Bills Digest No. 131 2001-02
Social Security and Veterans Entitlements Legislation
Amendment (Disposal of Assets - Integrity of Means Testing) Bill
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
Contact Officer & Copyright Details
Social Security and Veterans
Entitlements Legislation Amendment (Disposal of Assets - Integrity
of Means Testing) Bill 2002
Date Introduced: 14 March 2002
House: House of Representatives
Portfolio: Family and Community Services
Commencement: 1 July 2002
The Bill proposes
to reform the provisions of the Social Security Act 1991
and the Veterans Entitlements Act 1986 that relate to the
gifting of assets by recipients of income support.
Provisions to prevent people from depriving
themselves of property or income in order to obtain a pension, date
back to the Invalid and Old-age Pensions Act 1909.
Initially the sanction was disqualification from receipt of a
pension altogether. This situation applied until the introduction
in 1976 of an income only means test. Under the new provisions
where a person deprived themselves of income in order to qualify
for a pension or for a higher rate of pension, the disposed of
income continued to be deemed as income for the purposes of the
The present approach to the disposal of income
or assets dates back to the introduction of the Assets Test in
1985. Disposal of assets without adequate return was allowed to the
value of $2000 per annum for a single person or $4000 for a couple.
Disposal above these values resulted in the excess being assessable
under the asset test. The assessed value of disposed assets was
reduced by 10 per cent each year.
In 1991 these provisions were modified so that
up to $10 000 could be disposed of each year without sanction.
Amounts above $10 000 were deemed to earn 10 per cent interest
for five years. The value of disposed of assets above the limit
continued to be included in the calculation of the value of a
person s assets for the purposes of the assets test. This change
coincided with the introduction of the policy of deeming a minimum
rate of return on cash and deposits in financial institutions.
Minister Howe provided the rationale for these changes in his
second reading speech:
In order to limit avoidance of the social
security and veterans' affairs assets tests by the disposal of
property for either nominal or no consideration, the Bill will
provide that income will be deemed to have been received from
deprived assets at a minimum rate of 10 per cent a year. However,
to mitigate the impact of this measure where the disposition is
relatively minor, the annual gifting limit will be significantly
increased to $10,000 for both single persons and married
The Howard Government has already attempted to
modify these 1991 changes. In 1999 the Social Security Amendment
(Disposal of Assets) Bill 1999 contained provisions that would have
reduced the $10 000 limit to $5000.(2) The
Government argued that the $10 000 limit had "become a
favourite tool for many financial planners who exploit it to
increase the income support entitlement of their
customers".(3) The Bill was referred to the Senate
Community Affairs Legislation Committee for consideration. Welfare
groups defended the $10 000 limit because it provided scope
for the gifting of money to family members in financial
difficulties.(4) The Bill was defeated in the Senate by
the ALP and the Australian Democrats.
The Bill presently before the Parliament offers
a different approach to addressing the issues of concern to the
Government. It retains the $10 000 limit, but adds a further
limit of $25 000 over a rolling five year period. This change
is intended to reduce the scope for pensioners to use regular gifts
to increase the rate of payment they receive.
The Bill also introduces the use of financial
years for the purposes of the gifting limits. At present a pension
year is used which begins and ends on the anniversary of the day
each person commenced receiving a payment.
Schedule 1 deals with
amendments to the Social Security Act 1991.
Item 3 inserts a definition of
income year to ensure that it corresponds to a financial year.
Items 9-18 amend provisions
relating to Carer Payment where the situation is complicated by the
existence of a special income and assets test applied to recipients
Items 19-25 amend the main
gifting provisions in the Act to implement the new $25 000
Items 26-28 amend provisions
relating to Youth Allowance where the situation is complicated by
the operation of the "Family Actual Means Test".
Schedule 2 deals with
amendments to the Veterans Entitlements Act 1986.
Item 19 inserts the major new
provisions that relate to the disposal of assets and the new
$25 000 limit.
- Hon. B Howe MP. House of Representatives Hansard, 23
August 1990, p. 1493.
- A Digest for the 1999 Bill is available at: http://www.aph.gov.au/library/pubs/bd/1999-2000/2000bd025.htm
- Hon. W Truss MP, House of Representatives Hansard, 30
June 1999, p. 6105.
- See Senate Community Affairs Legislation Committee,
Consideration of legislation Referred to the Committee: Social
Security Amendment (Disposal of Assets) Bill 1999, November
8 May 2002
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.
IRS staff are available to discuss the paper's
contents with Senators and Members and their staff but not with
members of the public.
© Commonwealth of Australia 2002
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
Published by the Department of the Parliamentary Library,
Back to top