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2004-2005-2006-2007
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
VETERANS' ENTITLEMENTS AMENDMENT
(DISABILITY, WAR WIDOW AND WAR WIDOWER
PENSIONS) BILL 2007
EXPLANATORY MEMORANDUM
(Circulated by authority of the Minister for Veterans' Affairs,
The Honourable Bruce Billson MP)
Veterans' Entitlements Amendment (Disability, War Widow and War Widower Pensions) Bill
2007
Table of Contents
Outline and Financial Impact ............................................................. ii
Part 1 - Preliminary
1 Short Title .......................................................................................... iii
2 Commencement ................................................................................. iii
3 Schedule(s) ........................................................................................ iii
Schedule 1 - Veterans' Entitlements Act 1986 ......................................... 1
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Veterans' Entitlements Amendment (Disability, War Widow and War Widower Pensions) Bill
2007
OUTLINE AND FINANCIAL IMPACT
Outline
This Bill will increase the rates of extreme disablement adjustment disability pension, general
rate disability pension and the previously non-indexed component of war widow and widower
pension. The Bill will also introduce new indexation arrangements for general rate disability
pension and the previously non-indexed component of war widow and widower pension whereby
these rates will be indexed twice annually with regard to both the Consumer Price Index and
Male Total Average Weekly Earnings.
Financial Impact
Estimated
Year Total Financial Impact
2007-08 $24.5m
2008-09 $91.0m
2009-10 $104.7m
2010-11 $119.3m
2011-12 $133.0m
These figures are indicative costs and final costs are yet to
be agreed.
ii
Veterans' Entitlements Amendment (Disability, War Widow and War Widower Pensions) Bill
2007
Veterans' Entitlements Amendment (Disability, War Widow and
War Widower Pensions) Bill 2007
Notes on Clauses
Clause 1 sets out how the Act is to be cited.
Clause 2 provides that the Act commences on 20 March 2008.
Clause 3 provides that the Act specified in a Schedule to this Act is amended as set out in the
items of that Schedule, and any other items in a Schedule to this Act has effect according to its
terms.
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Veterans' Entitlements Amendment (Disability, War Widow and War Widower
Pensions) Bill 2007
Schedule 1 - Veterans' Entitlements Act 1986
Overview
This Bill will increase the rates of extreme disablement adjustment disability pension,
general rate disability pension and the previously non-indexed component of war
widow and widower pension. The Bill will also introduce new indexation
arrangements for general rate disability pension and the previously non-indexed
component of war widow and widower pension whereby these rates will be indexed
twice annually with regard to both the Consumer Price Index (CPI) and Male Total
Average Weekly Earnings (MTAWE).
Background
Pensions paid under Parts II and IV of the VEA are generally referred to as disability
pensions and war widow and widowers pensions. Disability pensions are paid to
veterans, Australian mariners and certain serving or former serving members for
incapacity from injuries or diseases (disabilities) that are accepted as war or defence-
caused. Disability pensions are non-taxable, and non-means tested and are payable
for life unless there ceases to be any incapacity from the disability or if the pension is
obtained by fraud or misrepresentation.
The general rate is payable in increments of 10 per cent, up to 100 per cent. The level
of general rate payment relates to the level of service-related incapacity, thus the
greater the incapacity, the greater the rate of disability pension.
An extreme disablement adjustment is paid to a veteran aged over 65 years who is
severely disabled and is entitled to a disability pension at the 100 per cent general
rate, but only where the veteran is ineligible for either the special rate or the
intermediate rate.
Parts II and IV of the VEA also provide for the payment of a pension to the widow or
widower of a veteran, Australian mariner or certain serving or former serving
members:
· whose death was war-caused or defence-caused; or
· who had been a prisoner-of-war; or
· who had been in receipt of a special rate of pension or an extreme disablement
adjustment immediately before death.
These widows and widowers are generally referred to as war widows and war
widowers.
The amount of pension payable to a war widow or widower is made up of two
components. The indexed component, specified in paragraphs 30(1)(a) and (c) of the
VEA, is aligned with the maximum basic rate of service or age pension payable to a
single person. The second component, specified in paragraph 30(1)(b), is the former
domestic allowance which is currently not indexed.
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Veterans' Entitlements Amendment (Disability, War Widow and War Widower
Pensions) Bill 2007
Explanation of the Changes
These changes to the VEA will increase the above general rate component of extreme
disablement adjustment by $15 per fortnight, resulting in a total of $510.40 with
effect from 20 March 2008. This rate will then be increased by the 5% increase to the
general rate, also provided for in this Bill. This subsequent rate will then be indexed
in accordance with subsection 198(5E) of the VEA, which provides for the indexation
of above general rate disability pensions. Above general rate disability pensions are
indexed, twice annually with reference to both the CPI and MTAWE.
The changes contained in this Bill will also increase the general rate of disability
pension and introduce a new method of indexation for general rate disability pension.
The 5 per cent increase to general rate disability pension will increase the rate to
$338.94 per fortnight with effect from 20 March 2008. General rate disability will
then be indexed immediately with reference to both CPI and MTAWE with effect
from 20 March 2008. This will be achieved by indexing general rate disability
pension by applying the pension MBR factor, which is the same proportional or
percentage increase as applies to service pension. This figure is obtained by dividing
the newly indexed maximum basic rate of single service pension by the previous
maximum basic rate of single service pension. This methodology is the same as that
used to index above general rate disability pensions in accordance with subsection
198(5E) of the VEA.
Furthermore, the changes in this Bill increase the former domestic allowance
component of war widow and widowers pension, specified in paragraph 30(1)(b) of
the VEA, by $10 per fortnight and introduce indexation of this component of war
widow and widowers pension. The amendments increase the former domestic
allowance component of war widow and widowers pension to $35 per fortnight, with
effect from 20 March 2008. This rate will then be subject to indexation with
reference to both CPI and MTAWE. Again, this will be achieved by indexing the
former domestic allowance component of war widow and widowers pension by the
pension MBR factor, which is the same proportional or percentage increase as applies
to service pension. This figure is obtained by dividing the newly indexed maximum
basic rate of single service pension by the previous maximum basic rate of single
service pension.
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Veterans' Entitlements Amendment (Disability, War Widow and War Widower
Pensions) Bill 2007
Schedule 1 - Veterans' Entitlements Act 1986
Explanation of the Items
Item 1 amends subsection 22(3) by omitting the rate "$216.90" and inserting the rate
"$338.94". This new figure reflects the 5 per cent increase to the general rate of
disability pension, with effect from 20 March 2008. This rate may be further
increased on 20 March 2008 as a result of the indexation that will apply to the general
rate of disability pension in accordance with new subsection 198(5DA). General rate
disability pension will be indexed with reference to both CPI and MTAWE with
effect on and from 20 March 2008.
Item 2 amends subsection 22(4) by omitting the rate "$433.65" and inserting the rate
"$510.40". This new figure reflects the $15 per fortnight increase to extreme
disablement adjustment with effect from 20 March 2008. This rate may be further
increased with effect from 20 March 2008 in accordance with the indexation
arrangements that apply to the above general rate of disability pension provided for in
subsection 198(5E).
Item 3 amends paragraph 30(1)(b) by omitting the rate "$25" and inserting the rate
"$35". This new figure reflects the $10 per fortnight increase to the former domestic
allowance component of war widow and widower pension. The new rate in paragraph
30(1)(b) may be further increased on 20 March 2008 as a result of indexation. The
rate specified in paragraph 30(1)(b) will be indexed with reference to both CPI and
MTAWE with effect on and from 20 March 2008.
Item 4 inserts a definition for adjustment day in subsection 198(1).
Item 5 inserts a definition for pension MBR factor in subsection 198(1).
Item 6 amends the definition of relevant rate in subsection 198(1) by repealing
paragraph (a) of the definition.
Item 7 inserts new subsection 198(5DA) after subsection 198(5D). New subsection
198(5DA) provides that, on each adjustment day, being each 20 March and
20 September, there is substituted for the general rate, the rate worked out using the
formula contained in the subsection. The resultant amount is then to be rounded up to
the nearest $0.10.
The formula contained in the subsection requires that the general rate on the day
before the adjustment day be multiplied by the Pension MBR factor for the
adjustment day. The pension MBR factor is worked out under section 59LA of the
VEA.
It should be noted that new headings are inserted for subsections 198(1), (2), (4),
(5A), (5E) and (6).
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Veterans' Entitlements Amendment (Disability, War Widow and War Widower
Pensions) Bill 2007
Item 8 amends subsection 198(5E) by omitting the words "the first day (the
adjustment day) of each relevant period" and substituting the words "each adjustment
day".
Item 9 amends Step 5 of the method statement in subsection 198(5E) by omitting the
words "specified in section 59LA".
Item 10 inserts new subsection 198(8A) after subsection 198(8). New subsection
198(8A) provides that, on each adjustment day, being each 20 March and 20
September, there is substituted for the rate specified in paragraph 30(1)(b), the rate
worked out using the formula contained in the subsection. The resultant amount is
then to be rounded up to the nearest $0.10.
The formula contained in the subsection requires that the rate specified in paragraph
30(1)(b), on the day before the adjustment day, be multiplied by the Pension MBR
factor for the adjustment day. The pension MBR factor is worked out under section
59LA of the VEA.
It should be noted that a new heading is inserted for subsection 198(10).
Item 11 provides for application and transitional provisions for the amendments.
Transitional provisions are required for the adjustment day of 20 March 2008 to
ensure that the 5 per cent increase to general rate, the $15 increase to extreme
disablement adjustment and the $10 increase to the rate specified in paragraph
30(1)(b) are correctly included in the indexation process.
Application
Subitem 11(1) is an application provision and provides that the amendments of the
Veterans' Entitlements Act 1986 made by this Act, apply on and after the
commencement of this Act. This Act commences on 20 March 2008.
Transitional -adjustment day that is 20 March 2008
Subitem 11(2) provides that, for the adjustment day of 20 March 2008 only, the
reference to "general rate on the day before adjustment day" in new subsection
198(5DA) is taken to be the rate of $338.94 per fortnight. This will ensure that the 5
per cent increase to general rate is included in the adjustment calculation that is to
occur on 20 March 2008.
Subitem 11(3) provides that, for the adjustment day of 20 March 2008 only, the
reference to "general rate" in subsection 198(5E) is taken to be the rate that results
from the adjustment provided for in new subsection 198(5DA) of the VEA. This will
ensure that the "general rate" to apply in subsection 198(5E) for the purposes of the
Method Statement for calculating the new rates of extreme disablement adjustment,
intermediate rate and special rate of disability pension includes the 5 per cent increase
and the 20 March 2008 adjustment.
Subitem 11(3) also provides that, for the adjustment day of 20 March 2008 only, Step
4 of the Method Statement applied for calculating the new rate of extreme
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Veterans' Entitlements Amendment (Disability, War Widow and War Widower
Pensions) Bill 2007
disablement adjustment is to have $15 added to the calculation. This will ensure that
the $15 increase to extreme disablement adjustment is included in the adjustment
calculation that is to occur on 20 March 2008.
Subitem 11(4) provides that, for the adjustment day of 20 March 2008 only, the
reference in new subsection 198(8A) to the "rate paragraph 30(1)(b) on the day before
the adjustment day" is taken to be the rate of $35 per fortnight. This will ensure that
the $10 per fortnight increase is included in the adjustment calculation that is to occur
on 20 March 2008.
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