for social security, family assistance and veterans' entitlements purposes, and will be tax-exempt. The amendments will also ensure that, where an individual is subject to income management, deductions will be made from any clean energy advances or quarterly supplements. The amendments also make various amendments of an administrative nature to the Social Security Administration Act where the amendments are common to a number of payments.
Background
In broad terms, this Schedule provides for certain amendments to various pieces of legislation to ensure that the various clean energy-related payments are tax-exempt and not to be treated as income for welfare-related purposes, and to ensure that lump sum clean energy advances or quarterly supplements will be income managed for those people who are subject to income management.
Various new payments are created by this Bill, including the clean energy advance (Schedules 1 and 2), low income supplement (Schedule 6) and the essential medical equipment payment (Schedule 7). Where common amendments are required to support the administration of these new payments, the amendments are made in this Schedule. Other amendments of an administrative nature are made in the main Schedules for the new payments.
The amendments made by this Schedule commence on 14 May 2012, subject to commencement of the new Clean Energy Act 2011.
Explanation of the changes
Amendments to the Family Assistance Act
Item 1 adds to paragraph (j) of clause 7 of Schedule 3 to the Family Assistance Act a reference to clean energy supplement. The effect will be that the clean energy supplement component of the relevant payment will not come within the defined term tax free pension or benefit and, therefore, will not be adjusted taxable income for family assistance purposes.
Amendments to the Income Tax Assessment Act 1997
Items 2 and 3 make consequential amendments to the table in section 11-15 of the Income Tax Assessment Act 1997, inserting references to the clean energy advance and single income family supplement under the Family Assistance Act, and to clean energy payments, including advances, under the Social Security Act, the Veterans' Entitlements Act, the Military Rehabilitation and Compensation Act and the Farm Household Support Act.
Items 4 and 5 similarly insert into section 52-10 reference to clean energy payments under the Social Security Act to provide that such payments are exempt from income tax.
Items 6, 7, 8 and 9 amend section 52-15 to provide that so much of a social security payment that is included by way of clean energy supplement is exempt from income tax.
Item 10 inserts into the table in section 52-40, which lists the provisions of the Social Security Act under which social security payments are made that are exempt from income tax, reference to a clean energy payment under Part 2.18A.
Item 11 inserts new paragraph (b) after paragraph 52-65(1)(a) to provide that clean energy payments under the Veterans' Entitlements Act are excluded from the table in that section (because they are covered at new subsection (1G), inserted at item 12 below).
Item 12 adds new subsection (1G) before subsection 52-65(2) to provide that clean energy payments under the Veterans' Entitlements Act are exempt from income tax.
Item 13 adds a new paragraph (e) to the definition of supplementary amounts of a veterans' affairs payment in section 52-70, to include reference to so much of the payment as is included by way of clean energy supplement.
Item 14 inserts references to Part IIIE and clean energy payment into the table in section 52-75, which lists the provisions of the Veteran's Entitlements Act under which veterans' affairs payments are made that are wholly or partly exempt from income tax.
Item 15 inserts reference to a clean energy payment under the Military Rehabilitation and Compensation Act into the table in section 52-114 as exempt from income tax.
Item 16 amends subsection 52-150(1) to specify that a clean energy advance or single income family supplement payment to families is exempt from income tax.
Item 17 inserts reference to a clean energy advance under the Farm Household Support Act into the table in section 53-10 as exempt from income tax.
Amendments to the Social Security Act
The clean energy advance payment to families will not be counted as income for social security purposes. Subsection 8(8) of the Social Security Act lists payments that are not income for social security purposes . Item 18 adds a reference to a clean energy advance under the Family Assistance Act into paragraph 8(8)(jaa). The single income family supplement is excluded from being income because it is a form of 'family assistance', which is already referred to within that paragraph.
Items 19 and 20 insert new paragraphs (yha) and (znb) into subsection 8(8) to provide that a clean energy payment under either the Veterans' Entitlements Act or the Military Rehabilitation and Compensation Act is not to be treated as income for the purposes of the Social Security Act.
Item 21 inserts new section 1224A into Part 5.2 of Chapter 5 of the Social Security Act. This new provision sets out when a low income supplement or a social security essential medical equipment payment is a debt. In broad terms, a debt would only arise where some or all of the payment was incorrectly paid because a relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information.
Where an individual is paid a low income supplement or an essential medical equipment payment because of a determination made under Part 3 of the Social Security Administration Act, the determination is later changed, revoked, set aside or superseded by another determination, a reason for the determination needing to be changed was that a relevant individual knowingly made a false or misleading statement or knowingly provided false or misleading information, and, apart from that statement or information, the payment would not have been paid, then the amount of the payment made is a debt. The relevant rules are in new subsection 1224A(1).
New subsection 1224A(2) provides that, in this case, the amount of the payment is a debt due to the Commonwealth by the individual.
New subsection 1224A(3) states that, with the exception of section 1224AA of the Social Security Act (relating to misdirected cheques), other provisions in relation to the raising of social security debts do not apply to the low income supplement or essential medical equipment payment.
Items 22 and 23 amend paragraph 1231(1AA)(b) of the Social Security Act.
Paragraph (b) provides that, when the Secretary makes a determination regarding what amount, if any, is to be deducted from a person's payments in repayment of an existing debt, the Secretary is not to reduce an individual's payment covered by the paragraph (including a reduction to nil) unless the person has requested the Secretary to do so. These items insert references to the low income supplement and the essential medical equipment payment into this paragraph, so that the same rules apply to these payments.
Amendments to the Social Security Administration Act
Item 24 adds two new paragraphs to subsection 47(1). Subsection 47(1) defines a lump sum benefit for the purposes of that section, which deals with how such benefits are to be paid, and applies various other needed provisions, such as the nominee provisions. New paragraph (k) includes the clean energy advance under the Social Security Act, and new paragraph (l) includes the low income supplement and the essential medical equipment payment under the Social Security Act, as lump sum benefits.
Item 25 inserts new sections 47D and 47DAA. New section 47D provides for payment of the clean energy advance to the individual in a single lump sum, and in such manner as the Secretary considers appropriate. However, new subsection (2) provides that the Secretary must not pay the advance if the Secretary is aware that the individual has died.
New section 47DAA provides for payment of the low income supplement or essential medical equipment payment under the Social Security Act to the individual in a single lump sum, and in such manner as the Secretary considers appropriate.
Item 26 inserts a new paragraph into section 123A after paragraph (c) of the definition of relevant payment. Section 123A provides the definitions for Part 3A - Nominees. The Secretary may appoint a nominee for a person in respect of a relevant payment. New paragraph (ca) includes a clean energy payment, to allow a nominee to be appointed in respect of such a payment, particularly the quarterly clean energy supplement.
Items 27 and 28 make amendments to Part 3B of the Social Security Administration Act, dealing with income management of a number of the new clean energy payments.
Item 27 amends section 123TC to insert a definition of clean energy income-managed payment, to mean a clean energy advance under the 1991 Act (that is, the Social Security Act), the Veterans' Entitlements Act for service pension or the Family Assistance Act, or a quarterly clean energy supplement under the 1991 Act (that is, the Social Security Act) or the Veterans' Entitlements Act.
Item 28 inserts new Subdivision DE after Subdivision DD of Division 5 of Part 3B, providing for deductions from clean energy income-managed payments that may be payable to a person who is subject to income management. New section 123XPJ provides that, if a clean energy income-managed payment is payable to a person who is subject to income management, 100 per cent of the payment is the deductible portion. This means that the full amount of these payments is to be deducted and credited to the Income Management Record and to the person's income management account.
An income managed individual's clean energy supplement that is paid as a distinct component of the person's rate of social security payment will be income managed by virtue of being part of the individual's rate of payment. The low income supplement, the essential medical equipment payment and the single income family supplement will not be income managed.
Item 29 inserts reference to the low income supplement or the essential medical equipment payment into paragraph 129(3)(a). In common with pension bonus, subsection 129(3) limits the capacity of a person to apply for review of a decision in relation to these payments more than 13 weeks after notice is given to the person of the decision. Date of effect provisions under the social security law (see Division 9 of Part 3 of the Social Security Administration Act) generally limit the date of effect of decisions on review where a person seeks such review more than 13 weeks after being given notice of the decision. For instalment payments, the review decision will take effect on the day review was sought in this situation, limiting retrospectivity of the decision. To limit retrospective payments of these lump sum payments, the equivalent result is produced by requiring review to occur within 13 weeks after notification of the decision. Where the particular income year has not ended, a fresh claim for the low income supplement or essential medical equipment payment may still be made.
Item 30 inserts reference to the low income supplement or the essential medical equipment payment after subsection 238(1) to provide, in new subsection (1A), that the Secretary is not required to make deductions sought by the Commissioner of Taxation. It is not intended that these payments be paid to the Commissioner in satisfaction of a tax debt owed by the individual.
Amendments to the Veterans' Entitlements Act
Item 31 inserts reference to a clean energy advance under the Family Assistance Act into paragraph 5H(8)(paa) to provide that such payments are not income in relation to a person for the purposes of the Veterans' Entitlements Act. (The single income family supplement is excluded from being income because it is covered by the term 'family assistance'.)
Item 32 inserts new paragraph 5H(8)(zzaaaa) after paragraph 5H(8)(zza), referring to a clean energy payment under the Military Rehabilitation and Compensation Act to provide that such a payment is not income in relation to a person for the purposes of the Veterans' Entitlements Act.
Item 33 inserts new paragraph 5H(8)(zzah) after paragraph 5H(8)(zzag), referring to a clean energy payment under Part IIIE to provide that such payment is not income in relation to a person for the purposes of the Veterans' Entitlements Act.