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 4 - Clean energy payments under the Military Rehabilitation and Compensation Act

Summary

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

Financial assistance will be delivered through increases to payments. The amendments in this Schedule provide for assistance to be provided by a lump sum clean energy advance paid in May to June 2012 before commencement of the carbon pricing scheme, and for ongoing clean energy supplements to be paid in 2013 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 or 12 months.

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

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

•

the additional increase amount above Consumer Price Index (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 on either 20 March 2013 or 1 July 2013, depending on the payment type of the recipient.

Clean energy supplements

Once normal indexation begins to deliver Consumer Price Index increases in respect of carbon pricing for a particular payment, 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 supplements would be fortnightly payments indexed by the Consumer Price Index and that will form part of a person's rate of pension. Indexation by the Consumer Price Index would mean that these payments would 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 Military Rehabilitation and Compensation Act that provide for the expected impact of the carbon price on indexation (0.7 per cent) to be transferred from indexation on the primary payment of certain Military Rehabilitation and Compensation Act payments to the clean energy supplement. The primary payment 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 or 1 July 2013 indexation point.

Explanation of the changes

Part 1 - Clean energy advances

Amendments to the Military Rehabilitation and Compensation Act

Item 1 inserts a definition for clean energy advance in subsection 5(1). Clean energy advance means an advance described in Division 1 or 3 of Part 5A of Chapter 11.

Item 2 inserts a definition for clean energy bonus in subsection 5(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 10 of Part 2 of Schedule 4 when it commences on 20 March 2013.

Item 3 inserts a definition for clean energy payment in subsection 5(1), defined as a clean energy advance.

Item 4 inserts a definition for clean energy underlying payment in subsection 5(1). Clean energy underlying payment means:

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weekly compensation for permanent impairment payable under Part 2 of Chapter 4 or a lump sum payment of compensation for permanent impairment paid or payable under Part 2 of Chapter 4; or

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Special Rate Disability Pension; or

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weekly compensation payable to a wholly dependent partner under Division 2 of Part 2 of Chapter 5 or a lump sum payment of compensation paid or payable to a wholly dependent partner under Division 2 of Part 2 of Chapter 5.

Item 5 inserts a reference to clean energy payments in the definition of compensation in subsection 5(1).

Item 6 inserts a new section 345A in Chapter 8 so that the existing review provisions can apply to a clean energy payment.

New subsection 345A(1) states that the modifications in section 345A apply to Chapter 8 in relation to a decision by the Military Rehabilitation and Compensation Commission that is only about a person's eligibility to a clean energy payment.

New subsection 345A(2) provides that Chapter 8 applies to a person in relation to their entitlement to a clean energy payment in the same way as it applies to a person who is a claimant. This modification is necessary because no claim is required for a clean energy advance or a clean energy supplement, so the person would otherwise not be a claimant and the existing review provisions would not apply to the person in relation to their entitlement to a clean energy payment. However, the provisions listed in paragraphs 345A(2)(a) to (g) are not affected by the modification.

Item 7 inserts a reference to section 424K in subsection 415(2). This means that the provisions in section 415 relating to the recovery of overpayments will not apply as the recovery of overpayments of clean energy payment is provided for separately in new section 424K.

Item 8 amends note 2 after subsection 415(2) to explain that Chapter 6 and Part 5A have their own recovery provisions and refers to section 315, 316, 317 and 424K.

Item 9 inserts a new Part 5A into the Military Rehabilitation and Compensation Act. New Part 5A 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.

Division 1 - Eligibility for clean energy advances

New section 424A sets out the eligibility rules for a clean energy advance for a person in receipt of permanent impairment compensation. New subsection 424A(1) provides that the Military Rehabilitation and Compensation Commission may, on a day (the test day) between 14 May 2012 and 30 June 2012 (dates inclusive), determine that the person is eligible for a clean energy advance for the period 1 July 2012 to 30 June 2013 in respect of their permanent impairment compensation if the person is in Australia on the test day and meets the conditions specified in subsection (3) for the test day.

New subsection 424A(2) provides that the Military Rehabilitation and Compensation Commission may determine that a person is eligible for a clean energy advance for the period to 30 June 2013 in respect of their permanent impairment compensation if the person is in Australia on the test day and meets the conditions specified in subsection (3) for the test day. This determination would be made on or after 1 July 2012.

A determination under 424A(2) must specify the first day on which the person meets the condition in subsection 424A(3) and is in Australia, disregarding any temporary absence that is less than 13 weeks.

New subsection 424A(3) provides that a condition for determining eligibility is that either or both of new paragraphs 424A(3)(a) and (b) apply.

New paragraph 424A(3)(a) specifies that, to be eligible for a clean energy advance in respect of permanent impairment compensation, the person must, on the test day, either be receiving permanent impairment compensation or would be receiving permanent impairment compensation if not for paragraph 398(3)(b) of the Military Rehabilitation and Compensation Act and subsection 13(4) of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004.

New paragraph 424A(3)(b) specifies that, to be eligible for a clean energy advance in respect of permanent impairment compensation, the person must, before the test day, have received a lump sum payment of permanent impairment compensation.

New subsection 424A(4) means that the Military Rehabilitation and Compensation Commission may only make one determination about an individual's eligibility under this section. That is, the Military Rehabilitation and Compensation Commission cannot make a determination that a person is eligible under both subsections 424A(1) and (2).

New section 424B sets out the eligibility rules for a clean energy advance for a person in receipt of Special Rate Disability Pension. New subsection 424B(1) provides that the Military Rehabilitation and Compensation Commission may, on a day (the test day) between 14 May 2012 and 30 June 2012 (dates inclusive), determine that the person is eligible for a clean energy advance for the period 1 July 2012 to 19 March 2013 in respect of their Special Rate Disability Pension if the person is in Australia on the test day and meets the conditions specified in subsection (3) for the test day.

New subsection 424B(2) provides that the Military Rehabilitation and Compensation Commission may determine that a person is eligible for a clean energy advance in respect of their Special Rate Disability Pension if they meet the conditions specified in subsection (3) for a test day in the period starting on 1 July 2012 and ending on 19 March 2013 and if the person is in Australia on the test day. This determination would be made on or after 1 July 2012.

A determination under 424B(2) must specify the first day on which the person meets the condition in subsection 424B(3) and is in Australia, disregarding any temporary absence that is less than 13 weeks.

New subsection 24B(3) specifies that, to be eligible for a clean energy advance in respect of Special Rate Disability Pension, the person must, on the test day, either be receiving Special Rate Disability Pension or would be receiving Special Rate Disability Pension if not for section 204 or paragraph 398(3)(b). Under section 204, Special Rate Disability Pension may be reduced, including to nil, by compensation from a source other than the Military Rehabilitation and Compensation Act or superannuation.

New subsection 424B(4) means that the Military Rehabilitation and Compensation Commission may only make one determination about an individual's eligibility under this section. That is, the Military Rehabilitation and Compensation Commission cannot make a determination that a person is eligible under both subsections 424B(1) and (2).

New section 424C sets out the eligibility rules for a clean energy advance for a person in receipt of compensation under Division 2 of Part 2 of Chapter 5 - compensation for the wholly dependent partner of a deceased member. New subsection 424C(1) provides that the Military Rehabilitation and Compensation Commission may, on a day (the test day) between 14 May 2012 and 30 June 2012 (dates inclusive), determine that the person is eligible for a clean energy advance for the period 1 July 2012 to 19 March 2013 in respect of compensation under Division 2 of Part 2 of Chapter 5 if the person is in Australia on the test day and meets the conditions specified in subsection (3) for the test day.

New subsection 424C(2) provides that the Military Rehabilitation and Compensation Commission may determine that a person is eligible for a clean energy advance for the period starting on 1 July 2012 and ending on 19 March 2013 in respect of compensation under Division 2 of Part 2 of Chapter 5 if the person is in Australia on the test day and meets the conditions specified in subsection (3) for the test day. This determination would be made on or after 1 July 2012.

A determination under 424C(2) must specify the first day on which the person meets the condition in subsection 424C(3) and is in Australia, disregarding any temporary absence that is less than 13 weeks.

New paragraph 424C(3)(a) specifies that, to be eligible for a clean energy advance in respect of compensation under Division 2 of Part 2 of Chapter 5, the person must, on the test day, either be receiving compensation under Division 2 of Part 2 of Chapter 5 or would be receiving compensation under Division 2 of Part 2 of Chapter 5 if not for paragraph 398(3)(b).

New paragraph 424C(3)(b) specifies that, to be eligible for a clean energy advance in respect of compensation under Division 2 of Part 2 of Chapter 5, the person must, before the test day, have received a lump sum payment of compensation under Division 2 of Part 2 of Chapter 5 and that subsection 388(6) has not applied to the person before the test day.

New subsection 424C(4) means that the Military Rehabilitation and Compensation Commission may only make one determination about an individual's eligibility under this section. That is, the Military Rehabilitation and Compensation Commission cannot make a determination that a person is eligible under both subsections 424C(1) and (2).

New section 424D provides that a person may be paid a clean energy advance for each clean energy underlying payment for which the Military Rehabilitation and Compensation Commission determines that the person is eligible for a clean energy advance.

A note at the end of the section explains that the section operates subject to section 424L which provides for multiple entitlement exclusions.

Division 2 - Amount of clean energy advance

New section 424E sets out how and when an amount of clean energy advance is to be calculated for a person.

New subsection 424E(1) provides that, when the Military Rehabilitation and Compensation Commission determines that a person is eligible for a clean energy advance (the decision day), the Military Rehabilitation and Compensation Commission must also determine the amount of clean energy advance that is payable to the person.

The note at the end of new subsection 424E(1) explains that the clean energy advance will be paid in a single lump sum as soon as is reasonably practicable after the decision day.

New subsection 424E(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 multiple of $10. Clean energy advance daily rate means the rate as worked out for the person's circumstances under new section 424F and the number of advance days is as worked out under new section 424G.

New section 424F sets out how to calculate 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 424F(1) sets out the formula for calculating the clean energy advance daily rate for a person whose clean energy underlying payment is a permanent impairment payment. For these payments, the clean energy advance daily rate is the same as that for general rate disability pension under subsection 22(3) of the Veterans' Entitlements Act worked out under new subsection 61D(1) of the Veterans' Entitlements Act.

New subsection 424F(2) sets out the formula for calculating the clean energy advance daily rate for a person whose clean energy underlying payment is Special Rate Disability Pension. For these payments, the clean energy advance daily rate is the same as that for special rate disability pension under subsection 24(4) of the Veterans' Entitlements Act worked out under subsection 61D(1) of the Veterans' Entitlements Act.

New subsection 424F(3) sets out the formula for calculating the clean energy advance daily rate for a person whose clean energy underlying payment is a payment under Division 2 of Part 2 of Chapter 5. For these payments, the clean energy advance daily rate is the same as that for war widow's or war widower's pension under subsection 30(1) of the Veterans' Entitlements Act worked out under subsection 61D(4) of the Veterans' Entitlements Act.

New section 424G 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:

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1 July 2012; or

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the day specified in a determination under subsection 424A(2), 424B(2) or 424C(2) that the person is eligible;

whichever is applicable, and ending on either:

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19 March 2013 if the clean energy underlying payment is Special Rate Disability Pension or compensation payable under Division 2 of Part 2 of Chapter 5; or

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30 June 2013 if the clean energy underlying payment is a permanent impairment payment.

Division 3 - Top-up payments of clean energy advance

This Division provides for top-up payments of clean energy advance to people where they have a change of circumstances that would result in the person not being appropriately compensated for the anticipated increased energy costs.

The operation of this Division will mean that, if the person's circumstances change during the clean energy advance period, resulting 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, 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 as a top-up that is 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.

Due to the numerous and complex interactions between the relevant payments under the Social Security Act, Veterans' Entitlements Act and the Military Rehabilitation and Compensation Act, the circumstances under which top-ups will be payable will be determined by legislative instrument. This will reduce the complexity of the legislation, and will optimise the ability of Centrelink and the Department of Veterans' Affairs to provide timely top-up payments for a wide range of circumstances. The legislative instrument will be made in writing, by the Military Rehabilitation and Compensation Commission, and will be subject to disallowance by the Parliament.

Subsection (1) of new section 424H provides that the Military Rehabilitation and Compensation 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 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 424H(2) enables the Military Rehabilitation and Compensation Commission to make a legislative instrument under subsection 424H(1) for a change in circumstances that involves persons becoming eligible for the original underlying payment for a longer period.

New subsection 424H(3) enables the Military Rehabilitation and Compensation Commission to make a legislative instrument under subsection 424H(1) for a change in circumstances that involves the person beginning to receive a different clean energy underlying payment.

New paragraph 424H(4)(a) 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 424H(5) enables an instrument under section 424H(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.

Division 4 - Payment of clean energy advance

Subsection (1) of new section 424J 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 424J(2) provides that a clean energy advance is not payable if the Commission is aware the person has died.

Division 5 - Debts

Subsection (1) of new section 424K 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.

The note at the end of the section explains the distinction between a determination that directly and indirectly affects payability or an amount.

New subsections 424K(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 424K(4) provides that a debt under section 424K is recoverable in a court of competent jurisdiction.

New subsection 424K(5) provides that a debt under this section may be deducted from an amount that is payable to or for the benefit of the person under the Military Rehabilitation and Compensation Act.

Division 6 - Multiple entitlement exclusions

New section 424L provides for multiple entitlement exclusions to prevent inappropriate double payments of clean energy advances.

New subsection 424L(1) enables the Military Rehabilitation and Compensation 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 5(1).

New subsection 424L(2) requires that the circumstances, for the purposes of the legislative instrument in new subsection 424L(1), must relate to a person's entitlement to, or receipt of, one or more of the following:

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

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

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a clean energy bonus under the Social Security Act; or

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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 424L(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

Division 1 - Amendments commencing on 20 March 2013

Amendments to the Military Rehabilitation and Compensation Act

Item 10 inserts paragraph (b) into the definition of clean energy bonus in subsection 5(1). Paragraph (b) defines clean energy bonus to include a payment known as a clean energy supplement or a quarterly clean energy supplement.

Item 11 inserts a reference to clean energy supplement into the definition clean energy payment in subsection 5(1).

Item 12 defines clean energy supplement in subsection 5(1) to mean clean energy supplement payable under section 209A or 238A.

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

Item 13 inserts a reference to clean energy supplement into subsection 204(2) so the amount will not be used to reduce an amount of Special Rate Disability Pension.

Item 14 inserts new section 209A to provide for the payment of clean energy supplement to recipients of Special Rate Disability Pension.

New subsection 209A(1) provides that a person is eligible for clean energy supplement for a day if the following requirements are met:

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the person receives Special Rate Disability Pension for the day; or

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the person would have received Special Rate Disability Pension for the day if not for section 204 and paragraph 398(3)(b); and

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the person is residing in Australia on the day; and

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

The note to new subsection 209A(1) explains that new section 424L (multiple entitlement exclusions) may affect a person's entitlement to the clean energy supplement.

New subsection 209A(2) specifies that the daily rate of clean energy supplement in respect of Special Rate Disability Pension is 1/14 of the CES 24(4) rate under the Veterans' Entitlements Act.

Item 15 inserts new section 238A to provide for the payment of clean energy supplement to recipients of compensation under Division 2 of Part 2 of Chapter 5.

New subsection 238A(1) provides that a person is eligible for clean energy supplement for a day if the following requirements are met:

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the person meets the condition in subsection 238A(2) for the day; and

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the person is residing in Australia on the day; and

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

The note to new subsection 238A(1) explains that new section 424L (multiple entitlement exclusions) may affect a person's entitlement to the clean energy supplement.

New subsection 238A(2) specifies that the condition to be met in accordance with paragraph 238A(1)(a) is that either or both of the following apply:

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weekly compensation under Division 2 of Part 2 of Chapter 5:

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is payable to the person for the day; or

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would be payable to the person for the day if not for paragraph 398(3)(b) applying to the person for the day;

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before the day, the person received lump sum compensation under this Division and subsection 388(6) has not applied to the person before the test day.

New subsection 238A(3) specifies that the daily rate of clean energy supplement in respect of compensation payable under Division 2 of Part 2 of Chapter 5 is 1/14 of the CES 30(1) rate under the Veterans' Entitlements Act.

Item 16 inserts new subsection 430(3AA) to provide that, in specifying intervals under subsection 430(1) for making payments of clean energy supplement, the Military Rehabilitation and Compensation Commission may take account of the person's choice to be paid clean energy supplement quarterly. However, this does not limit the Military Rehabilitation and Compensation Commission's power under subsection 430(1).

Division 2 - Amendments commencing on 1 July 2013

Amendments to the Military Rehabilitation and Compensation Act

Item 17 makes a technical amendment to the definition of clean energy supplement in subsection 5(1).

Item 18 adds new section 83A to provide for the payment of clean energy supplement to recipients of permanent impairment payments.

New subsection 83A(1) provides that a person is eligible for clean energy supplement for a day if the following requirements are met:

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the person meets the condition in subsection 83A(2) for the day; and

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the person is residing in Australia on the day; and

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

The note to new subsection 83A(1) explains that new section 424L (multiple entitlement exclusions) may affect a person's entitlement to the clean energy supplement.

New subsection 83A(2) specifies that one condition to be met in accordance with paragraph 83A(1)(a) is that either or both of the following apply:

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weekly compensation under this Part (except this section):

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is payable to the person for the day; or

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would be payable to the person for the day if not for paragraph 398(3)(b) of the Military Rehabilitation and Compensation Act and subsection 13(4) of the Military Rehabilitation and Compensation (Consequential and Transitional Provisions) Act 2004;

•

before the day, the person received lump sum compensation under this Part.

New subsection 83A(3) specifies that the daily rate of clean energy supplement in respect of permanent impairment compensation is 1/14 of the CES 22(3) rate under the Veterans' Entitlements Act.

A note at the end of the subsection explains that section 404 provides for the indexation of the daily rate for each indexation year starting on or after 1 July 2014.

Item 19 makes a technical amendment to the heading of section 404.

Item 20 repeals subsection 404(2) and substitutes new subsections 404(1A) and (2).

New subsection 404(1A) provides that section 404 also applies to the daily rate of clean energy supplement for permanent impairment for indexation years commencing on and after 1 July 2014. The daily rate of supplement for permanent impairment is specified in subsection 83A(4).

New subsection 404(2) provides that the indexation formula is to apply to both a dollar amount or a rate mentioned in section 404. This is to include the clean energy supplement amount that is expressed as a daily rate.

Part 3 - Indexation

Amendments to the Military Rehabilitation and Compensation Act

Item 21 inserts new subsection 404(5A). This new subsection provides for the indexation adjustment to the rate of permanent impairment payment specified in subsection 74(1). The additional Consumer Price Index impact of the carbon price is expected to be 0.7 per cent. The clean energy supplement will comprise the additional rise in the Consumer Price Index caused by the introduction of the carbon price (0.7 per cent), together with a further one per cent increase. The expected impact of the carbon price on indexation (0.7 per cent) will be delivered through the clean energy supplement, rather than indexation of the primary social security payment. Regular indexation of the primary payment will continue to apply, adjusted by the equivalent amount now being delivered through the clean energy supplement.

New subsection 404(5A) provides that, for the purposes of subsection 74(1), in an indexation year starting on or after 1 July 2013, the indexation factor is adjusted by the brought-forward CPI indexation amount for the year, but not below one.

Item 22 inserts a definition for brought-forward CPI indexation amount in subsection 404(6). The brought-forward CPI indexation amount is defined for an indexation year starting on or after 1 July 2013 as 0.007 less any adjustment made under subsection (5A) for an earlier indexation year.