House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Minister for Family and Community Services, Senator the Hon Kay Patterson)

Schedule 2 - Seniors concession allowance

Summary

The amendments made by this Schedule will introduce a new payment for self funded retirees, to be known as the seniors concession allowance. In general, the payment will be made to a person who holds a seniors health card on 1 December and 1 June of each year, commencing on 1 December 2004. Special transitional arrangements will enable the payment to be made to any person who is entitled to hold a card during any time in December 2004 (that is, other than on 1 December 2004). The new allowance will, subject to CPI indexation, be a payment of $200 a year. The allowance will be paid in two instalments as soon as practicable after 1 December and 1 June each year (with special arrangements for the transitional payment in December 2004).

Background

During the 2004 election campaign, the Government made a commitment to introduce a new payment to provide more help for self funded retirees. In general, the seniors health card is available to retirees with adjusted taxable income of less than $50,000 for single people and $80,000 (combined) for couples. The seniors health card provides access to cheaper prescriptions and a range of other benefits. However, it is recognised that most self funded retirees do not receive concessions for energy needs, rates, water and sewerage and motor vehicle registration costs from state and territory governments. Accordingly, the new payment will be introduced to provide assistance for self funded retirees in meeting such expenses. The allowance also recognises the contribution that this group has made in providing for their own retirement.

Explanation of changes

Part 1 - Amendments relating to Family and Community Services' payment of seniors concession allowance

Division 1 - Amendments

Income Tax Assessment Act 1997

Item 1 inserts a reference to the new seniors concession allowance in the table in section 52-10, which provides for the income tax treatment of social security payments. The effect of the amendment is that in each of the first two cases dealt with in that table, the new allowance will be exempt from income tax.

In particular, case 1 applies if a person receives an ordinary payment of the allowance (that is, a payment made other than because of a person's death) unless case 2 applies. Case 2 applies if a person's partner dies, the person does not qualify for bereavement payments (because no bereavement payments are payable in relation to the allowance), and the person receives an ordinary payment of the allowance on any of the person's paydays after their partner's death. Cases 3 and 4 are not applicable to the new allowance.

Item 2 inserts a reference to the new seniors concession allowance in the table in section 52-40, which lists the provisions of the Social Security Act under which social security payments are made that are wholly or partly exempt from income tax.

Social Security Act 1991

Item 3 inserts a definition of 'seniors concession allowance' in subsection 23(1) of the Social Security Act.

Item 4 inserts new Part 2.25B into the Social Security Act to provide for the new seniors concession allowance.

Division 1 - Qualification for and payability of seniors concession allowance

New subsection 1061U provides the qualification conditions for the new allowance. A person is qualified for the allowance if the person is the holder of a seniors health card and is in Australia. Alternatively, qualification will arise if a person is temporarily absent from Australia for a continuous period not exceeding 13 weeks, and the person was the holder of a seniors health card immediately before leaving Australia. (Under subsection 1061ZG(1) of the Social Security Act, a person must be in Australia to be qualified for the seniors health card.)

New subsection 1061UA provides for when the new allowance is payable.

New subsection 1061UA(1) provides the general rule that the allowance is payable to a person for each seniors concession allowance test day (defined in new subsection 1061UA(3) as 1 June and 1 December) on which the person is qualified for the allowance.

New subsection 1061UA (2) provides that the allowance will not be payable on a seniors concession allowance test day if:

•

two instalments of any combination of the new seniors concession allowance and the new utilities allowance (whether under the Social Security Act or the Veterans' Entitlements Act) have already been payable in the same financial year as the test day - this recognises that a person is not entitled to more than two payments of either or both of the new payments in any financial year, as the new payments are closely related; or

•

before that day, the person has elected not to receive the allowance, and has not withdrawn such an election - this recognises that a person has the right not to receive the payment if they so decide, but they can change their mind about this, so that that the allowance can again become payable; or

•

subsection 55(5) of the Social Security Administration Act applies to the person, as a result of the person failing to nominate a bank account.

New section 1061UB provides that a person's annual rate of the new allowance is $200. This annual rate of the allowance is indexed twice a year in line with CPI increases.

Item 5 inserts a reference to 'income support supplement' in paragraph 1061ZG(1)(g). The effect of this amendment is that a person who is receiving this payment cannot be qualified for a seniors health card under the Social Security Act. A person receiving income support supplement may be qualified for a seniors health card under the Veterans' Entitlements Act.

Item 6 inserts new paragraph 1061ZG(2)(aa) to provide that a person is not qualified for a seniors health card under the Social Security Act if the person holds a seniors health card under the Veterans' Entitlements Act. This mirrors the corresponding rule in section 118X of the Veterans' Entitlements Act.

Items 7 and 8 provide for the indexation of the annual rate of seniors concession allowance set out in new section 1061UB. In general terms, the annual rate of the allowance is indexed twice a year in line with CPI increases. Item 9 provides that the first indexation of the allowance will take place on 1 June 2005.

Social Security (Administration) Act 1999

Item 10 inserts new section 12D, which provides that a claim is not required for the new seniors concession allowance. The new payment will be made automatically if a person is qualified for the allowance, and the allowance is payable, on a test day.

Item 11 inserts new section 48B, which provides for the payment of the new seniors concession allowance. New subsection 48B(1) provides that the allowance is to be paid be instalments. New subsection 48B(2) provides that an instalment of the allowance is to be paid as soon as is reasonably practicable on or after the relevant seniors concession allowance test day (defined in subsection (4) as 1 June and 1 December). New subsection 48B(3) provides that an instalment of the new allowance is the annual rate of the allowance divided by two.

Item 12 amends subsection 55(1) to enable the usual provisions relating to the manner of payment of a social security entitlement to apply to the new allowance.

Division 2 - Transitional provisions

Item 13 contains rules relating to the special payment of seniors concession allowance, to be known as transitional seniors concession allowance.

Subitem 13(1) provides definitions of terms used in the item.

Subitem 13(2) provides that the transitional allowance is payable in relation to a transitional day (defined as any day in December 2004 other than 1 December 2004) if the seniors concession allowance would be payable if that day had been the 1 December 2004 test day, and seniors concession allowance was not payable in relation to the 1 December 2004 test day.

Subitem 13(3) provides that the transitional allowance is payable only once in relation to December 2004.

Subitem 13(4) provides that the transitional payment of the allowance is to be paid as soon as practicable on or after the transitional day, and that the amount of the instalment of the allowance is $100.

Subitem 13(5) provides that, for the purposes of relevant legislation, transitional seniors concession allowance is to be treated as if it were seniors concession allowance payable in relation to the 1 December 2004 test day, and an instalment of the transitional allowance is to be treated as an instalment of seniors concession allowance under new section 49B of the Social Security Administration Act in relation to the 1 December 2004 test day.

Part 2 - Amendments relating to Veterans' Affairs payment of seniors concession allowance

The amendments made in this Schedule provide for the introduction of new Part VIIAD into the Veterans' Entitlements Act providing for the payment of the seniors concession allowance of $200 per year to holders of a Commonwealth Seniors Health Card (seniors health card) under Part VIIC of the Veterans' Entitlements Act. The allowance will be paid in two instalments each year with the payments being made as soon as practicable after the 1 December and 1 June of each year.

The first payment will be made to all eligible persons who are cardholders on 1 December 2004.

In addition, the first payment will be made to a person whose claim for a seniors health card has been granted in respect of a period that includes any day in December 2004. In that case, the payment will be made as soon as reasonably practicable after eligibility for the seniors health card has been determined.

The amount of the payment will be indexed twice yearly on the basis of CPI increases. Section 198E has been amended to provide for the indexation of the allowance.

The allowance will be subject to the general payment provisions of sections 122, 122A, 122B, 202, 202A and 202B relating to such matters as the manner of payment and payments to agents and trustees.

The payments will be non-taxable and amendments have been made to sections 52-65 and 52-75 of the Income Tax Assessment Act 1997.

The seniors concession allowance will be payable to an eligible person who has been temporarily absent from Australia for a continuous period not exceeding 13 weeks.

To ensure that persons will not be eligible under both the Social Security Act and Veterans' Entitlements Act for the payment of the allowance section 118X of the Veterans' Entitlements Act provides that a person who holds a seniors health card under the Social Security Act is not entitled to one under the Veterans' Entitlements Act.

As it is possible for individuals to move from receiving income support to holding a seniors health card (and back again) over time, some people may meet the test for both the seniors concession allowance and the new utilities allowance in any one year. To prevent 'double dipping', a person will only be entitled to be paid no more than two instalments of either of the new payments in any financial year (including the financial year commencing 1 July 2004).

The amendments also provide the cardholder with the opportunity to elect (by written notice) to not receive the allowance.

The existing debt recovery provisions in Part XII of the VEA will provide for the recovery of a payment made to a person not entitled to receive it.

Division 1 - Amendments

Income Tax Assessment Act 1997

Item 14 amends section 52-65. Section 52-65 contains a table setting out the income tax treatment of veterans' affairs payments.

The table setting out the income tax treatment of veterans' affairs payments is amended by the inclusion of new item 16A.1 referring to payments of the seniors concession allowance. The reference provides that payments of seniors concession allowance will be exempt from income tax.

Item 15 inserts a reference to the new seniors concession allowance being payable under Part VIIAD in the table in section 52-75 listing the provisions of the Veterans' Entitlements Act under which payments are made.

Social Security Act 1991

Item 16 inserts new subparagraph (viib) referring to seniors concession allowance payable under Part VIIAD of the Veterans' Entitlements Act in paragraph 8(8)(y). Paragraph 8(8)(y) lists Veterans' Entitlements Act payments that are to be regarded as an 'excluded amount' for the purposes of determining income under the Social Security Act.

Veterans' Entitlements Act 1986

Item 17 amends subsection 5H(8) by inserting new paragraph (gb). Subsection 5H(8) sets out the payments that are to be regarded as being an 'excluded amount' for the purposes of determining the income of a person under the Veterans' Entitlements Act.

New paragraph 5H(8)(gb) provides that all payments of seniors concession allowance made under Part VIIAD are to be regarded as being an 'excluded amount'.

Item 18 inserts in subsection 5Q(1) a definition of 'seniors concession allowance' as meaning the seniors concession allowance payable under new Part VIIAD.

Item 19 inserts new Part VIIAD into the Veterans' Entitlements Act.

New Part VIIAD is titled 'Seniors concession Allowance'.

Division 1 - Eligibility for and payability of seniors concession allowance

New section 118P defines the 'seniors concession allowance test day' for the purposes of the new Part as being either the 1 June or 1 December of each year.

New section 118PA provides the eligibility conditions for the new allowance. The conditions as set out in paragraph 118PA(a) are that the person must be the holder of a seniors health card and be in Australia.

For the allowance to be payable to a person who is not in Australia, paragraph 118PA(b) provides that the person must be temporarily absent from Australia for a continuous period not exceeding 13 weeks and that the person was the holder of a seniors health card immediately before leaving Australia.

New section 118PB provides for when the new allowance is payable.

New subsection 118PB(1) provides the general rule that the allowance is payable to a person for each seniors concession allowance test day (as defined in new section 118P as either 1 June or 1 December) on which the person is eligible for the allowance.

New subsection 118PB(2) provides that the allowance will not be payable on a seniors concession allowance test day if either:

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two instalments of any combination of both the new utilities allowance and the new seniors concession allowance have already been payable under the Veterans' Entitlements Act or the Social Security Act in the same financial year as the test day - this provision recognises that a person is not entitled to more than two payments of either or both of the new payments in any financial year, as the new payments are closely related; or

•

before that day, the person has elected not to receive the seniors concession allowance, and has not withdrawn such an election - this recognises that a person has the right to not receive the payment if they so decide, but they can change their mind about this, so that that the allowance can again become payable.

Subsection 118PB(3) refers to the making of an election not to receive payments of seniors concession allowance and the withdrawal of such an election. It provides that an election and the withdrawal of an election must be by document lodged at an office of the Department of Veterans' Affairs in accordance with section 5T. The lodgement of the document will be taken to have been made on a date determined under that section.

Division 2 - Rate of seniors concession allowance

New section 118PC provides for a person's annual rate of payment of the new allowance. The person's annual rate is $200 (subject to indexation).

The Note to section 118PC refers to the annual rate of the seniors concession allowance being indexed in line with increases in the CPI as provided for in section 198E.

Division 3 - Payment of utilities allowance

New section 118PD provides for the payment of the new seniors concession allowance. New subsection 118PD(1) provides that the allowance is to be paid in instalments.

New subsection 118PD(2) provides that an instalment of the allowance is to be paid as soon as is reasonably practicable on or after the seniors concession allowance test day.

Subsection 118PD(3) provides for the six monthly instalments of seniors concession allowance to be paid at a rate equivalent to one half of the annual rate.

Subsection 118PD(4) provides for an instalment of seniors concession allowance that is not a multiple of ten cents to be rounded up to the next ten cents.

Items 20 and 21 amend section 122A. The amendments include a reference to a payment of seniors concession allowance in subsection 122A(1A) and insert new subsections 122A(1C) and (1D).

Section 122A provides for he payment of pensions and allowances under the Veterans' Entitlements Act to be paid into a bank account nominated by the recipient. Subsection 122A(1A) provides that a pension or allowance will not be payable if an account has not been nominated. The effect of the amendment is to exclude payments of seniors concession allowance from being subject to the operation of the existing provisions of section 122A.

Subsection 122B(1B) operates so that a payment not payable under subsection 122A(1A) because bank account details were not provided will be later payable if the an account is nominated.

New subsection 122A(1C) provides that a payment of seniors concession allowance will not be payable after a period of 28 days (or more as nominated) if a response to request for bank account details made by the Repatriation Commission has not been received.

New subsection 122A(1D) provides that if a bank account is nominated after the end of the 28 day period (or more if nominated) then subsection 122A(1C) will no longer apply to the person.

Item 23 amends section 198E to provide for the indexation of the annual rate of seniors concession allowance referred to in new section 118PC. In general terms, the annual rates of the allowance are indexed twice a year in line with CPI increases with reference to the March and September quarters. Subsection 198E(10A) provides that the first indexation of the allowance will occur in relation to the seniors concession allowance payment made for the 1 June 2005 test day.

Division 2 - Transitional provision

Item 24 contains rules relating to the special payment of seniors concession allowance, to be known as transitional seniors concession allowance.

Subitem 24(1) provides definitions of terms used in the item.

Subitem 24(2) provides that the transitional allowance is payable in relation to a transitional day (defined as any day in December 2004 other than 1 December 2004) if the seniors concession allowance would be payable if that day had been the 1 December 2004 test day, and seniors concession allowance was not payable in relation to the 1 December 2004 test day.

Subitem 24(3) provides that the transitional allowance is payable only once in relation to December 2004.

Subitem 24(4) provides that the transitional payment of the allowance is to be paid as soon as practicable on or after the transitional day, and that the amount of the instalment of the allowance is $100.

Subitem 24(5) provides that, for the purposes of relevant legislation, transitional seniors concession allowance is to be treated as if it were seniors concession allowance payable in relation to the 1 December 2004 test day, and an instalment of the transitional allowance is to be treated as an instalment of seniors concession allowance under new Part VIIAD in relation to the 1 December 2004 test day.