Bills Digest No. 47 1999-2000 Veterans' Affairs Legislation Amendment Bill (No. 1) 1999


Numerical Index | Alphabetical Index

WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments. This Digest does not have any official legal status. Other sources should be consulted to determine the subsequent official status of the Bill.

CONTENTS

Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details

Passage History

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.

Purpose

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.

Background

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.

Main Provisions

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.

Concluding Comments

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.

Endnotes

  1. Department of Veterans' Affairs, Portfolio Budget Statements 1999-2000, p 27.

  2. Explanatory Memorandum, p 3.

  3. Foreign Affairs, Defence and Trade Legislation Committee, 9 June 1999.

  4. ibid.

  5. Compiled from Department of Veterans' Affairs Portfolio Budget Statements and evidence to the Foreign Affairs, Defence and Trade Legislation Committee, 9 June 1999.

  6. Minister for Veterans' Affairs, Media Release, 21 August 1998.

  7. Department of Veterans' Affairs, Portfolio Budget Statements, p 39.

Contact Officer and Copyright Details

Chris Field and Peter Yeend
25 August 1999
Bills Digest Service
Information and Research Services

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian government document.

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and their staff but not with members of the public.

ISSN 1328-8091
© Commonwealth of Australia 1999

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Published by the Department of the Parliamentary Library, 1999.

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