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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Veterans' Affairs Legislation Amendment
Bill (No. 1) 1999
Date Introduced: 30 June 1999
House: House of Representatives
Portfolio: Veterans' Affairs
Commencement: Main amendments relating to
changes to the test for permanent incapacity to work and extending
the Veterans' Children Education Scheme will commence on 1 January
2000, while those relating to veterans' housing will commence on
Royal Assent.
To:
-
- allow determinations to be made which will align the test for
permanent incapacity for work for the invalidity service pension
with that for the special rate (totally and permanently
incapacitated) disability pension
-
- allow determinations to be made which will align the test for
permanent incapacity for the income support supplement with that
for the social security disability support pension
-
- extend eligibility for the HomeFront scheme and introduce a
Home Loan Support program to provide loans for home maintenance and
alteration, and
-
- extend the Veterans' Children Education Scheme to recipients of
the Extreme Disability Adjustment.
Veterans' payments were introduced in 1914 for
those who would be killed or injured in the First World War, and
the range of benefits available was increased in 1935 and later
years. The range of conflicts for which injury or disease gave rise
to eligibility for compensation payments has increased to reflect
Australia's military involvement in wars, other war like actions
(such as policing operations) and peacekeeping services.
Compensation Payments - Permanent
Incapacity
One of the payments is the invalidity service
pension (ISP). To be eligible, the person must have been engaged in
qualifying service as defined in the Veterans' Entitlements Act
1986 (VEA) and have a degree of disability that makes them, in
the Commissioner's opinion, permanently incapacitated for work. The
definition of 'qualifying service' covers a number of circumstances
and depends upon whether an area in which the veteran served, and
the time during which they served, falls within the categories
listed in the definition. To be eligible for an ISP the veteran
must, in the Commissioner's opinion, have an 85% or greater
permanent incapacity for work or be permanently blind in both eyes.
The ISP is subject to income and assets tests.
As well as the ISP, the Department of Veterans'
Affairs (DVA) administers the disability pension, which is payable
where the veteran is incapacitated due to a war-caused injury or
disease. The veteran does not need 'qualifying service' to be
eligible for a disability pension. Disability pension is payable at
a number of rates and is not taxable or subject to a means test.
The four categories of disability pension are:
-
- General Rate: Ranges from 10 to 100% of the pension depending
on the degree of disability.
-
- Extreme Disablement Adjustment: Payable at 150% of the General
Rate to veterans aged 65 or over and who have a very high
assessment of disability.
-
- Intermediate Rate of Disability Pension: payable to veterans
who, due to their disability, cannot work full-time. The veteran
must be receiving a pension of at least 70% of the General Rate,
suffering a loss of income and have a restricted working ability so
that the person cannot work for greater than 50% of normal working
hours or 20 hours a week.
-
- Special Rate Pension (also known as the Totally and Permanently
Incapacitated Pension- TPI): Available to those in receipt of at
least 70% of the General Rate, unable to work more than 8 hours per
week and suffering a loss of income due to the inability to work.
For veterans aged 65 or over who are deemed to have left the
workforce, special rules apply.
-
- Temporary Special Rate Pension: Payable on the same terms as
the General Rate pension to veterans who are temporarily unable to
work.
For disability pensions, the amount of
disability that a veteran has is determined in accordance with the
Guide to the Assessment of Rates of Veterans' Pensions (GARP).
Assessment is based on medical disability and lifestyle effects and
is calculated as a percentage of impairment of a person as a whole,
so that 0% relates to no impairment while 100% impairment means
that the person is dead. GARP contains a number of tables that are
used in the calculation of the degree of impairment, and the tables
are based on the degree of functional loss arising from a condition
and as functional loss increases so do the number of points used in
determining the person's entitlement.
While the ISP and disability pensions are both
based on degree of incapacity, they are not measured in the same
manner, with ISP being dependent on the Commissioner's opinion
while the disability pension depends on the GARP calculation
together with the time for which the person may work (e.g. a
maximum of 8 hours a week for the TPI pension).
The Income Support Supplement (ISS) may be
payable to a war widow/widower who falls within one or more of a
number of categories, including that they are permanently
incapacitated. The ISS is subject to income and assets tests and
was introduced to enable veterans who were in receipt of a payment
from social security as well as DVA to receive a combined payment
from DVA equal to that they would have received from the two
agencies. In determining if a widow/widower is permanently
incapacitated for the purposes of ISS, the same test as for ISP is
used, rather than the GARP based disability pension test.
It was announced in the 1999-2000 Budget that
the test for permanent incapacity for the invalid service pension
would be aligned with that used in the disability pension so
that:
-
- GARP would be used in the assessment of the level of disability
and eligibility would require an assessment of at least 40 points,
a similar level as currently required for the TPI pension, and
-
- the ability to work test would also be used, so that
permanently incapacitated invalid service pensioners would have to
satisfy the test that they could not work for more than 8 hours a
week.(1)
The proposal will apply equally to new and
existing invalid service pensioners, so that there will be no
'grandfathering' for existing recipients. The explanatory
memorandum to the Bill estimates that 'about 13%' of existing
pensioners will be medically re-examined.(2) For those who cease to
be eligible for the invalid service pension, the explanatory
memorandum states:
It is estimated that nearly all those not
meeting the new criteria will be eligible for some other form of
income support from Centrelink, including disability support
pension, sickness allowance, Newstart allowance, all of which are
supported by various vocational services.(3)
In this regard, after outlining the expected
total savings in government revenue from this measure (i.e. DVA
savings less increased Centrelink expenditure), a Departmental
officer questioned by the Foreign Affairs, Defence and Trade
Legislation Committee stated:
They will get a much tougher test at Centrelink
if they go for a disability support pension, because they are asked
a whole lot of questions about their medical condition and also
about their employability, their employment record and so on. If it
is considered that they have employment prospects, then they are
automatically put in touch with either Newstart or with vocational
training services.(4)
The expenditure savings figures given in the
explanatory memorandum for the Bill reflect only the savings to DVA
and so do not reflect the total effect on government finances as
the Department of Family and Community Services will incur
expenditure in relation to those people transferred to Centrelink
due to the tightened eligibility test for the invalid service
pension. When taking these into account, the savings are estimated
to be $323 000 in 2000-01; $3.894 million in 2001-02; and $6.089
million in 2002-3.(5) These savings will come from a combination of
a decrease in the number of people receiving government benefits
due to this measure, and lower payments to those transferred to
other benefits.
In addition to the loss of DVA benefits, which,
being based on permanent incapacity, have a continuing nature,
veterans who do not satisfy the proposed test for permanent
incapacity also face the possible loss of fringe benefits,
principally medical treatment at DVAs expense, although there is a
'period of grace' under the Bill.
Housing
HomeFront was introduced on 1 January 1999 and
provides for the assessment of eligible veterans and war widows
homes and up to $150 towards the cost of minor home alterations and
home safety appliances and items. Through these measures HomeFront
aims to reduce the number of accidents, particularly falls, in
veterans' and war widows' and widowers' homes. When announcing the
program, the Minister stated that a trial of the measures in the
Albury-Wodonga area had found that falls were reduced by more than
50%.(6) Currently, approximately 291 000 Gold Card holders (who
receive maximum veterans' medical benefits) are eligible for
HomeFront. It was announced in the 1999-2000 Budget that HomeFront
would be extended to approximately 63 000 White Card holders (who
are eligible for lesser medical benefits). The measure is estimated
to cost $1.7 million in 1999-2000; $2 million in 2000-01; and $1.9
million in each of 2001-02 and 2002-03.(7)
A new program, Home Loan Support, was also
announced in the 1999-2000 Budget and will provide of up to $10 000
for eligible veterans, war widows and widowers who do not have a
Defence Service Home Loan or, if they do, a loan of less than $10
000. The loans are to be used for home maintenance and
modifications. (The loans are described as being 'low interest' but
will carry an interest rate of 6.85%.)
Veterans' Children Education Scheme
(VCES)
VCES provides financial assistance and support
to the children of certain deceased, blinded or totally and
permanently incapacitated veterans, members of the Defence Forces
or members of Peacekeeping Forces. As at 30 June 1998 there were 4
313 children being assisted by VCES, the majority being children of
Vietnam veterans receiving the TPI disability pension. Children
receive benefits under VCES until they are aged 25 or, if they are
undertaking a continuing course at that age and the course has been
approved, until the end of the course.
Where the veteran is still alive, their children
will be covered by VCES if the veteran is in receipt of a TPI
pension or if they receive a benefit in respect of more than one
amputation. If the veteran is deceased, the child may be eligible
to be covered by VCES in a number of circumstances, including that
the former member of the Defence Forces or Peacekeeping Force was
eligible to receive a disability pension at the extreme disablement
rate. However, as the VEA stands children of living Extreme
Disability Allowance recipients are not eligible for VCES. The Bill
will correct this anomaly and extend VCES to such children from 1
January 2000. The measure will cost an estimated $64 000 in
1999-2000; $120 000 in 2000-01; $97 000 in 2001-02; and $70 000 in
2002-03.
Changes to Permanent Incapacity
Eligibility for the ISP is determined under
section 37 of the VEA. Item 1 of Schedule 1 of the
Bill will amend section 37 to remove the criteria that the veteran
is, in the Commissioner's opinion, permanently incapacitated for
work, and substitute the requirement that the veteran satisfies the
test contained in proposed section 37AA, which
provides that the Commissioner must make a determination as to how
permanent incapacity is to be calculated. Such a determination will
be disallowable by either House of Parliament. (This may be
compared to the requirements for eligibility for the TPI disability
pension which are stated in section 24 of the VEA rather than
determined by the Commissioner. As the aim is to align the two
tests, there would appear to be no reason why similar requirements
to those appearing in section 24 could not be inserted in the
legislation rather than implementing them by determination.)
Where a veteran in receipt of an ISP is
undertaking a rehabilitation program under the Veterans' Vocational
Rehabilitation Scheme they are not required to satisfy the
requirement that they have a permanent incapacity for work of at
least 85% (subsection 37(2A)). Due to the above changes the 85%
criteria will no longer be relevant and such people could lose
their ISP while undertaking the rehabilitation program. To prevent
this such people will be deemed to be permanently incapacitated for
the purposes of the ISP for 5 years from ceasing to be permanently
incapacitated (item 7 of Schedule 6). (This
amendment will commence from 10 November 1997, the date of the
introduction of the rehabilitation scheme.)
Similar amendments in respect of the ISS will be
made by items 4 and 6 of Schedule
1, but the explanatory memorandum states that rather than
being aligned with the criteria for the TPI disability pension, the
criteria to be used in the determination for ISS will be that used
in relation to the social security disability support pension. As
there is no criteria contained in the Bill this cannot be
checked.
Short term continuation of fringe benefits are
dealt with in proposed sections 53A and 53B. Under
proposed section 53B, which will be inserted into
the VEA by item 8, the Commissioner may determine
that conditions in which a person ceases to be an invalid service
pensioner due to ceasing to be permanently incapacitated, are
'continuing fringe benefits eligibility circumstances'. If a person
has ceased to be an invalid service pensioner under such
circumstances, fringe benefits will continue for the shorter of the
duration of the continuing fringe benefits eligibility
circumstances and 12 months from the time when the person ceased to
be eligible for the ISP (proposed section
53A).
Housing
Schedule 2 of the Bill provides
that the Commissioner may determine that a veteran in a specified
class is eligible for treatment of a specified kind. Such a
determination will be disallowable by either House of Parliament
(proposed section 88A). The explanatory memorandum
to the Bill states that a determination will be made under proposed
section 88A to extend HomeFront to White Card holders.
Schedule 5 will amend the
Defence Service Homes Act 1918 to introduce the Home Loan
Support program. The program will be open to people eligible under
that Act for loan assistance and 'eligible veterans', which is
defined in item 2 of Schedule 5 to include a
person who has rendered eligible war service, a person who has died
due to injury or disease resulting from operations against hostile
forces, a member of the Forces or a Peacekeeping Force, or a widow
or widower of one of the above. Home Loan Support will be advanced
where a certificate of entitlement has been issued by the
Secretary, which is only to be issued to an eligible veteran or
person who owns a dwelling place, or has a right of residence in a
retirement village, to assist them to remain independently housed.
If a person is liable to repay an advance under the Act, i.e. a
subsidised housing loan, they will only be entitled to Home Loan
Support if the total of the other advances is less than $10 000
(item 9).
The maximum amount of Home Loan Support will be
$10 000 and if there are other outstanding advances, $10 000
reduced by the amount outstanding (item 17).
The rate of interest for a Home Loan Support
advance will be 6.85% (item 18).
VCES
Schedule 3 will amend section
116 of the VEA to provide that the VCES will be extended to
children of living recipients of extreme disablement
adjustment.
It is claimed that aligning the permanent
incapacity test for invalidity service pension with the test that
applies for the special rate (TPI) disability pension does make
sense in terms of consistency and administrative compatibility
between payments, paid under the same legislation. However, the VEA
is like the SSA and provides for separate and discrete payments
with a range of different origins and purposes.
The projected savings of up to $17 million on
program outlays (now described as administered expenses) to be
achieved in the out years, clearly indicates it is expected that
far less claimants/recipients will qualify under the special rate
(TPI) disability pension incapacity rules.
The logic or rationale for aligning the work
incapacity tests between two very different payments is not
self-evident. The two payments are in origin and purpose very
dissimilar. The invalidity service pension is very much like the
social security Disability Support Pension (DSP), being income
support for a person of working age substantially unable to work
due to illness or injury. In fact, the 85% permanently
incapacitated for work test has its origins in the old social
security invalid pension (IP) test. IP being replaced by Disability
Support Pension (DSP) from November 1991. The invalidity service
pension, being income support for persons of working age, is income
and assets tested and is not payable once the person reaches
service pension age. So it is very much a mirror payment to the
DSP.
The veterans' disability pension is a very
different payment, being compensation for war caused or related
illnesses/injuries. Being compensation it is not income or asset
tested and is payable to an eligible veteran also receiving a
service pension, i.e. a veteran of retired age. Therefore, the
origins and purposes of the two different incapacity tests for
these two payments are different.
The IP 85% incapacity test was abandoned with
the replacement of IP with DSP in November 1991. The DSP test is
one of an impairment of 20% or more and an inability to work for at
least 30 hours a week at full award wages for the next two years.
If it is perceived there is a need to update or align the
invalidity service pension 85% permanently incapacitated test, it
perhaps would make more sense to align the test with the current
DSP incapacity test.
-
- Department of Veterans' Affairs, Portfolio Budget
Statements 1999-2000, p 27.
- Explanatory Memorandum, p 3.
- Foreign Affairs, Defence and Trade Legislation Committee, 9
June 1999.
- ibid.
- Compiled from Department of Veterans' Affairs Portfolio Budget
Statements and evidence to the Foreign Affairs, Defence and Trade
Legislation Committee, 9 June 1999.
- Minister for Veterans' Affairs, Media Release, 21
August 1998.
- Department of Veterans' Affairs, Portfolio Budget
Statements, p 39.
Chris Field and Peter Yeend
25 August 1999
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