House of Representatives

Revised Explanatory Memorandum

(Circulated by the authority of the Minister for Social Services, the Hon Kevin Andrews MP)

Schedule 8 - Pension bonus scheme

Summary

From 1 March 2014, this Schedule will end late registrations for the closed pension bonus scheme.

The scheme provides a lump sum payment to people who are qualified for age pension, age service pension, partner service pension after reaching pension age, or income support supplement after reaching qualifying age - but who choose to defer their pension and remain in the workforce. The scheme was closed from 2009, although people remained able to register for the scheme if they were qualified for it, but had not registered, at the time of its closure.

However, the introduction around the same time of a work bonus for age pensioners with earnings from employment has been more effective in encouraging older Australians to continue contributing to the workforce past pension age. Ending late registrations for the pension bonus scheme will help ensure the pension system is simpler and more sustainable for older Australians into the future.

Background

Both the social security law and the Veterans' Entitlements Act provide for a pension bonus scheme.

The pension bonus scheme under the social security law is established by Part 2.2A of the Social Security Act. It allows a person registered for the scheme, who qualifies for age pension but defers claiming it, to claim a single lump-sum pension bonus.

A person must apply to register in the pension bonus scheme (section 92D), and be registered (section 92J) in order to become a member of the scheme and accrue a pension bonus. Section 92H imposes time limits on when a person can lodge an application for registration, depending on the person's date of qualification for age pension.

The pension bonus scheme was closed to new entrants whose date of qualification for age pension occurred on or after 20 September 2009 (subsection 92J(1A). In general, an application for registration must be made within 13 weeks after the date of the person's qualification for age pension (section 92H). However, subsection 92H(3) permits the Secretary to extend the period within which a person must lodge their application. This has allowed a person to make a late application for registration in the pension bonus scheme and have their registration start date backdated.

This Schedule prevents an application for registration in the scheme from being made on or after 1 March 2014. It removes capacity for the Secretary to extend the period for an application for registration to be made on or after 1 March 2014. As a result, it will no longer be possible for a person to apply for registration in the scheme if their application for such registration is not lodged before 1 March 2014. A saving provision will allow registration applications lodged prior to 1 March 2014 to be processed after that date, and the person registered in the scheme if qualified.

Similarly, under the Veterans' Entitlements Act, the scheme provides a lump sum payment to people who are registered in the scheme and eligible for service pension or partner service pension after reaching pension age, or income support supplement after reaching qualifying age, but who choose to defer their pension or supplement and remain in the workforce. The pension bonus scheme is established under Part IIIAB of the Veterans' Entitlements Act.

Mirror amendments are made to the Social Security Act and the Veterans' Entitlements Act.

The amendments made by this schedule commence on 1 March 2014.

Explanation of the changes

Amendments to the Social Security Act

Items 1 and 2 add new subsection (2) to section 92D, to provide expressly that a person cannot make an application on or after 1 March 2014.

Item 3 repeals notes to subsections 92H(1) and (2) consequential upon the main repeal made by item 4 below.

Item 4 repeals subsections 92H(3) to (7), which provided capacity for the Secretary to extend the timeframe for an application for registration in the pension bonus scheme.

Item 5 provides a saving provision. If an application for registration has been made prior to 1 March 2014, then, despite the repeal of subsection 92H(3), the Secretary may register the person in the scheme as a result of the application, with the registration taking effect on a date determined under that subsection. That is, applications for registration in the scheme lodged before 1 March 2014 will be determined in line with legislation in effect immediately before the commencement of this Schedule. It will not be possible to lodge an application for registration in the Scheme on or after 1 March 2014.

Amendments to the Veterans' Entitlements Act

Items 6 and 7 add new subsection 45TD(2) to provide expressly that a person cannot make an application for registration in the pension bonus scheme on or after 1 March 2014.

Item 8 repeals the notes to subsections 45TH(1) and (2) consequential to the repeal made by item 9.

Item 9 repeals subsections 45TH(3) to (7), which provided capacity for the Repatriation Commission to extend the timeframe for an application for registration in the pension bonus scheme.

Item 10 provides a saving provision. If an application for registration has been made prior to 1 March 2014, then, despite the repeal of subsection 45TH(3), concerning late applications, the Repatriation Commission may register the person in the scheme. The registration will take effect on a date determined under the repealed subsection 45TH(3). This provision enables the Repatriation Commission to continue to extend the application lodgement period for registrations lodged before 1 March 2014 in accordance with the legislation that was in effect immediately before the commencement of this Schedule. It will not be possible to lodge an application for registration in the scheme on or after 1 March 2014.