BILLS DIGEST NO. 44, 2016–17              23 November 2016

Veterans’ Affairs Legislation Amendment (Budget and Other Measures) Bill 2016

Michael Klapdor
Social Policy Section 

Date introduced:  13 October 2016

House:  House of Representatives

Portfolio:  Veterans' Affairs

Commencement: Schedule 1 by Proclamation or six months after Royal Assent; Schedule 2 the day after Royal Assent; Schedule 3 on 1 July 2017.

Links: The links to the Bill, its Explanatory Memorandum and second reading speech can be found on the Bill’s home page, or through the Australian Parliament website.

When Bills have been passed and have received Royal Assent, they become Acts, which can be found at the Federal Register of Legislation website.

All hyperlinks in this Bills Digest are correct as at November 2016.

Purpose of the Bill

The Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 2016 (the Bill) amends the Military Rehabilitation and Compensation Act 2004[1] (the MRCA) and the Veterans’ Entitlements Act 1986[2] (the VEA) to:

•       allow for an interim incapacity payment at 100 per cent of normal earnings to be paid until information is received about an individual’s Commonwealth superannuation entitlements, and their final incapacity payment rate can be determined

•       extend access to non-liability mental health treatment to all past and current members of the Australian Defence Force (ADF) irrespective of how long or where they served, or the type of service, and

•       align the end date for veterans’ incapacity payments with the incremental increase in the Age Pension age (to 67 by 2024).

The measures were announced in the 2016–17 Budget.[3] The measures are expected to cost $43.6 million over the forward estimates period.[4]

Structure of the Bill and the Bills Digest

The Bill is divided into three Schedules. This Bills Digest will address the background, key issues and provisions for each Schedule in separate sections.

Committee consideration

The Bill has not been referred to any Committee.

Senate Standing Committee for the Scrutiny of Bills

The Senate Standing Committee for the Scrutiny of Bills had no comment to make on the Bill.[5]

Policy position of non-government parties/independents

At the time of writing, the Opposition and non-government parties and independents had not stated a position on the Bill.

Position of major interest groups

At the time of the Budget announcement, ex-service organisations and defence organisations welcomed the extension of eligibility for non-liability mental health treatment and the payment of interim incapacity payments at the rate of normal earnings.

The Returned and Services League of Australia (RSL) stated that they were pleased with the non-liability mental health treatment extension and ‘noted with pleasure’ the interim incapacity measure.[6] However, the RSL stated that they were disappointed that the extension of non-liability health care did not cover non-mental health conditions such as muscular-skeletal conditions.[7]

The Alliance of Defence Service Organisations, representing a broad group of service and ex-service organisations, stated that they welcomed the extension of eligibility to non-liability health care for mental health conditions.[8]

Financial implications

According to the Explanatory Memorandum for the Bill, the total cost of the three measures in the Bill is $43.6 million to 30 June 2020. Over the forward estimates period:

•       the interim incapacity payments measure is expected to cost $0.2 million

•       the extension of non-liability health care measure is expected to cost $37.9 million and

•       the alignment of the cut off age for incapacity payments with the Age Pension age is expected to cost $5.5 million.[9]

Statement of Compatibility with Human Rights

As required under Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 (Cth), the Government has assessed the Bill’s compatibility with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of that Act. The Government considers that the Bill is compatible.[10]

Parliamentary Joint Committee on Human Rights

The Parliamentary Joint Committee on Human Rights found that the Bill did not raise any human rights concerns.[11]

General background to veterans’ affairs legislation

There are three main Acts that provide for supports and compensation for veterans and their dependents:

•       the VEA which primarily provides benefits and entitlements for those who undertook operational service, peacekeeping service and hazardous military service before 1 July 2004, and/or peacetime military service from 7 December 1972 up to 6 April 1994

•       the Safety, Rehabilitation and Compensation Act 1988 (the SRCA),[12] which provides coverage for illness, injury or death arising from military service undertaken from 3 January 1949 to 30 June 2004; and for certain periods of operational service between 7 April 1994 and 30 June 2004 and

•       the MRCA which provides coverage for illness, injury or death arising from military service undertaken from 1 July 2004.

The VEA provides four main types of benefits:

•        compensation, through disability pensions to veterans, certain members of the Defence Force and members of peacekeeping forces, and war and defence widow/er’s pensions and orphan pensions for their dependants. These compensation payments are paid at rates determined by the level of impairment or by specific conditions/death and are not means-tested. They can be paid at the same time as income support payments

•        income support, through service pensions for veterans with qualifying service and their partners, and income support supplements for war or defence widow/ers. These payments are means tested and are paid at the same rate as Centrelink pensions

•        health care for veterans and their dependants and

•        additional allowances and benefits for veterans and dependants (such as travel assistance, attendant and decoration allowances, and financial support for dependent children of veterans to undertake study).[13]

In order to be eligible for compensatory pensions through the VEA, a person’s disability or illness must be determined to be related to their service (that is, war-caused or defence-caused).

The SRCA and MRCA provide rehabilitation and compensation coverage for military service-related injuries, illnesses or death. The MRCA and the SRCA are different types of legislation to the VEA, with the MRCA and the SRCA being more like more modern workers’ compensation legislation—including the provision of both lump-sum payments and on-going payments—with elements reflecting the hazards particular to military service. This is also featured in these two Acts having payments rates linked to the rate of pay of the entitled recipient when they became ill/injured.

Both the MRCA and SRCA provide permanent impairment lump-sum payments, death benefits, wage-replacement incapacity payments, vocational and medical rehabilitation services, and a large range of allowances for additional costs (such as household services and attendant allowances).

Schedule 1—Payments before a person receives a Commonwealth superannuation benefit

Schedule 1 will provide for interim incapacity payments to be payable at 100 per cent of normal earnings in situations where it is not possible for the correct level of incapacity payments to be calculated because information has not been received from relevant agencies (such as information on superannuation entitlements). Currently, interim incapacity payments can only be paid at the rate of the national minimum wage.

Background

Incapacity payments are a form of economic loss compensation for those who cannot work or who have a reduced capacity to work because of a condition accepted as service-related under the MRCA.[14] These payments can be made to currently-serving or ex-serving Australian Defence Force (ADF) members (permanent and reserve), cadets, cadet officers, instructors and declared members.

Incapacity payment rates are paid at a rate based on the difference between an eligible person’s ‘normal earnings’ and their ‘actual earnings’ in a particular week. If the person was incapacitated during full-time service in the ADF, normal earnings are based on their salary at that time. If they had been discharged, then normal earnings are based on their ADF salary at the date of their discharge. Actual earnings are what the person is actually earning from paid employment—which may be zero.

An eligible person can receive 100 per cent of the difference between their normal and actual earnings for the first 45 weeks of incapacity. After this period, the rate will based on the difference between a percentage of their normal earnings and their actual earnings—the percentage can range between 75 and 100 per cent depending on the number of hours the person can work each week.[15]

Incapacity payments can continue to be paid for as long as a person’s actual earnings are less than their normal earnings due to their service injury or disease. Payments will cease, however, when the person turns 65 (the current Age Pension age). An exception to this age cut-off rule is where the injury or disease causing the incapacity occurred between the age of 63 and 65. In such cases incapacity payments can be paid for up to 104 weeks.[16]

Commonwealth superannuation payments can affect the rate of any incapacity payments. Where a person is receiving any Commonwealth superannuation payments (such as a payment for forced retirement due to incapacity/invalidity) it can reduce their incapacity payment. The employer-funded component of any Commonwealth superannuation payment will reduce their incapacity payment on a dollar for dollar basis (this is known as offsetting). Offsetting occurs to prevent the Commonwealth providing two compensation payments for the same purpose (that is, economic loss arising from incapacity to work).[17]

Interim incapacity payments

Currently, the Department of Veterans’ Affairs (DVA) is able to make interim incapacity payments at the rate of the national minimum wage where the calculation of the person’s actual entitlement is delayed while information is being sought from another agency (such as the Department of Defence or the Commonwealth Superannuation Corporation (CSC)). These interim payments are made under section 179 of the MRCA which establishes that where normal earnings are less than the minimum wage then the person’s normal earnings are calculated using the full-time minimum wage rate.

According to the MRCA policy manual:

Delegates have the discretion … to approve interim incapacity payments on the basis of section 179 (“normal earnings that are less than the national minimum wage”) if:

-          entitlement to compensation for incapacity has been established;

-          the person has requested interim incapacity payments;

-          the person has been warned of the potential for overpayment, the consequences thereof (i.e. recovery action), and explicitly authorises the delegate to proceed with interim payments; and

-          the delegate has advised the person of the process to access their superannuation entitlements from CSC and that they should advise the Department of any entitlements once known.[18]

When the information from other agencies is eventually received, and the correct entitlement calculated, any overpayments made via these interim incapacity payments can be recovered directly from their payments under the MRCA (under section 415 of the MRCA)[19].

Section 179 of the MRCA does not explicitly provide for the payment of interim incapacity payments but, according to the policy manual, it appears to be used for situations where information has been delayed and a claimant is in need of financial support.

Key issues and provisions

Schedule 1 will amend the MRCA to provide for interim incapacity payments to be offered at 100 per cent of the current or former member’s normal earnings when there are delays in obtaining information from external agencies on the amount of Commonwealth funded superannuation a person will receive.

The amendments will provide for a much higher rate of interim payment than is currently available under the MRCA in such situations and will make explicit provision for the payment of such an interim payment (unlike the current discretionary use of section 179).

Minister for Veterans’ Affairs Dan Tehan stated in his second reading speech on the Bill that there can sometimes be several months before incapacity amounts can be determined while superannuation entitlements are finalised and ADF members can experience financial hardship during this period.[20] It is unclear how many people are affected by such delays or the average time it takes for such information to be provided.

Boosting the amount available for interim payments will be of significant assistance for those facing delays. While higher rates of interim payments may lead to higher rates of overpayment that need to be recovered, the benefit of immediate assistance would be likely to outweigh the impact of reduced payments at a later date.

Provisions

Item 6 inserts new section 89B into the MRCA to provide for the Military Rehabilitation and Compensation Commission (MRCC) to determine that section 89A does not apply to a person in certain situations. Section 89A sets out how a current ADF member’s (including full-time members, part-time Reservists, cadets and declared members) incapacity compensation is to be worked out where they are also in receipt of a pension or lump sum under a Commonwealth superannuation scheme. Not applying section 89A to a person who has applied for a superannuation benefit allows for an interim incapacity payment to be paid until that person starts receiving or has received their superannuation benefit, or until they withdraw their application for the superannuation benefit.

A determination can be made under proposed section 89B where the person:

•       has applied for a benefit under a Commonwealth superannuation scheme on the basis of their incapacity for service or work

•       has not begun to receive or has not received the benefit

•       has been notified as to the effect of this section (and that any interim payments made could result in an overpayment which may need to be recovered), and

•       has agreed in writing for the section not to apply (and to notify the MRCC if they withdraw their superannuation application or when they receive their benefit).

A determination under section 89B can be revoked by the MRCC where the person has withdrawn their application for a Commonwealth superannuation benefit, where they have begun to receive or have received the benefit, or where they have not complied with a requirement to provide information or take any action in relation to the application for the benefit. Where a determination is revoked and the person has begun to receive or has received their benefit, then section 89A is taken to have always applied to the person and their incapacity compensation amount worked out accordingly.

Item 14 inserts new section 126A which provides for a similar determination to be made in relation to incapacity payments for former members. The determination would mean that section 126, which sets out how a retired ADF member’s incapacity compensation is to be worked out where they are also in receipt of a Commonwealth superannuation pension or lump sum, would not apply in certain situations.

Items 22–28 make amendments in relation to sections 417 and 418 which currently provide for the MRCC to give a notice to the administrator of a Commonwealth superannuation scheme to not pay a superannuation benefit where the MRCC is of the opinion that the person may have received a compensation overpayment. The amendments replace references to ‘retiree’ with ‘incapacitated person’ and allow for such notices to be made in relation to those who were subject to a determination under new sections 89B or 126A where the determination has been revoked. The MRCC can recover any compensation overpayments from the person’s outstanding superannuation benefits via the administrator.

The remaining items are consequential to these amendments.

Schedule 2—Non-liability health care for certain mental health disorders

Schedule 2 amends the VEA to remove superfluous provisions relating to eligibility for non-liability health care for mental health conditions. A 2016–17 Budget measure to extend access to non-liability mental health treatment to all past and current members of the ADF irrespective of how long or where they served, or the type of service, was implemented in August via a determination by the Repatriation Commission. The amendments in Schedule 2 are consequential to this determination and clarify the application of the VEA provisions for non-liability health care.

Background

The mental health of veterans has emerged as a key issue in the Veterans’ Affairs Portfolio—partly due to greater recognition and diagnoses of mental health issues amongst the veteran community and the long-term impact of previous conflicts, and partly due to the nature of recent operations making service-related psychological/psycho-social illnesses more common than other categories of injuries and illness. The prioritisation and implementation of mental health strategies has become a critical issue for the Australian Defence Force (ADF) and the DVA. In particular, efforts have been made to de-stigmatise mental health conditions and provide more effective supports.[21]

Those with conditions accepted as war-caused or service-related and eligible for compensation under the VEA, MRCA or the SRCA will be entitled to health services funded by DVA including clinical psychological or psychiatric services.

Health care is provided for under the VEA and includes eligibility provisions for those in receipt of certain forms of compensation or who had liability for a condition recognised under the SRCA or MRCA. There are two main groups eligible for health care under the VEA: Gold Card holders and White Card holders. Holders of the Gold Card (the Repatriation Health Card—For All Conditions) are entitled to the full range of health care services at DVA’s expense including medical, dental and optical care, within Australia. Holders of the White Card (the Repatriation Health Card—For Specific Conditions) are entitled to the full range of health care services at DVA’s expense but only for those specific disabilities or illnesses accepted as service-related or for which they have been deemed eligible for treatment.

As at June 2016, there were 45,236 veterans with service-related mental health conditions.[22] More than half (25,474) had conditions related to service in the Vietnam War, 3,981 had mental health conditions related to post-1999 conflicts and 8,802 to peacetime service only.[23]

As at September 2016, there were 3,111 veterans from East Timor, Solomon Islands, Afghanistan and Iraq with post-traumatic stress disorder claimed under the VEA or MRCA (the most common accepted condition for these veterans), 1,707 had a depressive disorder and 1,187 had alcohol dependence and/or abuse.[24] Many of these veterans have multiple accepted conditions and these numbers exclude claims under the SRCA. Of Vietnam War veterans with an accepted condition, 18,266 had post-traumatic stress disorder and 6,218 had alcohol dependence and/or abuse.[25]

Non-liability health care

Non-liability health care refers to coverage by DVA for health treatments without the need to establish service-causation or recognise liability for providing compensation.

Non-liability health care for veterans’ dates back to 1935 when eligibility for treatment for tuberculosis was expanded to all veterans (due to the difficulty of assessing whether tuberculosis was attributable to war service).[26] In 1973, cancer treatment entitlement was extended to those who had service in a theatre of war (regardless of whether the cancer was war-caused) and free treatment was extended to all veterans of the Boer War and World War I. Treatment for malignancies was extended in 1975 to those with only peacetime service (but this ceased for new ADF members in 1994).[27]

Non-liability cover for post-traumatic stress disorder was introduced from July 1995 in order to provider earlier treatment to veterans with this condition (and followed on from recommendations of the 1994 Veterans’ Compensation Review Committee’s report).[28]

In 2000, the VEA was amended to allow the Repatriation Commission to make determinations that treatment could be provided to certain veterans in a specified class (and to dependents).[29] Determinations made in 2000 included cover for veterans and other members entitled under the VEA who suffer an unidentified condition and for psychiatric assessments of dependents of war veterans. In 2004, a determination was made to provide treatment for veterans and other members entitled under the VEA who were suffering an anxiety or depressive disorder.[30]

Those with operational service covered under the MRCA (from 1 July 2004) are covered by the non-liability health care provisions in the VEA. Those who entered the ADF after 1994 and with peacetime service only were not eligible for non-liability health care under the VEA as a result of the Military Compensation Act 1994 (which shifted coverage for ADF members injured in the course of all ordinary peacetime service from the VEA to the SRCA).[31]

In 2014, changes were made to non-liability health care provisions in the VEA following the 2011 Review of Military Compensation Arrangements.[32] Firstly, to include alcohol abuse disorder and substance abuse disorder as conditions that may be covered by non-liability health care. Secondly, to provide access to non-liability health care to those with peacetime service only. The expanded eligibility applied to:

•       members of the ADF with at least three years continuous full-time peacetime service on or after 7 April 1994 (or before and on or after 7 April 1994) and

•       members of the ADF with less than three years continuous full-time service on or after 7 April 1994 (or before and on or after 7 April 1994), who were discharged on the grounds of invalidity or mental or physical incapacity.[33]

The expanded access to non-liability care was based on a recommendation of the 2011 Review. The Review Committee was split on this matter:

Committee members representing the DVA and the Australian Defence Organisation, and Mr Peter Sutherland [visiting fellow, Australian National University College of Law; an expert in workers’ and military compensation] believe that non-liability health cover for all psychiatric disorders should be provided under the MRCA for former ADF members and part-time Reservists who have served after 1 July 2004. These Committee members also believe that this is consistent with the thrust of recommendations of recent reviews including the suicide study by Professor David Dunt, which drew particular attention to members’ needs around the period of transition to discharge and did not limit consideration to those who had operational service.

The Committee members representing the Department of Finance and Deregulation, the Treasury and the Department of Education, Employment and Workplace Relations believe the MRCA (or Safety, Rehabilitation and Compensation Act 1988) is not an appropriate vehicle to extend non-liability health cover for all psychiatric disorders to former ADF members and part-time Reservists with peacetime service only. In principle, compensation schemes should only deal with cases where liability is established.[34]

The relevant recommendation of the Review (Recommendation 25.1) offered two alternatives:

(a) providing non-liability health cover under the Military Rehabilitation and Compensation Act 2004 for certain psychiatric conditions to all former members of the Australian Defence Force (ADF) and part-time Reservists who have served after 1 July 2004 – favoured by the Department of Veterans’ Affairs (DVA) and the Australian Defence Organisation (Defence) representatives and Mr Peter Sutherland; or

(b) requesting Defence and DVA to gather further evidence to establish both the benefit and need of additional psychiatric care, separate to the existing general health services, for former members of the ADF and part-time Reservists who have served after 1 July 2004. If benefit and need are established, then options could be presented to the Government to deliver such health coverage outside of compensation legislation – favoured by the Department of Finance and Deregulation, the Treasury and the Department of Education, Employment and Workplace Relations representatives.[35]

The then Labor Government had accepted the latter recommendation (25.1(b)) noting that ‘those former members with warlike and non-warlike service after 1 July 2004 already have access to non-liability health care for certain psychiatric conditions via provision in the VEA’.[36] The Abbott Government, however, adopted a version of Recommendation 25.1(a), extending access to those with full-time service from April 1994.[37]

As at June 2016, there were 18,636 people with ADF service with a mental health condition accepted under the non-liability health care arrangements, an increase of 44 per cent on June 2011 numbers.[38]

Senate Foreign Affairs, Defence and Trade Committee inquiry into processes to support victims of abuse in Defence

In 2014, the Senate Foreign Affairs, Defence and Trade References Committee conducted an inquiry into the accessibility and adequacy of processes to support victims of abuse in Defence, with reference to an earlier inquiry into the review of allegations of sexual and other abuse in Defence (the DLA Piper Review).[39]

One of the recommendations of the 2014 inquiry was that Government remove the three year minimum service requirement for eligibility for non-liability health care to make non-liability health care available to any person who had completed any service.[40] The recommendation was based on an issue raised in the inquiry where a person may be discharged from the ADF on their own request, before meeting the three year service requirement and not on medical grounds, and would therefore not be eligible for non-liability health care:

One of the challenges identified during the inquiry is that persons who have suffered abuse may leave military service early after an adverse experience and whose true reason for leaving may not be reflected in their official record of service.[41]

In its response to the Senate Committee’s report, in May 2015, the Government noted this recommendation and stated:

An expansion of eligibility for NLHC [non-liability health care] along these lines would enable a greater number of victims of abuse to access treatment for specific mental health conditions. This proposal will need to be considered in the context of the Government's broader budget priorities.[42]

2016–17 Budget

In the 2016–17 Budget, the Government announced that it would extend non-liability health care for certain mental health conditions to all current and former ADF members, irrespective of their date, duration or type of service.[43]

Veterans' Entitlements (Extension of Non-Liability Health Care for Mental Health Treatment) Determination 2016

The Government implemented the 2016–17 Budget measure via the Veterans' Entitlements (Extension of Non-Liability Health Care for Mental Health Treatment) Determination 2016 in August 2016.[44] The Determination took effect from 1 July 2016. Section 88A of the VEA allows the Repatriation Commission to make determinations that veterans, dependants of veterans or other persons are eligible to be provide with a specified treatment.

The Determination enables veterans (as defined under the VEA)[45] or a person who is or has been a member of the ADF rendering continuous full-time service, to be eligible for treatment for alcohol use disorder, anxiety disorder, depressive disorder, post-traumatic stress disorder or substance use disorder. Continuous full-time service is defined in the VEA as service in the naval, military or air force ‘of the kind known as continuous full-time service’.[46] A veteran or other eligible person must make a request to DVA to be provided with treatment for a specified mental health condition. The request can either be in writing (including email) or via a phone call.

The Determination removed a requirement that a person requesting non-liability health care treatment have a diagnosis at the time of requesting the treatment.

Current non-liability health care arrangements

Under the Veterans' Entitlements (Extension of Non-Liability Health Care for Mental Health Treatment) Determination 2016, all current and former members with continuous full-time service are eligible for treatment of post-traumatic stress disorder, depressive disorder, anxiety disorder, alcohol use disorder and substance use disorder.

Under subsection 85(2) of the VEA non-liability treatment for cancer (malignant neoplasm) and pulmonary tuberculosis is available to those with the following types of service:

•       eligible war service under the VEA

•       operational service under the VEA

•       warlike and non-warlike service under the VEA or the MRCA

•       peacekeeping service

•       hazardous service

•       British Nuclear Test defence service

•       three years continuous full-time service between 7 December 1972 and 6 April 1999

•       discharged on the ground of invalidity or physical or mental incapacity to perform duties before completing three years continuous full-time service between 7 December 1972 and 6 April 1999 or

•       a National Serviceman on 6 December 1972 who completed their contracted period of National Service.[47]

For treatment for mental health conditions, there is no requirement to lodge an application, only that a request be made in writing or over the phone. Diagnosis of the condition or conditions is not required at the time the request is made, but a diagnosis by a psychiatrist, clinical psychologist or general practitioner is required within six months of the date of approval for treatment to continue.[48]

For treatment for cancer or tuberculosis, veterans must fill out the appropriate application form. A diagnosis by an appropriately qualified health professional is required.[49]

Eligible veterans will be issued with a White Card.

Treatments include treatments by a general practitioner, medical specialist, psychologist, psychiatrist, specialist PTSD program, pharmaceuticals, social work or occupational therapist.[50]

Key issues and provisions

As noted above, the Budget measure has already been provided for via the Veterans' Entitlements (Extension of Non-Liability Health Care for Mental Health Treatment) Determination 2016. The amendments in Schedule 2 essentially remove the superfluous, and more restrictive, provisions for non-liability health care for mental health conditions at subsection 85(2) of the VEA.

The Budget measure increases the number of people eligible for mental health treatment and improves access by not requiring a diagnosis at the time a request for treatment is made. Non-liability health care allows for early intervention which can lessen the impact of mental health conditions in the long-term. Allowing all service and ex-service personnel access to such treatments, regardless of their length or type of service or whether the condition is service-related, demonstrates the level of concern the Government places on the mental wellbeing of ADF members and ex-members.

Provisions

Item 1 amends subsection 85(2) of the VEA to remove references to mental health conditions (post-traumatic stress disorder, alcohol use disorder or substance use disorder). The provision will now provide only for non-liability health care for veterans with malignant neoplasia and pulmonary tuberculosis.

Item 2 inserts a note after subsection 85(2) to indicate that the provision of health care for mental health and other conditions may be available under a determination made under section 88A.

Item 4 inserts application and transitional provisions. Importantly, the item provides that an application lodged under subsection 85(2) prior to the commencement of Schedule 2 that is yet to be determined will be taken as a request in accordance with the Veterans' Entitlements (Extension of Non-Liability Health Care for Mental Health Treatment) Determination 2016. This will mean that these applications for mental health treatment can be considered under the less stringent eligibility criteria set out in the Determination.

Schedule 3—Pension age

Schedule 3 will amend the MRCA to increase the incapacity payment cut-off age to align with the age at which a person becomes eligible for the Age Pension (the pension age). From July 2017, the pension age will gradually increase by six months every two years until it reaches 67 on 1 January 2024. The amendments will ensure that the cut-off age for incapacity payments increase in line with the pension age changes.

Background

As noted in the Schedule 1 section of this Bills Digest, incapacity payments paid under the MRCA can continue to be paid for as long as a person’s actual earnings are less than their normal earnings due to their service injury or disease. Payments will cease, however, when the person turns 65 (the current Age Pension age). An exception to this age cut-off rule is where the injury or disease causing the incapacity occurred between the age of 63 and 65. In such cases incapacity payments can be paid for up to 104 weeks.[51]

The Explanatory Memorandum to the Bill states that the rationale for this age cut-off is that ‘an injured worker should not continue to receive payments intended to replace lost earnings when they would ordinarily have retired from the work force, and that the age pension is available from age 65’.[52]

Age pension age increase

As part of the Rudd Government’s 2009 pension reforms, amendments were made to the Social Security Act 1991 to increase qualifying age for the Age Pension from 65 to 67—to be phased in from 2017 to 2023.[53] This was intended to reflect ‘the significant improvements in life expectancy that have occurred since the age pension was introduced in 1909’.[54] The Age Pension qualifying age for men has been 65 since its inception in 1909.[55]

Key issues and provisions

Schedule 3 will change the general cut-off age for incapacity payments from the nominal amount of ‘65’ to instead reference the pension age as defined in the Social Security Act 1991. It will also amend the exception so that the 104 week cut-off applies where the injury or disease causing the incapacity occurs in the two years before pension age, rather than between the age of 63 and 65.

The amendments are sensible and ensure those eligible for incapacity payments are able to receive their full-entitlement up to the point where they can start receiving the age pension. While some would have been eligible for another income support payment such as Disability Support Pension or an invalidity service pension, these would generally be paid at a lower rate than incapacity payments.

Provisions

Item 1 inserts a new term and definition of pension age into the list of definitions at subsection 5(1) of the MRCA. The definition refers to the meaning of pension age given in subsections 23(5A), (5B), (5C) or (5D) of the Social Security Act 1991.

Item 4 amends section 120 of the MRCA so, other than as provided in section 121, the Commonwealth is not liable to pay incapacity payments to former ADF members over pension age.

Item 5 amends the exception to this rule at section 121 so that where a person’s injury is sustained, or service disease is contracted when the person is the age that two years before pension age or older, the Commonwealth is liable to pay an incapacity payment to a former ADF member for a maximum of 104 weeks during which the person is incapacitated for work.

Items 7 and 8 amend the provisions used to convert weekly amounts into lump sums at section 138 of the MRCA so that the age limit on the number of days used in the calculation ends either when the person turns pension age, or within 104 weeks of an injury or service disease that occurs within two years of the person turning pension age.

Concluding comments

The amendments proposed in the Bill are beneficial to current and former ADF members and improve both the level of support offered, and the ease of access to support.

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[1].              Military Rehabilitation and Compensation Act 2004 (the MRCA).

[2].              Veterans’ Entitlements Act 1986 (the VEA).

[3].              Australian Government, Budget measures: budget paper no. 2: 2016–17, p. 155.

[4].              Explanatory Memorandum, Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 2016, p. 1.

[5].              Senate Standing Committee for the Scrutiny of Bills, Alert digest, 8, 2016, The Senate, 9 November 2016, p. 62.

[6].              Returned and Services League Australia, RSL national comment on the 2016–17 budget, media release, 2016.

[7].              Ibid.

[8].              Alliance of Defence Service Organisations, Federal budget 2016: veterans health the key outcome, media release, 4 May 2016.

[9].              Explanatory Memorandum, Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 2016, op. cit., p. 1.

[10].              The Statement of Compatibility with Human Rights can be found at page 2 of the Explanatory Memorandum to the Bill. Explanatory Memorandum, Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 2016, p. 2.

[11].              Parliamentary Joint Committee on Human Rights, Report 8 of 2016, 9 November 2016, pp. 55–56.

[12].              Safety, Rehabilitation and Compensation Act 1988 (the SRCA). A Bill before the Parliament will create a new Safety, Rehabilitation and Compensation (Defence-related Claims) Act 1988 that will be a modified version of the SRCA that applies only to members of the Defence Force and their dependants. See Parliament of Australia, ‘Safety, Rehabilitation and Compensation Legislation Amendment (Defence Force) Bill 2016 homepage’, Australian Parliament website.

[13].              Review of Veterans’ Entitlements, Report of the review of veterans’ entitlements, (Clarke Review), Commonwealth of Australia, Canberra, January 2003, p. 103. Department of Veterans’ Affairs (DVA), Overview of disability pensions and allowances, fact sheet, DP01, DVA website, last updated 12 October 2016.

[14].              DVA, ‘Military Rehabilitation and Compensation Act (MRCA)’, DVA website.

[15].              Those unable to work any hours have the 75 per cent of normal earnings rate used in the incapacity payment calculation. The percentage rate increases depending on the percentage of normal weekly hours (usually 37.5 hours) the person is able to work. DVA, ‘6.1 Overview’, Military Rehabilitation and Compensation Act 2004 policy manual, DVA website, last amended 1 July 2013.

[16].              Ibid. Note that these age cut-offs will be changed by the amendments proposed in Schedule 3 of the Bill.

[17].              DVA, ‘6.6 Commonwealth superannuation’, Military Rehabilitation and Compensation Act 2004 policy manual, DVA website.

[18].              DVA, ‘6.3.12 interim payments at the national minimum wage’, Military Rehabilitation and Compensation Act 2004 policy manual, DVA website, last amended 26 August 2015.

[19].              Ibid.

[20].              D Tehan, ‘Second reading speech: Veterans’ Affairs Legislation Amendment (Budget and Other Measures) Bill 2016’, House of Representatives, Debates, 13 October 2016, p. 1860.

[21].              N Brangwin, ‘Mental health of military personnel and veterans’, Briefing book: key issues for the 44th Parliament, Parliamentary Library, Canberra, 2013, pp. 154–55.

[22].              Veteran is defined here as anyone with service in the Australian Defence Force. DVA, Annual report 2015–16, DVA, Canberra, 2016, p. 54.

[23].              Ibid.

[24].              DVA, Top 20 accepted conditions – September 2016, DVA, Canberra, September 2016, p. 1.

[25].              Ibid., p. 2.

[26].              Review of Military Compensation Arrangements, Review of military compensation arrangements , ‘Volume two: detailed analysis’, Department of Veterans’ Affairs, Canberra, February 2011, p. 342.

[27].              Ibid., pp. 342–343.

[28].              I Ireland, Veterans Affairs (1995–96 Budget Measures) Legislation Amendment Bill 1995, Bills digest, 21, 1995–96, Parliamentary Library, Canberra, 1995, p. 7.

[29].              C Field and P Yeend, Veterans’ Affairs Legislation Amendment Bill (No. 1) 1999, Bills digest, 47, 1999–00, Department of the Parliamentary Library, Canberra, 1999; C Field, Veterans’ Affairs Legislation Amendment (Budget Measures) Bill 2000, Bills digest, 25, 2000–01, Department of the Parliamentary Library, Canberra, 2000.

[30].              Veterans’ Entitlements Treatment (Anxiety and Depressive Disorders) Determination R23/2004.

[31].              C Horan, Military Compensation Bill 1993, Bills digest, 40, 1993–94, Department of Parliamentary Library, Canberra, 1994.

[32].              L Buckmaster, Veterans’ Affairs Legislation Amendment (Mental Health and Other Measures) Bill 2014, Bills digest, 76, 2013–14, Parliamentary Library, Canberra, 2014.

[33].              Ibid., p. 6.

[34].              Review of Military Compensation Arrangements, Review of military compensation arrangements, op. cit., pp. 341–2.

[35].              Ibid., p. 348.

[36].              Australian Government, Government response to review of military compensation arrangements, DVA, Canberra, 8 May 2012.

[37].              Buckmaster, Veterans’ Affairs Legislation Amendment (Mental Health and Other Measures) Bill 2014, Bills digest, op. cit., p. 7.

[38].              DVA, Annual report 2015–16, op. cit., p. 54.

[39].              Senate Foreign Affairs, Defence and Trade References Committee, Processes to support victims of abuse in Defence, The Senate, Canberra, 31 October 2014. See earlier report: Senate Foreign Affairs, Defence and Trade References Committee, Report of the DLA Piper Review and government’s response, The Senate, Canberra, 27 June 2013.

[40].              Ibid., p. xi.

[41].              Ibid., p. 88.

[42].              Australian Government, Australian Government response to the Foreign Affairs, Defence and Trade References Committee report: Processes to support victims of abuse in Defence, Australian Government, Canberra, May 2015, p. 4.

[43].              Australian Government, Budget measures: budget paper no. 2: 2016–17, p. 155.

[44].              Veterans' Entitlements (Extension of Non-Liability Health Care for Mental Health Treatment) Determination 2016.

[45].              VEA, sections 80–81.

[46].              VEA, section 5C(1).

[47].              DVA, Non-liability health care, fact sheet, HSV109, DVA website, 4 October 2016.

[48].              Ibid.

[49].              Ibid.

[50].              Ibid.

[51].              DVA, ‘6.1 Overview’, op. cit.

[52].              Explanatory Memorandum, Veterans' Affairs Legislation Amendment (Budget and Other Measures) Bill 2016, op. cit., p. 21.

[53].              D Daniels, L Buckmaster and P Yeend, Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009, Bills digest, 179, 2008–09, Parliamentary Library, Canberra, 2009.

[54].              J. Macklin, ‘Second reading speech: Social Security and Other Legislation Amendment (Pension Reform and Other 2009 Budget Measures) Bill 2009’, House of Representatives, Debates, 15 June 2009, p. 5854.

[55].              In 1909 the qualifying age for the age pension was 65 for both men and women but was reduced to age 60 for women in 1910. Starting in 1995 and finishing in 2013, the qualifying age for women was incrementally raised from age 60 to 65. Department of Social Services, ‘3.4.1.10 qualification for age’, Guide to social security law, version 1.227, DSS website, last reviewed 1 July 2014.