Bills Digest No. 21  1998-99 1998 Budget Measures Legislation Amendment (Social Security and Veterans' Entitlements) Bill 1998


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 and Copyright Details

Passage History

1998 Budget Measures Legislation Amendment (Social Security and Veterans' Entitlements) Bill 1998

Date Introduced: 12 November 1998

House: House of Representatives

Portfolio: Family and Community Services

Commencement: Generally 1 January 1999

Purpose

The purpose of the 1998 Budget Measures Legislation Amendment (Social Security and Veterans' Entitlements) Bill 1998 (the "Bill"), is to change the basis for the income test which applies to the seniors health card.

The test will be based on taxable income rather than ordinary income and the income levels will be increased from $21 320 to $40 000 for a single person and from $35 620 to $67 000 for a couple.

Background

Currently an Australian resident qualifies for a seniors health card if the person has reached pension age, satisfies the ordinary income test and is not in receipt of a social security pension or benefit. The card was introduced in 1994.

The current ordinary income test is both cumbersome and intrusive.(1) It was originally inserted into the legislation(2) to determine eligibility for pensions and other income support payments. It is unlikely that it was originally intended to have general application to determinations associated with ancillary benefits and concessions other than payments (such as the seniors health card).

In an effort to reduce complicated and invasive administrative procedures the Bill proposes to change the qualification criterion from ordinary income to taxable income and to allow recipients to rely upon their previous tax assessment notice issued by the Australian Taxation Office for verification of taxable income.

Main Provisions

The Acts to be amended are the Social Security Act 1991, the Veterans' Entitlements Act 1986 and the National Health Act 1953.

Schedule 1 - Part 1 - Amendment of the Social Security Act 1991

This Schedule commences, or is taken to have commenced on 1 January 1999.

1. Substitution of 'taxable income' for 'ordinary income' in Part 2A.1 - Seniors Health Card

Section 1061ZA contains the qualification criteria for entitlement to a seniors health card. Amendments are proposed to be made to subsection 1061ZA(1) to omit the word 'ordinary' and to substitute the word 'taxable' to reflect the change to the taxable income test from the ordinary income test.

2. Production of notices of tax assessments

A person will not qualify for a seniors health card:

  • if the person fails to comply with new section 1061ZLA which simply states that if requested by the Secretary a person must provide a copy of his or her notice of assessment of taxable income within 3 months of receipt; new subsection 1061ZA(5) or
  • where a person made an estimate of taxable income for the particular year and failed to provide a copy of his or her notice of assessment of taxable income within 12 months after the end of the tax year. new subsection 1061ZA(5)

3. Insertion of a new Part 3.9 - Seniors Health Card Taxable Income Test Calculator.

There are five steps contained in the method statement to determine whether a person satisfies the seniors health card taxable income test at a particular time. New point 1071-1

Step 1 - work out the person's adjusted taxable income for the reference tax year.

For the purposes of the calculation a person's adjusted taxable income is the sum of the person's taxable income, fringe benefits value, target foreign income and net rental property loss for the year. New point 1071-3

A reference tax year will either be the tax year immediately preceding the test time if the person received a notice of assessment of taxable income for that year or the year immediately before that. A person may also elect to have the assessment made on the basis of his or her adjusted taxable income for the current year. New point 1071-2(1)

Step 2 - work out the person's seniors health card limit.

The limits are found in new point 1071-12 in the Seniors Health Card Taxable Income Limit Table. As previously mentioned these limits have been significantly increased.

Step 3 - work out whether the person's adjusted taxable income exceeds the seniors health
card taxable income limit.

Step 4 - if the person's adjusted taxable income is less than the person's seniors health card taxable income limit, the person satisfies the test.

Step 5 - if the person's adjusted taxable income is equal to or exceeds the persons seniors health card taxable limit the person does not satisfy the test.

New points 1071-4, 1071-5, 1071-6, 1071-7 and 1071-8 define the meaning of taxable income, assessed taxable income, fringe benefits value, target foreign income and net rental property loss respectively.

Schedule 1 - Part 2 -Amendment of the Veterans' Entitlements Act 1986

This Schedule commences, or is taken to have commenced on 1 January 1999.

The amendments to the Veterans' Entitlements Act 1986 that change the eligibility criteria for entitlement to a seniors health card essentially mirror the amendments to the Social Security Act 1991 contained in Schedule 1.

The income test is changing from an ordinary income test to a taxable income test and as with social security provisions the income limits have been increased.

1. Omit the word 'ordinary' in section 118V

Section 118V contains the qualification criteria for entitlement to a seniors health card. Various amendments are proposed to be made to section 118V to omit the word 'ordinary' to reflect the change to the taxable income test from the ordinary income test.

2. Production of notices of tax assessments

A person will not qualify for a seniors health card:

  • if the person fails to comply with new section 118ZJA which simply states that if requested by the Secretary a person must provide a copy of his or her notice of assessment of taxable income within 3 months of receipt; new subsection 118V(4) or
  • where a person made an estimate of taxable income for the particular year and failed to provide a copy of his or her notice of assessment of taxable income within 12 months after the end of the tax year. new subsection 118V(4)

3. Insertion of a new Part 3.9 - Seniors Health Card Taxable Income Test Calculator.

There are five steps contained in the method statement to determine whether a person satisfies the seniors health card income test at a particular time. New point 118ZAA-1

Step 1 - work out the person's adjusted taxable income for the reference tax year.

For the purposes of the calculation a person's adjusted taxable income is the sum of the person's taxable income, fringe benefits value, target foreign income and net rental property loss for that year. New point 118ZAA-3

A reference tax year will either be the tax year immediately preceding the test time if the person received a notice of assessment of taxable income for that year or the year immediately before that. A person may also elect to have the assessment made on the basis of his or her adjusted taxable income for the current year. New point 118ZAA-2(1)

Step 2 - work out the person's seniors health card limit.

The limits are found in new point 118ZAA-11 in the Seniors Health Card Income Limit Table. As previously mentioned these limits have been significantly increased.

Step 3 - work out whether the person's adjusted taxable income exceeds the seniors health card income limit.

Step 4 - if the person's adjusted taxable income is less than the person's seniors health card income limit, the person satisfies the test.

Step 5 - if the person's adjusted taxable income is equal to or exceeds the persons seniors health card income limit the person does not satisfy the test.

New points 118ZAA-4, 118ZAA-4(3), 118ZAA-5, 118ZAA-6 and 118ZAA-7 define the meaning of taxable income, assessed taxable income, fringe benefits value, target foreign income and net rental property loss respectively.

Schedule 2 - Amendments relating to single people sharing accommodation, Social Security Act 1991

This Schedule commences, or is taken to have commenced on 1 January 1999.

In 1996 an amendment reduced the maximum rate of rent assistance payable to single persons (without dependent children) who share accommodation, to two thirds of that payable to non-sharing single people.(3)

Section 5A(2) lists current exceptions, that is, persons not to be treated as a single person sharing accommodation. If a person either pays amounts for board and lodging, is the recipient of a disability support pension or is residing in a nursing home the person will not be caught by the provisions reducing the rate of assistance.

The proposed amendments in the Bill seek to expand the category of persons not to be treated as a single person sharing accommodation.

New subparagraph 5A(2)(ab) expands the exception to include a person residing in exempt accommodation.

New subsection 5A(5A) states that a person's accommodation is exempt accommodation if it is in premises that are, in the Secretary's opinion, a boarding house, guest house, hostel, hotel, private hotel, rooming house, lodging house or similar premises.

Pursuant to new subsections 5A(5B) and 5A(5C) there are ten characteristics that the Secretary is to have regard to that point towards the accommodation in question being exempt accommodation. These may be summarised as follows:

  • the premises are known as a boarding house or similar premises
  • a manager is retained to manage the premises
  • staff are retained by the manager to work in the premises on a frequent basis
  • the residents lack control over the day to day management of the premises
  • house rules limit residents rights to such things as access and cooking facilities
  • the person is not obligated to pay separately for gas, water or electricity
  • the number and nature of bedrooms, bathrooms and unrelated persons living in the premises indicate the accommodation is not private residential accommodation
  • the accommodation is not offered on a leasehold basis
  • there is no requirement for the payment of a bond, and
  • the person's accommodation is available on a daily or short term basis.

Schedule 3 - Part 1 - Amendments relating to parenting payment to single people

Part 1 of Schedule 3 commences on 1 September 1999.

The purpose of the amendments to the Social Security Act 1991 in this Schedule 3 is to align the single and partnered foster carers' qualification for parenting payment.

The aim is to remove the 12 months waiting period for qualification for assistance in respect of single foster carers.

Paragraph 500D(2)(c) is repealed together with section 500D(note 2).

Schedule 3 - Part 2 - Amendments relating to health care cards for fostered children - National Health Act 1953

Part 2 of Schedule 3 commences on 1 July 1999

Fostered children, in respect of whom family allowance is being paid at less than the maximum rate, will under the proposed amendments be issued with a health care card, provided that they were included on a health care card or pensioner concession card held by their original family.

The amendment that facilitates this change is one to include the children in the list of concessional beneficiaries in the National Health Act 1953 by virtue of new subparagraph 84(1)(ba).

Concluding Comments

Financial Impacts

1.1 Amendment relating to the seniors health card

The seniors card permits holders access to concessional rates pursuant to the Pharmaceutical Benefits Scheme which is governed by the National Health Act 1953.

Extending the income limit will allow greater access to pharmaceutical concessions by self-funded retirees. This will also represent a fundamental shift in the recipient target group from low income earners to those with incomes up to $40 000 for singles and $67 000 for couples.

It is estimated that 70 percent of eligible customers (approximately 220 000 people) will take the opportunity to access the seniors health card with the introduction of the new simplified administrative procedures. The financial impacts are dependent upon the accuracy of predicated use and take-up rates.

 

 

Net Outlays $

1998-1999

13.188m

1999-2000

28.599m

2000-2001

30.231m

2001-2002

31.273m

 

1.2 Amendments relating to persons sharing accommodation

 

Net Outlays $

1998-1999

1.601m

1999-2000

6.515m

2000-2001

6.013m

2001-2002

5.993m

1.3 Amendments relating to single foster carers

 

Net Outlays $

1999-2000

2.266m

2000-2001

2.460m

2001-2002

2.492m

 

1.4 Amendments relating to health care cards for fostered children

 

Net Outlays $

1998-1999

0.962m

1999-2000

2.142m

2000-2001

2.217m

2001-2002

2.372m

 

Endnotes

  1. The application of the ordinary income test is affected by sections 1072 and 1073 (the general concept of ordinary income); sections 1074 and 1075 (business income); sections 1076 to 1084 (deemed income from financial assets); and sections 1095 to 1099 (income from retirement funds and annuities).

  2. A means test was incorporated into the legislation from commencement of payments in 1909. It was a combined income and assets test. This was replaced in 1976 with an income test that is basically comparable to the current ordinary income test. In 1985 an assets test was inserted into the Act as an additional eligibility criterion to the ordinary income test.

  3. The sharers' measure was introduced in 1996 by the Social Security Legislation Amendment (Further Budget and Other Measures) Act 1996.

Contact Officer and Copyright Details

Lesley Lang
20 November 1998
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.

ISSN 1328-8091
© Commonwealth of Australia 1998

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 duties.

Published by the Department of the Parliamentary Library, 1998.

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