House of Representatives

Explanatory Memorandum

Circulated By the Authority of the Minister for Families, Housing, Community Services and Indigenous Affairs, the Hon Jenny Macklin MP

Schedule 3 - Clean energy payments under the

Veterans' Entitlements Act

Summary

The Clean Energy Household Assistance Package will provide financial assistance to veterans, members, former members and their dependants to assist with increases in the cost of living arising from the introduction of a carbon price on 1 July 2012.

Financial assistance will be delivered through clean energy payments that are equivalent to permanent increases to the rates of relevant pensions. The amendments in this Schedule provide for assistance to be provided by a lump sum clean energy advance before commencement of the carbon pricing scheme, and for ongoing clean energy supplements to be paid from the end of the clean energy advance lump sum period.

Background

Clean energy advances

Part of the Schedule makes amendments to provide for a lump sum clean energy advance, payable to people before the commencement of the carbon pricing scheme. The clean energy advance period will cover a period of nine months.

The clean energy advance will start being paid to people from 14 May 2012 as a tax-free payment to the recipients of certain payments under the Veterans' Entitlements Act targeted under the Household Assistance Package. The clean energy advance would include:

•

the expected Consumer Price Index impact of carbon pricing (0.7 per cent); and

•

the additional increase amount above Consumer Price Index impact (one per cent).

The clean energy advance will be paid in respect of the period from 1 July 2012 until the normal payment indexation arrangements begin to deliver Consumer Price Index increases related to carbon pricing from 20 March 2013.

Clean energy supplements

Once normal indexation begins to deliver Consumer Price Index increases in respect of carbon pricing from 20 March 2013, the additional increase will be paid as clean energy supplements.

It is proposed that ongoing clean energy supplements will start to be paid from the end of the clean energy advance lump sum period. The clean energy supplement will be a separate payment from the relevant Veterans' Affairs pension. The clean energy supplements will be permanent, and indexed by the Consumer Price Index so they maintain their value in real terms over time.

It is proposed that recipients be given the option of receiving their supplement as a quarterly payment in arrears rather than a fortnightly payment.

Indexation

The expected additional impact on the Consumer Price Index from carbon pricing (0.7 per cent) will be permanently included in the clean energy supplement (plus an additional one per cent increase). Part 3 contains amendments to the Veterans' Entitlements Act that provide for the expected impact of the carbon price on indexation (0.7 per cent) to be transferred from the maximum basic rate and pension supplement of certain veterans' payments to the clean energy supplement. The maximum basic rate and the pension supplement will continue to be indexed in accordance with usual indexation arrangements. The clean energy supplement will also be indexed to maintain its real value over time.

The carbon price impacts will start to flow through to primary payment indexation at the 20 March 2013 indexation point.

Explanation of the changes

Part 1 - Clean energy advances

Amendments to the Veterans' Entitlements Act

Item 1 inserts four new terms into the index of definitions.

Item 2 inserts a definition for clean energy advance in subsection 5Q(1). Clean energy advance means an advance described in Subdivision A or C of Division 1 of Part IIIE.

Item 3 inserts a definition for clean energy bonus in subsection 5Q(1). Paragraph (a) of the definition provides that a clean energy bonus under an Act or a scheme is a payment known as a clean energy advance provided for by the Act or scheme.

Paragraph (c) of the definition provides that clean energy bonus is also an increase that is described using the phrase 'clean energy' and that affects the rate of another payment that is provided for by the Act or scheme.

Paragraph (b) of the definition will be inserted by item 11 of Part 2 of Schedule 3 when it commences on 20 March 2013.

Item 4 inserts a definition for clean energy payment in subsection 5Q(1) and contains paragraph (a) to include clean energy advance.

Item 5 inserts a definition for clean energy underlying payment in subsection 5Q(1). Clean energy underlying payment means:

•

a pension under Part II or IV at a rate determined under or by reference to Division 4 of Part II - this covers general rate, extreme disablement adjustment, intermediate rate, special rate, temporary special rate and rates set by section 27; or

•

a pension under Part II or IV at a rate determined under or by reference to subsection 30(1) - this covers war widow's or war widower's pension; or

•

service pension; or

•

seniors supplement.

Item 6 inserts a new Part IIIE into the Veterans' Entitlements Act. New Part IIIE creates two new payments, the clean energy advance and the clean energy supplement. The new Part also sets out the eligibility, payability and rate rules for both the clean energy advance and the clean energy supplement.

Part IIIE - Clean energy payments

Division 1 - Clean energy advances

Subdivision A - Eligibility for clean energy advances

New section 61A sets out the eligibility rules for people in receipt of clean energy underlying payments. New subsection 61A(1) provides that, if, on a day between 14 May 2012 and 30 June 2012 (dates inclusive), a person receives a clean energy underlying payment, their rate of payment is greater than nil, and they are in Australia, the Repatriation Commission may determine that the person is eligible for a clean energy advance for the period from 1 July 2012 to 19 March 2013. This provision will provide eligibility for persons receiving a clean energy underlying payment and who are in Australia on a day during the period 14 May 2012 and 30 June 2012.

A note at the end of the section advises that clean energy underlying payment is defined in subsection 5Q(1).

New subsection 61A(2) provides that, if, on a day between 1 July 2012 and 19 March 2013 (dates inclusive), a person receives a clean energy underlying payment, their rate of payment is greater than nil, and they are in Australia, the Repatriation Commission may determine that the person is eligible for a clean energy advance for the period ending on 19 March 2013. This provision will provide eligibility for persons who begin to receive a clean energy underlying payment on or after 1 July 2012 or who were receiving the clean energy underlying payment prior to 1 July 2012 but who returned to Australia on or after 1 July 2012.

A note at the end of the section advises that clean energy underlying payment is defined in subsection 5Q(1).

New subsection 61A(3) provides that, if the Repatriation Commission makes a determination under new subsection 61A(2), the determination must specify the first day on which the person satisfies both new paragraphs 61A(2)(a) and (b), and the day that is the first day during the period the person is in Australia, disregarding any temporary absence that is less than 13 weeks.

New subsection 61A(4) provides that, if, at the time the Repatriation Commission makes a determination under new subsection 61A(1) or (2) regarding eligibility, a person's rate of clean energy underlying payment is nil merely because:

•

the rate is reduced, or the pension is not payable, due to the operation of a provision under Division 4, 5 or 5A of Part II or section 74; or

•

they are receiving quarterly pension supplement;

the person's rate is taken to be greater than nil and the person will, therefore, meet the requirement in paragraphs 61A(1)(b) and 61A(2)(b).

New subsection 61A(5) prevents the Repatriation Commission from determining that a person is eligible for a clean energy advance under new subsection 61A(2) if the Repatriation Commission has already determined that the person was eligible for a clean energy advance for the same clean energy underlying payment under new subsection 61A(1) or 61A(2).

New section 61B provides that a person may be paid a clean energy advance for each clean energy underlying payment for which the Repatriation Commission determines that the person is eligible for a clean energy advance.

A note at the end of the section explains that the section is subject to the multiple entitlement exclusion provisions in new section 65A.

Subdivision B - Amount of clean energy advance

New section 61C sets out how a clean energy advance is to be calculated for a person.

New subsection 61C(1) provides that, when the Repatriation Commission determines that a person is eligible for a clean energy advance (the decision day), the Repatriation Commission must also determine the amount of clean energy advance that is payable to the person (the recipient).

A note after the subsection explains that the advance will be paid as a lump sum as soon as is reasonably practicable after the decision day.

New subsection 61C(2) provides that the amount of the clean energy advance will be the clean energy advance daily rate multiplied by the number of advance days, rounded up to the nearest $10. Clean energy advance daily rate means the rate as worked out for the person's circumstances under new section 61D and the number of advance days is the number of days worked out under new section 61E.

New section 61D sets out the various methods of calculating a person's clean energy daily rate. A person's clean energy advance daily rate will depend on the type of payment that the person receives.

New subsection 61D(1) sets out the formula for calculating the clean energy advance daily rate for a person whose clean energy underlying payment is a rate determined under or by reference to general rate, extreme disablement adjustment, intermediate rate or special rate of disability pension. In these cases, the daily rate is calculated by working out 1.7 per cent of the person's rate of disability pension on 1 July 2012, adding 20 cents to that amount (which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as a clean energy supplement rather than as a lump sum advance), rounding the resulting amount up or down to the nearest 10 cents and dividing that result by 14. For persons on a percentage of general rate disability pension, for the purposes of this section, their rate will be 100 per cent of the general rate disability pension.

New subsection 61D(2) sets out the formula for calculating the clean energy advance daily rate for a person whose clean energy underlying payment is a rate of disability pension determined under or by reference to section 27. In these cases, the daily rate is calculated by working out 1.7 per cent of the person's rate of disability pension on 1 July 2012 using the table at the end of the subsection, adding 20 cents to that amount (which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as a clean energy supplement rather than as a lump sum advance), rounding the resultant amount up or down to the nearest 10 cents and dividing that result by 14.

New subsection 61D(3) means, when using the table in new subsection 61D(2), the person's rate of disability pension is to be taken to be the rate that the person would be receiving if subsections 23(5) or (6), sections 25A, 26, Division 5A of Part II or section 74 were not applied and did not reduce the person's rate of disability pension.

New subsection 61D(4) sets out the formula for calculating the clean energy advance daily rate for a person whose clean energy underlying payment is war widow's or war widower's pension. In these cases, the daily rate is calculated by working out 1.7 per cent of the person's rate of war widow's or war widower's pension on 1 July 2012, adding 20 cents to that amount (which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as a clean energy supplement rather than as a lump sum advance), rounding the resultant amount up or down to the nearest 10 cents and dividing that result by 14.

New subsection 61D(5) sets out the formula for calculating the clean energy advance daily rate for people in receipt of service pension or seniors supplement. A person's clean energy advance daily rate is worked out by calculating 1.7 per cent of the sum of twice the maximum basic rate on 1 July 2012 as set out under SCH6-B1 of the Rate Calculator for a person who is partnered and the combined couple rate of pension supplement on 1 July 2012, and this figure is then rounded up or down to the nearest multiple of $5.20. An amount of $5.20 is then added to this figure, which compensates for the lack of indexation that would have occurred if the clean energy advance was paid as a clean energy supplement rather than as a lump sum advance. The calculation produces an annual figure for a combined couple, which is then adjusted to take account of the particular person's circumstances by applying the relevant percentage in the table at the end of new subsection 61D(5) that corresponds with the person's particular circumstances. The percentage adjusted figure is then rounded up or down to the nearest multiple of $2.60, rounding up if the figure is not a multiple of $2.60 but is a multiple of $1.30. The final figure is an annual figure which is then divided by 364 to obtain a daily rate.

The note at the end of new subsection states where the family situation terms used in the table are defined in the Veterans' Entitlements Act.

New subsection 61D(6) means that, when using the table at the end of subsection 61D(5) for the purposes of paragraph 61(D)(5)(d), the person's family situation is to be determined as at either:

•

the day the Repatriation Commission determines under subsection 61A(1) that the person is eligible ; or

•

the day specified in a determination under subsection 61A(2) that the person is eligible.

New section 61E sets out how the number of advance days is worked out to enable the clean energy advance to be calculated. The number of advance days is the number of days in the person's clean energy advance period to be calculated starting on either:

•

1 July 2012; or

•

if a determination under subsection 61A(2) applies to the person, the day specified in the determination under subsection 61A(3) that the person is eligible;

and ending on 19 March 2013.

Subdivision C - Top-up payments of clean energy advance

This Subdivision, comprising new section 61F, provides for top-up payments of clean energy advance to people where a change of circumstances during the clean energy advance period would result in the person not being appropriately compensated for the anticipated increased energy costs.

The operation of this Subdivision will mean that, if the person's circumstantial change during the clean energy advance period results in:

•

the person starting to receive a different clean energy underlying payment that is paid at a higher rate than their previous clean energy underlying payment (for example, a person changes from partner service pension to war widow's or war widower's pension); or

•

the person starting to receive the same clean energy underlying payment at a higher rate (for example, a person changes from the partnered rate of service pension to the single rate of service pension);

then, where the person is not able to receive the entire advance amount because of a multiple entitlement exclusion, the person will receive an additional amount of clean energy advance equivalent to the difference between the higher and lower advance amounts for the number of days remaining in the advance period.

This may happen more than once.

New subsection 61F(1) provides that the Repatriation Commission may determine, by legislative instrument, that persons who have been paid a clean energy advance (the original payment for the original underlying payment) and whose circumstances change, are eligible for a further top-up payment of clean energy advance. The instrument will further specify the time period within which the change of circumstances must occur, the type of circumstance change and the method of calculating the additional clean energy advance amount.

New subsection 61F(2) enables the Repatriation Commission to make a legislative instrument under subsection 61F(1) for a change in circumstances that involves persons becoming eligible for a higher rate of the original underlying payment.

New subsection 61F(3) enables the Repatriation Commission to make a legislative instrument under subsection 61F(1) for a change in circumstances that involves the person beginning to receive a different clean energy underlying payment.

New subsection 61F(4) provides, for the purposes of subsection (3), that a multiple entitlement exclusion is an instrument providing that a person is not entitled to a clean energy bonus because of the person's entitlement to or receipt of the original payment or the original payment or the original underlying payment.

A multiple entitlement exclusion is also an instrument that is made under section 65A of the Veterans' Entitlements Act, section 424L of the Military Rehabilitation and Compensation Act, section 918 of the Social Security Act, or an instrument establishing entitlements to a clean energy bonus under a scheme.

New subsection 61F(5) enables an instrument under section 61F(1) to be made in relation to different periods of time for changes in circumstances and different ways of working out further amounts of clean energy advance.

Subdivision D - Payment of clean energy advance

Subsection (1) of new section 61G requires a clean energy advance to be paid in a single lump sum. The amount is to be paid on the earliest day that the Commission considers it reasonably practicable for the amount to be paid.

New subsection 61G(2) provides that a clean energy advance is not payable if the Commission is aware that the person has died.

Subdivision E - Debts

Subsection (1) of new section 61H provides that a clean energy advance is a debt due to the Commonwealth if the payment was made because the recipient knowingly made a false or misleading statement or knowingly provided false information.

Notes 1 and 2 at the end of the subsection provide examples of determinations that directly and indirectly affect payability and amounts.

New subsections 61H(2) and (3) provide that an advance and an amount by which an advance would have been reduced can be debts due to the Commonwealth.

New subsection 61H(4) provides that the other debt creation provisions of the Veterans' Entitlements Act do not apply in relation to clean energy advances.

New subsection 61H(5) provides that a debt is a recoverable amount within the meaning of subsection 205(8).

Division 5 - Multiple entitlement exclusions

New section 65A provides for multiple entitlement exclusions to prevent inappropriate double payments of clean energy advances.

New subsection 65A(1) enables the Repatriation Commission to make a legislative instrument to determine the circumstances under which persons are not entitled to a clean energy bonus.

A note at the end of the subsection explains that the term clean energy bonus is defined in subsection 5Q(1).

New subsection 65A(2) requires that the circumstances, for the purposes of the legislative instrument to be made under new subsection 65A(1), must relate to a person's entitlement to, or receipt of, one or more of the following:

•

another clean energy bonus under the Veterans' Entitlements Act; or

•

a clean energy bonus under the Military Rehabilitation and Compensation Act; or

•

a clean energy bonus under the Social Security Act; or

•

a clean energy bonus under a scheme (however described), whether or not the scheme is provided for by or under an Act.

As this section will involve multiple entitlement exclusions within and between a number of different Acts and schemes, the term 'entitlement to' refers to a variety of concepts relating to a payment, amount or rate that may be used in other Acts or schemes, including, but not limited to, 'qualification for', 'eligibility for' and 'the Commonwealth being liable to pay'.

New subsection 65A(3) provides that an instrument made under subsection (1) has effect according to its terms and despite any other provision of this Act. This means that, if a person may otherwise appear to be eligible for a payment, a multiple entitlement exclusion instrument precludes that eligibility.

Part 2 - Clean energy supplements and quarterly energy supplement

Amendments to the Veterans' Entitlements Act

Items 7 to 9 insert a number of new terms into the index of definitions in section 5.

Item 10 inserts new section 5GB to contain the definitions required for clean energy supplement and quarterly clean energy supplement introduced in new Part IIIE.

New subsection 5GB(1) defines the term CES 22(3) rate as, subject to section 198, the rate calculated by working out 1.7 per cent of the rate specified in subsection 22(3) on 20 March 2013 (including any indexation) and rounding that result up or down to the nearest multiple of 10 cents.

A note at the end of the subsection explains that section 198 provides for the indexation of the rate.

New subsection 5GB(2) defines the term CES 22(4) rate as, subject to section 198, the rate calculated by working out 1.7 per cent of the rate specified in subsection 22(4) on 20 March 2013 (including any indexation) and rounding that result up or down to the nearest multiple of 10 cents.

A note at the end of the subsection explains that section 198 provides for the indexation of the rate.

New subsection 5GB(3) defines the term CES 23(4) rate as, subject to section 198, the rate calculated by working out 1.7 per cent of the rate specified in subsection 23(4) on 20 March 2013 (including any indexation) and rounding that result up or down to the nearest multiple of 10 cents.

A note at the end of the subsection explains that section 198 provides for the indexation of the rate.

New subsection 5GB(4) defines the term CES 24(4) rate as, subject to section 198, the rate calculated by working out 1.7 per cent of the rate specified in subsection 24(4) on 20 March 2013 (including any indexation) and rounding that result up or down to the nearest multiple of 10 cents.

A note at the end of the subsection explains that section 198 provides for the indexation of the rate.

New subsection 5GB(5) defines the term CES 30(1) rate as, subject to section 198, the rate calculated by working out 1.7 per cent of the rate specified in subsection 30(1) on 20 March 2013 (including any indexation) and rounding that result up or down to the nearest multiple of 10 cents.

A note at the end of the subsection explains that section 198 provides for the indexation of the rate.

New subsection 5GB(6) defines the term clean energy pension rate for a person as, subject to sections 59B, 59C, 59D and 59E, the rate of clean energy supplement worked out by calculating 1.7 per cent of the total of twice the maximum basic rate under the Rate Calculator for a person who is partnered and the combined couple rate of pension supplement (as at 20 March 2013) and rounding the result up or down to the nearest multiple of $5.20 (rounding up if the result is not a multiple of $5.20 but is a multiple of $2.60).

The reference to the maximum basic rate under the Rate Calculator for a person who is partnered means the amount set out at table item 2 in Table B - maximum basic rates at the end of point SCH6-B1 as indexed.

A note at the end of the subsection explains that sections 59B, 59C, 59D and 59E provide for indexation of the rate.

Item 11 inserts paragraph (b) into the definition of clean energy bonus in subsection 5Q(1). Paragraph (b) defines clean energy bonus to include a payment known as a clean energy supplement or a quarterly clean energy supplement.

Item 12 inserts paragraph (b) into the definition clean energy payment in subsection 5Q(1). Paragraph (b) provides that the following payments are clean energy payments

•

clean energy supplement under 62A in respect of disability pension; and

•

clean energy supplement under 62B in respect of war widow's or war widower's pension; and

•

quarterly clean energy supplement in respect of service pension.

Item 13 inserts a definition of clean energy supplement into subsection 5Q(1) as:

•

clean energy supplement payable under section 62A in respect of disability pension; and

•

clean energy supplement payable under 62B in respect of war widow's or war widower's pension; and

•

clean energy supplement added to the maximum basic rate of service pension under the rate calculator.

The clean energy supplement is an amount that is added to a person's relevant rate of pension.

Item 14 inserts a definition of quarterly clean energy supplement into subsection 5Q(1), in relation to service pension, as the separate payment described in new subsection 62E.

The quarterly clean energy supplement is an amount that is added to the person's quarterly rate of pension supplement.

Item 15 inserts a new subsection 58A(6) after subsection 58A(5). New subsection 58A(6) provides that, where either or both a pension supplement that is more than the person's pension supplement basic amount and clean energy supplement is added to a person's maximum basic rate of pension for a particular day, the person has not elected to receive quarterly pension supplement, and, apart from this subsection, the person would receive less than the equivalent of the daily rate for the amounts in paragraph (a), then their amount is to be increased to the daily rate.

Items 16 and 17 make technical amendments to subsection 58A(7).

Item 18 repeals subsection 58A(8).

Item 19 modifies the formula in paragraph 59Q(7)(b) to take account of the new clean energy supplement. This formula is used to calculate a person's lump sum preclusion period during which a compensation affected pension will not be payable.

Item 20 inserts a definition for point SCH6-BB3 amount in paragraph 59Q(7)(b).

Item 21 inserts new Division 2 in new Part IIIE of the Veterans' Entitlements Act.

Division 2 - Clean energy supplements

Subdivision A - Clean energy supplements for pension under Parts II and IV

New section 62A provides for clean energy supplement for recipients of disability pension.

New subsection 62A(1) provides that a person is eligible for clean energy supplement for a day if the following requirements are met:

•

the person receives disability pension for the day; and

•

the person's rate of disability pension for the day is greater than nil; and

•

the person is residing in Australia on the day; and

•

on the day, either the person is in Australia or is temporarily absent for a period not exceeding 13 weeks.

The note at the end of new subsection 62A(1) explains that section 62C may affect whether a person meets the conditions in paragraph (1)(a) and (b) of this section.

New subsection 62A(2) provides that the Commonwealth is liable to pay clean energy supplement to the person for the day in respect of the person's disability pension.

Note 1 explains that the clean energy supplement is a separate payment from the disability pension.

Note 2 explains that section 65A may affect the person's entitlement to the clean energy supplement.

New subsection 62A(3) provides for the rate of clean energy supplement. The rate is worked out by identifying in the table the person's rate of pension and applying the corresponding rate of clean energy supplement. For the purposes of identifying the person's rate of pension that is worked out under section 27, subsections 23(5) and (6), sections 25A and 26, Division 5A of Part II and section 74 are to be ignored. This means that any compensation offsetting that would otherwise apply is to be ignored.

New section 62B provides for clean energy supplement for recipients of war widow's or war widower's pension.

New subsection 62B(1) provides that a person is eligible for clean energy supplement for a day if the following requirements are met:

•

the person receives war widow's or war widower's pension for the day; and

•

the person's rate of that pension for the day is greater than nil; and

•

the person is residing in Australia on the day; and

•

on the day, either the person is in Australia or is temporarily absent for a period not exceeding 13 weeks.

The note at the end of new subsection 62B(1) explains that section 62C may affect whether a person meets the conditions in paragraph (1)(a) and (b) of this section.

New subsection 62B(2) provides that the Commonwealth is liable to pay clean energy supplement to the person for the day in respect of the person's war widow's or war widower's pension.

Note 1 explains that the clean energy supplement is a separate payment from the war widow's or war widower's pension.

Note 2 explains that section 65A may affect the person's entitlement to the clean energy supplement.

New subsection 62B(3) provides that the fortnightly rate of clean energy supplement is the CES 30(1) rate as defined in new subsection 5GB(5).

New section 62C provides that, for the purposes of new sections 62A and 62B, a person is taken to receive a pension under Part II or IV at a rate greater than nil even if the person's rate would otherwise be nil or the pension would not be payable under Division 4, 5 or 5A of Part II or section 74.

New section 62D provides, for a person receiving disability or war or war widower's pension, an option to receive their clean energy supplement on a quarterly basis.

New subsection 62D(1) provides that a person receiving disability or war widow's or war widower's pension can elect to receive their clean energy supplement quarterly, in accordance with the requirements of the Repatriation Commission.

New subsection 62D(2) provides for when an election comes into force, ceases or may be revoked.

New subsections 62D(3) and (4) provide for when the quarterly clean energy supplement is to be paid and the amount of the supplement.

Subdivision B - Quarterly clean energy supplement for service pension

Subsection (1) of new section 62E provides that a quarterly clean energy supplement for service pension is payable to a person, as a separate payment, for as long as the person elects to receive quarterly pension supplement.

Note 1 at the end of the subsection explains that, as seniors supplement is paid quarterly, there is no need for a quarterly payment election.

Note 2 explains that section 65A may affect the person's entitlement to quarterly clean energy supplement. Section 65A provides for multiple entitlement exclusions.

New subsection 62E(2) specifies when an instalment of quarterly clean energy supplement is paid.

New subsection 62E(3) specifies that the amount of the instalment is the total amount payable to the person for the days in the period for which the election was in force.

New subsection 62E(4) provides that the daily rate of quarterly clean energy supplement is 1/364 of what would otherwise be the person's clean energy supplement amount under the Rate Calculator.

New subsections 62E(5) and (6) provide for an exception to a reduction of quarterly pension supplement under subclause 4(5) of Schedule 6.

Items 22 and 23 make technical amendments.

Item 24 repeals section 118PB and substitutes a new section 118PB to deal with the addition of clean energy supplement to a person's seniors supplement. This is achieved in new subsection 118PB(1) by changing the method for calculating seniors supplement daily rate and making provision for the addition of clean energy supplement to the daily rate of seniors supplement.

Notes 1 to 3 refer to the locations of the definitions used in the subsection.

Note 4 explains that section 65A may affect the person's entitlement to the increase in rate of senior supplement.

Subsection 118PB(2) provides that an additional amount is added to a person's rate of seniors supplement under paragraph 118PB(1) if, on that day, the person is residing in Australia and is in Australia or temporarily absent for a period not exceeding 13 weeks.

Item 25 repeals subsection 118PC(3) and substitutes a new subsection 118PC(3) to take account of the addition of clean energy supplement to seniors supplement.

Item 26 inserts a new subsection 121(6B). New subsection 121(6B) provides that the rules in section 121 have effect subject to, or are modified to take account of, situations where a person has elected to receive quarterly clean energy supplement.

Item 27 inserts a reference to clean energy supplement in the definition of pension in subsection 121(7).

Item 28 inserts a reference to clean energy supplement in subparagraph 4(a)(ia) of clause 30 of Schedule 5. This will ensure that clean energy supplement is included in calculating the maximum payment rate for the purposes of a transitional rate of service pension.

Item 29 adds Note 7 at the end of subclause 30(4) of Schedule 5. Note 7 explains that section 65A may affect the inclusion of the clean energy supplement in subparagraph (4)(a)(ia).

Item 30 inserts a new subclause 5 at the end of clause 34 of Schedule 5. New subclause 5 means that, if subclause 31(1) or (2) applies to a person, the person's clean energy supplement will be included when working out the rate of the person's service pension.

Item 31 inserts a reference to clean energy supplement in note 1 to subclause 1(1) of Schedule 6.

Item 32 inserts a reference to clean energy supplement under Module BB into the table in subclause 4(1) of Schedule 6.

Item 33 inserts new notes 1 and 2 immediately after the table in subclause 4(1) of Schedule 6.

Note 1 explains that table item 4A will not apply if an election by the person under subsection 60A(1) is in force, as there will not be any increase under Module BB.

Note 2 states that Table item 5 will not apply where a person has elected (under subsection 60A(1)) to receive a quarterly pension supplement as the rate has already been reduced to nil.

Item 34 inserts new subclause (5) at the end of clause 4 of Schedule 6. New subclause 4(5) provides that, where a person's rate of service pension is to be reduced as described in subclause 4(1) and the person has elected to receive quarterly pension supplement, a person's quarterly clean energy supplement is reduced to the same extent (if any) that the component of the main rate that would correspond to the person's clean energy supplement would be reduced under subclause (1) were the election not in force.

Item 35 inserts Step 1B into method statement 1 in subpoint SCH6-A1(2). New Step 1B requires that an amount of clean energy supplement be worked out for the purposes of the method statement.

Item 36 makes a technical amendment to step 4 of method statement 1 in subpoint SCH6-A1(2).

Item 37 inserts a note at the end of step 4 of method statement 1 in subpoint SCH6-A1(2). The note explains that section 65A may affect whether the amount obtained in step 1B is added.

Item 38 inserts Step 2B into method statement 2 in subpoint SCH6-A1(3). New Step 2B requires that an amount of clean energy supplement be worked out for the purposes of the method statement.

Item 39 makes a technical amendment to step 4 of method statement 2 in subpoint SCH6-A1(3).

Item 40 inserts a note at the end of step 4 of method statement 2 in subpoint SCH6-A1(3). The note explains that section 65A may affect whether the amount obtained in step 2B is added.

Item 41 makes a technical amendment to step 1 of method statement 3 in subpoint SCH6-A1(4). This will ensure that an amount of clean energy supplement is not included when calculating the amount of service pension for a war widow/war widower - pensioner. Clean energy supplement for a war widow/war widower - pensioner who receives a service pension will be paid through the war widow's or war widower's pension.

Item 42 inserts new Module BB into Schedule 6. New Module BB sets out how a person's clean energy supplement is to be calculated.

Point SCH6-BB1 provides that a clean energy supplement is to be added to a person's rate of pension if the person is in Australia, or is temporarily absent from Australia for a period of no more than 13 weeks.

Point SCH6-BB2 provides that the clean energy supplement module does not apply to the calculation of a person's rate of service pension if that person is receiving quarterly clean energy supplement.

Point SCH6-BB3 provides that a person's clean energy supplement is worked out by applying the percentage table at the end of point SCH6-BB3 to the clean energy rate and rounding up or down to the nearest multiple of $2.60.

Notes 1 and 2 refer to the location of terms used in the table in point SCH6-BB3.

Part 4 - Indexation

Amendments to the Veterans' Entitlements Act 1986

Item 43 inserts a new item into the indexed and adjusted amounts table at the end of section 59A. This item identifies the clean energy pension rate as an amount to be indexed under Division 18 of Part IIIB and the provision in which the amount is specified.

Item 44 makes a technical amendment to the note at the end of section 59A.

Item 45 inserts a second note after section 59A, which confirms for the reader that the indexation of the clean energy pension rate will have a flow-on effect to the rate at which quarterly clean energy supplement is paid and the amount of seniors supplement that is payable to a person. As the clean energy supplement rate is increased, the increase will flow on to quarterly clean energy supplement and seniors supplement.

Item 46 inserts a new item into the CPI indexation table at the end of subsection 59B(1) which represents the new clean energy pension rate. This item provides for the Consumer Price Index indexation of the rate. The arrangements are similar to the Consumer Price Index indexation arrangements that apply in relation to the maximum basic rate of pension, except that the rounding rule for the clean energy pension rate is consistent with the rounding rule for indexation of the pension supplement.

Item 47 inserts new subsection 59C(2AC) to specify that the first indexation of the clean energy pension rate is to take place on 20 September 2013. This item ensures that Consumer Price Index increases are not applied to the clean energy supplement amounts until the first indexation point after the supplements are added to the relevant pensions.

Items 48 and 49 amend subsections 59D(1) and 59EAB(1) respectively, to make it clear that the provisions are subject to new sections 198MA and 198MB. New sections 198MA and 198MB provide for the adjustment of indexation of the clean energy pension rate that will apply on or after 20 March 2013.

Item 50 amends the heading to section 198 to include a reference to clean energy supplements.

The initial brought forward CPI indexation amount is 0.007, the expected additional increase in the Consumer Price Index due to carbon pricing, which is being delivered through the clean energy supplement, rather than indexation on the primary veterans' payment.

Item 51 inserts a definition for brought-forward CPI indexation amount in subsection 198(1). The term means, in relation to a relevant period, 0.007 less any adjustment made under paragraph 198(5)(c) in relation to an earlier relevant period.

Item 52 adds new paragraph 198(5)(c) to subsection 198(5). New paragraph 198(5)(c) provides that, if the relevant period starts on or after 20 March 2013 and the brought-forward CPI indexation amount for the period is more than zero - the brought-forward CPI indexation amount is the number worked out under paragraph (a) or (b) of this subsection adjusted by that amount, but not below one.

Item 53 inserts new subsections 198(9) and (9A) to provide for the indexation of rates affected by clean energy supplements. New subsection 198(9) provides that, on each adjustment day on or after 20 September 2013, there are substituted for each of the following rates:

•

CES 22(3) rate;

•

CES 22(4) rate;

•

CES 23(4) rate;

•

CES 24(4) rate; and

•

CES 30(1) rate;

the rate worked out by multiplying the appropriate rate immediately before that day by the factor (the CES indexation factor) worked out under subsection 198(9A). This result is then rounded up or down to the nearest $0.10 a fortnight.

New subsection 198(9A) specifies the formula for calculating the CES indexation factor.

Item 54 adds a new subsection 198(11) to provide that, if another rate were substituted on an adjustment day for a rate mentioned in paragraph (9)(a), (b), (c), (d) or (e), the substitution affects each instalment of clean energy supplement due on or after that day, except an instalment that is payable because of the grant of pension after that day that has effect before that day and is for a period starting before that day.

This provision will prevent indexation increases from being inappropriately applied to certain backdated amounts of disability or war widow's or war widower's pension.

Item 55 inserts a definition for brought-forward CPI indexation amount in subsection 198D(1). The term means, for a year commencing on or after 20 September 2013, 0.007 less any adjustment made under paragraph 198D(5)(d) for an earlier year.

Item 56 inserts new paragraph 198D(5)(d) to provide the indexation adjustment arrangements for items 7 to 15 in the table in subsection 27(1).

Item 57 inserts new sections 198MA and 198MB to provide for the adjustment of indexation arrangements relating to clean energy household assistance.

New section 198MA sets out some special rules that apply to indexation of specified amounts on or after 20 March 2013.

New subsection 198MA(1) provides that new section 198MA relates to the following payments on or after 20 March 2013:

•

a service pension;

•

seniors supplement;

•

disability and war widow's or war widower's pension;

•

Special Rate Disability Pension under the Military Rehabilitation and Compensation Act; and

•

compensation under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act.

Note 1 explains that the rate of Special Rate Disability Pension under the Military Rehabilitation and Compensation Act is set by reference to the rate of special rate disability pension under section 24 of the Veterans' Entitlements Act. This means that indexation of the rate under section 24 also affects the rate of Special Rate Disability Pension under the Military Rehabilitation and Compensation Act.

Note 2 explains that the payment rate under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act is set by reference to the rate of war widow's or war widower's pension under section 30(1) of the Veterans' Entitlements Act. This means that indexation of the rate under war widow's or war widower's pension also affects the rate of compensation under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act.

New subsection 198MA(2) provides that an indexation factor that is worked out under section 59D on a day that is on or after 20 March 2013 is for the purposes of the indexation of certain amounts on that day, to be adjusted by the brought-forward CPI indexation amount, but not below one.

Paragraph (b) of new subsection 198MA(2) lists the amounts that are directly or indirectly affected by the subsection. As a result of this, the payments that may be directly or indirectly affected are service pension, seniors supplement, disability pension, war widow's or war widowers pension, Special Rate Disability Pension and compensation under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act.

Note 1 explains that an indexation factor worked out under section 59D is indirectly relevant to the indexation of an amount provided for by subsection 22(3) or (4), 23(4) or 24(4) or paragraph 30(1)(b). This is because section 198 provides for indexation of such an amount by reference to the pension MBR factor worked out under section 59LA. It is also because the pension MBR factor depends on the increase in the single pension rate MBR amount, which in turn depends (under section 59G) on indexation of the pension MBR amount under section 59C, which involves the indexation factor worked out under section 59D.

Note 2 explains that an indexation factor worked out under section 59D is indirectly relevant to the indexation of an amount provided for by paragraph 30(1)(a). This is because that amount is affected by indexation under section 59G, which in turn depends on indexation under section 59C.

Note 3 explains that, once the brought-forward CPI indexation amount becomes zero, there will be no further adjustment of the indexation factor.

New subsection 198MA(3) defines the term brought-forward CPI indexation amount for the purposes of the section as meaning, for a relevant day, 0.007 less any adjustment made under subsection (2) for an earlier day or zero if the brought-forward PBLCI indexation amount for the day under section 198MB is zero.

New section 198MB sets out further special rules that may apply to the indexation of specified amounts on or after 20 March 2013.

New subsection 198MB(1) provides that new section 198MB relates to the following payments on or after 20 March 2013:

•

a service pension;

•

seniors supplement;

•

disability and war widow's or war widower's pension;

•

Special Rate Disability Pension under the Military Rehabilitation and Compensation Act; and

•

compensation under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act.

Note 1 explains that the rate of Special Rate Disability Pension under the Military Rehabilitation and Compensation Act is set by reference to the rate of special rate disability pension under section 24 of the Veterans' Entitlements Act. This means that indexation of the rate under section 24 also affects the rate of Special Rate Disability Pension under the Military Rehabilitation and Compensation Act.

Note 2 explains that the payment rate under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act is set by reference to the rate of war widow's or war widower's pension under section 30(1) of the Veterans' Entitlements Act. This means that indexation of the rate under war widow's or war widower's pension also affects the rate of compensation under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act.

New subsection 198MB(2) provides some special rules that modify the living cost indexation factor that is worked out under section 59EAB. These rules apply for each indexation day on or after 20 March 2013 and have the effect of adjusting the living cost indexation factor to reflect the fact that the 0.7 per cent expected additional Consumer Price Index impact from carbon pricing will be delivered through the clean energy supplement, rather than indexation of primary veterans' payments. These rules also ensure that primary veterans' payments will not be adjusted, should the relevant PBLCI indexation factor be less than one plus the brought forward PBLCI indexation amount. (The initial brought forward PBLCI indexation amount is 0.007.)

Paragraph (b) of new subsection 198MB(2) lists the amounts that may directly or indirectly be affected by the subsection. As a result of this, the payments that may directly or indirectly be affected are service pension, seniors supplement, disability pension, war widow's or war widowers pension, Special Rate Disability Pension and compensation under Division 2 of Part 2 of Chapter 5 of the Military Rehabilitation and Compensation Act.

Note 1 explains that an indexation factor worked out under section 59D is indirectly relevant to the indexation of an amount provided for by subsection 22(3) or (4), 23(4) or 24(4) or paragraph 30(1)(b). This is because section 198 provides for indexation of such an amount by reference to the pension MBR factor worked out under section 59LA. It is also because the pension MBR factor depends on the increase in the single pension rate MBR amount, which in turn depends (under section 59G) on indexation of the pension MBR amount under section 59C, which involves the indexation factor worked out under section 59EAB.

Note 2 explains that an indexation factor worked out under section 59EAB is indirectly relevant to the indexation of an amount provided for by paragraph 30(1)(a). This is because that amount is affected by indexation under section 59G, which in turn depends on indexation under section 59C.

Note 3 explains that, once the brought-forward CPI indexation amount becomes zero, there will be no further adjustment of the indexation factor.

New subsection 198MB(3) defines the term brought-forward PBLCI indexation amount for the purposes of the section as meaning, for a relevant day, 0.007 less any adjustment made under subsection (2) for an earlier day or zero if the brought-forward CPI indexation amount for the day under section 198MA is zero.

Item 58 adds new clause 35 at the end of Part 5 of Schedule 5. New clause 35 applies if clause 30 affects the rate at which service pension is payable to a person on or after 20 March 2013.