Bills Digest no. 169 2008–09
Veterans' Affairs Legislation Amendment (Budget
Measures) Bill 2009
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
Contact officer & copyright details
Abbreviation Definition
ADF Australian Defence Force
CCB Child Care Benefit
DHOS Defence Home Owner Scheme
DHOAS Defence Home Ownership Assistance Scheme
DSHA Defence Service Homes Act 1918
DFHIS Defence Service Home Insurance Scheme
FTB-A Family Tax Benefit Part A
FTB-B Family Tax Benefit Part B
ITAA Income Tax Assessment Act 1997
MRCA Military Rehabilitation and Compensation Act
2004
SSA Social Security Act 1991
VEA Veterans Entitlements Act 1986
Passage history
Date
introduced: 28 May
2009
House: House of Representatives
Portfolio: Veterans' Affairs
Commencement:
On the day after Royal
Assent.
Links: The
relevant links to the Bill, Explanatory Memorandum and second
reading speech can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
To provide for amendments to the
Veterans Entitlements Act 1986 (VEA) and other Acts
necessary to implement several 2009-10 Budget initiatives. These
are:
- to allow the payment of an entitlement under the VEA to a
person resident overseas into a bank account in an overseas
bank,
- to extend access to the Defence Service Home Insurance Scheme
(DSHIS) to persons eligible under the Defence Home Ownership
Assistance Scheme (DHOAS), and
- to wind up and pay out the dependants pension paid to
dependants of a veteran.
The government announced the initiative to provide payments to
an overseas financial institution where the recipient of a payment
under the VEA is residing overseas.[1] Currently, payments provided to a VEA recipient
residing overseas have to be made into a bank account in an
Australian financial institution. Then the individual has to
arrange their own transfer of the funds to themselves overseas.
The estimated cost of this initiative is $0.2 million in
2009-10, $0.1 million in 2010-11, $0.1 million in 2001-12 and $0.1
million in 2012-13.[2]
Some payments provided under the VEA are payable even where the
person resides overseas. These payments commonly include the Age
Service Pension, Disability Pension, and War Widow s/er s Pension.
This is the same as other payments provided under the Social
Security Act 1991 (SSA), that are payable to a person residing
overseas like the Age Pension and the Disability Support
Pension.
This initiative to provide VEA payments to recipients residing
overseas into their overseas bank account is long overdue.
Centrelink has been providing payments to recipients residing
overseas into their overseas financial institution accounts since
2001.
The government announced the initiative to provide access to the
DSHIS to members of the DHOAS in the 2009-10 Budget.[3]
The estimated cost of this initiative is $0.2 million in
2009-10, $0.1 million in 2010-11, $0.3 million in 2001-12 and $0.3
million in 2012-13.[4] The Budget announcement projected that this initiative
would realise a net saving of $1.0 million over four years and will
eventually be cost neutral. This would be realised by the balance
between payouts on claims against monies received from
premiums.[5]
The DHOAS provides eligible Australian Defence Force (ADF)
members with access to a subsidy on the interest incurred on their
home loan. The aim of the scheme is to improve retention rates in
the ADF by making home ownership easier for ADF members in today's
competitive housing market. Members are given an incentive to
remain in the ADF through access to progressively higher levels of
subsidy assistance the longer they serve.
The amount of the monthly subsidy depends on two key
factors:
- length of service, which determines the eligible subsidy tier,
and
- the amount borrowed up to the subsidised loan limit.
ADF members can be eligible under one of three subsidy tiers. As
the member reaches certain service milestones they can move into a
higher subsidy tier. For permanent ADF members, the minimum years
of service for the three subsidy tiers are 4, 8 and 12 years of
service. For reservists it is 8, 12 and 16 years of service. As
shown in the table below, the higher the eligible tier, the greater
the benefit under DHOAS.[6]
|
Subsidy Tier
Level
|
Minimum
Permanent
Service
|
Minimum
Reserve
Service
|
Subsidised Loan
Limit
|
Maximum
Monthly
Subsidy
|
|
1
|
4 years
|
8 years
|
$187,159
|
Up to $200
|
|
2
|
8 years
|
12 years
|
$280,738
|
Up to $301
|
|
3
|
12 years
|
16 years
|
$374,318
|
Up to $401
|
The Defence Home Owner Scheme (DHOS) was introduced in 1991 to
assist eligible members, and ex-members, of the ADF to purchase
their own home by providing a subsidy on the interest of a home
loan borrowed from the approved lender, the National Australia
Bank. The scheme is administered in accordance with the Defence
Force (Home Loans Assistance) Act 1990. After a review of the
DHOS, the Howard government announced changes to the provision of
home loan assistance in the 2007-08 Budget.[7] This Budget initiative eventually saw
the Defence Home Ownership Assistance Scheme Act
2008.[8]
Part 2 of this Bill is basically extending
access to the DSHIS to persons eligible for assistance under the
new DHOAS.
The Government announced the initiative to close up the
dependants pension from the end of September 2009.[9] The proposal is to cease the
payment as at 22 September 2009 and to provide a lump-sum advance
payment of three years payment, as a pay-out amount.
The estimated cost of this initiative is $5.3 million in 2009-10
followed by savings of $2.2 million in 2010-11, $2.0 million in
2001-12 and $1.9 million in 2012-13.[10]
Dependants (children and spouses) of veterans were eligible
under the Repatriation Act for a dependants pension. The rate of
payment depended on the rate of pension paid to the veteran or
member, that is, 10 per cent of the amount of pension paid to the
veteran/member. The current maximum rate of dependants pension paid
is $8.42 a fortnight, but some dependants are paid as little as 29
cents a fortnight. These payments have remained unchanged for many
years. There have been no new grants of dependants pension since
1985 and except for a small increase in the rate as a part of the
compensation arrangements provided for the introduction of Goods
and Services Tax (GST) in 2000, the rates have been frozen since
1964.[11]
It is interesting to note that since 1985 there have been no new
grants of dependants pension. The main reason for this is the need
to provide these payments over the past 20 years has been taken
over by other assistance payments to the parents/carers of a child.
These payments were originally the Chile Endowment and then became
the Family Allowance and now the Family Tax Benefit Part A (FTB-A)
and the Family Tax Benefit Part B (FTB-B) payments.
Under the proposal, current recipients of the dependants pension
will receive a lump-sum equivalent to three years payments.
Approximately 26 000 people will receive a one-off lump-sum payment
of up to $656.76. Lump-sums will be paid at the end of September
2009 at which time the pension will cease.
The fact that there are still dependants pensions being paid to
the dependants of persons entitled to a payment under the VEA is
somewhat anachronistic. Dependants assistance is now and has been
for many years been provided with the main family assistance
payments like FTB-A, FTB-B and also the Child Care Benefit. The
only other payments provided to a person, as they are the dependant
of a veteran or a person qualified to a payment under the VEA, is
the Partner Service Pension and the Orphan s Pension. However, even
the Partner Service Pension has recently had access to
qualification narrowed; recognising that generally an adult of
working age should qualify for an income support payment in their
own right.[12]
Item 1 changes the reference to an account with
a bank in existing subsection 430(1) of the Military
Rehabilitation and Compensation Act 2004 (MRCA) to an account
with a bank account or, where a person is physically outside
Australia, a foreign corporation that takes money on deposit.
Item 4 changes the reference to an account with
a bank in subsection 58F(1) of the VEA to an account with a bank
or, where a person is physically outside Australia, a foreign
corporation that takes money on deposit. Item 7
does likewise to existing subsection 122A(1).
Item 11 inserts a proposed
section 38CAA into the Defence Service Homes
Act 1918 (DSHA) which empowers the Commonwealth to undertake
insurance in respect of:
- a house,
- the building materials on the site of a house, or
- the permanent structural improvements of a house.
for which a person is eligible under the DHOAS.
Item 12 inserts a proposed section
38EAA which provides for the cancellation of insurance
undertaken under the proposed section 38CAA when
the person ceases to be eligible to the DHOAS.
Item 14 inserts a proposed subsection
52 65(1E) into the Income Tax Assessment Act 1997
(ITAA) to ensure that any lump-sum payment under section 198N of
the VEA is not taxable income.
Item 15 inserts a proposed section
198N into the VEA. Proposed section 198N
details the dependants pension payable under subsection 4(6) or
(8B)[13] of the
Veterans Entitlements (Transitional Provisions and
Consequential Amendments) Act 1986 will not be payable after
22 September 2009. Proposed section
198N provides that those persons currently in receipt of
dependants pension will be entitled to a lump-sum payment equal to
three years entitlement at the rate the pension was last paid to
them.
Concluding comments
The move to allow payments under the VEA into an account in an
overseas financial institution is long overdue.
The extension of access to the DSHIS to persons eligible for
assistance under the new DHOAS is essentially an update to ensure
this incentive aimed at retaining members in the ADF is
continued.
The dependants pension has seen no new grants since 1985 and the
rates frozen since 1964, indicating how outmoded this payment is.
The payout of three years lump-sum advance is quite generous, given
the payments could, and probably should, have just been stopped as
of a date in the future.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2413.
[7]. Australian
Government, Australian Government, Budget measures:
budget paper no. 2: 2007-08, Commonwealth of Australia, p.
105, viewed on 9 June 2009, http://www.budget.gov.au/2007-08/bp2/html/index.htm
[8]. P Pyburne, Defence Home Ownership
Assistance Scheme Bill 2008, Bills digest no. 141, 2007-08,
Parliamentary Library, Canberra, 18 June 2008, viewed 9 June 2009,
http://www.aph.gov.au/library/pubs/bd/2007-08/08bd141.htm
[12]. D Daniels, P Yeend, Families,
Housing, Community Services and Indigenous Affairs and Other
Legislation Amendment (Further 2008 Budget and Other Measures) Bill
2008, Bills digest no. 52, 2008-09, Parliamentary Library,
Canberra, 31 October 2008, http://www.aph.gov.au/library/pubs/bd/2008-09/09bd052.htm
Peter Yeend
12 June 2009
Bills Digest Service
Parliamentary Library
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