Commonwealth Numbered Acts

SOCIAL SECURITY AND VETERANS' AFFAIRS LEGISLATION AMENDMENT ACT 1988 No. 135, 1988 - SECT 24

24. After section 37A of the Principal Act the following Division is inserted:
                        "Division 1A-Investment Income
Interpretation

"37B. In this Division, unless the contrary intention appears:
'accruing return investment' means an arrangement by a person that consists of
or includes an investment of money, being an investment:

   (a)  that produces:

        (i)    a fixed rate or quantifiable rate of return, whether or not
               that rate varies from time to time; or

        (ii)   a rate of return that may be reasonably approximated; and

   (b)  the value of which from time to time is unlikely to decrease as a
        result of market changes;
'approved deposit fund' means a fund that is an approved deposit fund for the
purposes of Subdivision AA of Division 2 of Part III of the Assessment Act;
'Assessment Act' means the Income Tax Assessment Act 1936;
'deferred annuity' means an annuity that is a deferred annuity for the
purposes of Subdivision AA of Division 2 of Part III of the Assessment Act;
'determination of entitlement', in relation to a person, means a
determination:

   (a)  whether the person is qualified to receive a pension or allowance
        under this Part; or

   (b)  of the rate at which a pension or allowance under this Part is payable
        to the person;
'eligible investment' means an investment that satisfies all of the following
conditions:

   (a)  money or property invested is paid or transferred by the investor
        directly or indirectly to a body corporate or into a trust fund;

   (b)  the assets that represent money or property invested (in this
        definition called the 'investment assets') are held otherwise than in
        the names of investors;

   (c)  the investor does not, either alone or jointly with a relative or
        relatives of the investor, have effective control over the management
        of the investment assets;

   (d)  the investor has a legally enforceable right to share in any
        distribution of the income or profits derived from the investment
        assets;
'friendly society' means:

   (a)  a society registered as a friendly society under a law in force in a
        State or Territory; or

   (b)  a society that had, before 13 December 1987, been approved for the
        purpose of the definition of 'friendly society' in subsection 115 (1)
        of the Social Security Act 1947;
and, for the purpose of the definition of 'market-linked investment' in this
subsection, includes a society that has been approved for the purpose of the
definition of 'friendly society' in subsection 115 (1) of the Social Security
Act 1947 on or after 13 December 1987;
'investment product' means a class of market-linked investments specified in a
notice under subsection 12B (2) of the Social Security Act 1947;
'market-linked investment' means:

   (a)  an investment in:

        (i)    an approved deposit fund;

        (ii)   a deferred annuity;

        (iii)  a public unit trust; or

        (iv)   an insurance bond;

   (b)  an investment with a friendly society; or

   (c)  an eligible investment other than an investment referred to in
        paragraph (a) or (b);
not being:

   (d)  an accruing return investment; or

   (e)  an investment consisting of the acquisition of real property, stock or
        shares;
'public unit trust' means a unit trust that:

   (a)  except where paragraph (b) applies-was, in relation to the unit
        trust's last year of income, a public unit trust for the purposes of
        Division 6B of Part III of the Assessment Act; or

   (b)  where the first year of income of the unit trust has not yet
        finished-has, at some time since the trust was established, satisfied
        at least one of the paragraphs of subsection 102G (1) of the
        Assessment Act;
'return', in relation to an investment, means any increase, whether of a
capital or income nature and whether or not distributed, in the value or
amount of the investment;
'statutory rate of return' means 11% per annum or such lower percentage per
annum as is specified in a notice in force under subsection 12E (1) of the
Social Security Act 1947. Accruing return investments

"37C. (1) Where a person has made, or makes, whether before, on or after 13
December 1987, an accruing return investment, being an investment to which
subsections (2) and (3) do not apply, the person shall, for the purposes of
this Act, be taken to receive the current annual rate of return on that
investment as income of the person from the day on which that investment was
made.

"(2) Where a person makes, on or after 1 January 1988, an accruing return
investment:

   (a)  with a friendly society; or

   (b)  of a kind where a return is not available until the end of a period of
        at least 12 months after that investment was made or until realisation
        of that investment; the person shall, for the purposes of this Act, be
        taken to receive the current annual rate of return on that investment
        as income of the person from the day on which that investment was
        made.

"(3) Where a person has made, at any time before 1 January 1988, an accruing
return investment:

   (a)  with a friendly society; or

   (b)  of a kind where a return is not available until the end of a period of
        at least 12 months after that investment was made or until realisation
        of that investment; and the person becomes entitled to receive an
        amount by way of a return on that investment, the person shall, for
        the purposes of this Act, be taken to receive one fifty-second of that
        amount as income of the person during each week in the period of 12
        months commencing on the day on which the person becomes entitled to
        receive that amount.

"(4) For the purposes of this section, the current annual rate of return on an
investment of the kind referred to in subparagraph (a) (ii) of the definition
of 'accruing return investment' in section 37B is a reasonable approximation
of that rate of return.

"(5) A reference in subsection (3) to a person becoming entitled to receive an
amount includes a reference to the person becoming entitled to receive an
amount under an arrangement of the kind referred to in the definition of
'accruing return investment' in section 37B to the extent that subsection (1)
or (2) does not apply to that entitlement. Market-linked investments

"37D. (1) Where, on or after 9 September 1988, a person makes a market-linked
investment, the person shall, for the purposes of this Act, be taken to
receive the product rate of return on that investment as income of the person
from:

   (a)  the day on which that investment was made; or

   (b)  the commencement of this section; whichever is later.

"(2) For the purposes of this Division, the product rate of return on a
market-linked investment is:

   (a)  except where paragraph (b) applies-the statutory rate of return for
        that investment; or

   (b)  if a determination by the Secretary to the Department of Social
        Security under subsection 12F (1) of the Social Security Act 1947 is
        in force in relation to that investment-the percentage per annum
        specified in that determination. Special provisions about certain
        investments made before 9 September 1988

"37E. (1) Where:

   (a)  before 9 September 1988, a person has made a market-linked investment;
        and

   (b)  under an agreement made before 9 September 1988, dividends payable to
        the person in respect of that investment are not paid to the person
        directly but are invested in the person's name in market-linked
        investments included in the same investment product; any market-linked
        investment arising from the investment of a dividend pursuant to that
        agreement on or after 9 September 1988 shall, for the purposes of this
        Division, be taken to have been made before 9 September 1988.

"(2) Subsections (3) and (4) apply where, at any time after 9 September 1988:

   (a)  a person held, or holds, 2 or more market-linked investments included
        in the same investment product;

   (b)  at least one of the investments was made before 9 September 1988 and
        at least one of the investments was made on or after that day; and

   (c)  the person disposed, or disposes, of any of those investments.

"(3) If the amount received in respect of the disposal is or was greater than
or equal to:

   (a)  the value or amount, at the time of the disposal, of the investment
        made before 9 September 1988; or

   (b)  the sum of the values or amounts, at the time of the disposal, of the
        investments made before 9 September 1988; as the case requires, the
        person shall, for the purposes of this Division, be taken to have
        disposed of the whole of that investment or those investments.

"(4) If the amount received in respect of the disposal (in this subsection
called the 'disposal amount') is or was less than:

   (a)  the value or amount, at the time of the disposal, of the investment
        made before 9 September 1988; or

   (b)  the sum of the values or amounts, at the time of the disposal, of the
        investments made before 9 September 1988; as the case requires, the
        person shall, for the purposes of this Division, be taken to have
        disposed of so much of that investment or those investments as is
        equal to the disposal amount. Conversion of certain investments

"37F. (1) Where an investment that was not an accruing return investment (in
this subsection called the 'original investment') is converted into an
accruing return investment, whether or not it was able to be so converted
because of a provision of the agreement relating to the making of the original
investment, then, for the purposes of this Division:

   (a)  the accruing return investment shall be taken to have been made on the
        day the original investment was so converted; and

   (b)  the original investment shall be taken to have been realised on that
        day.

"(2) Where an investment that was not a market-linked investment (in this
subsection called the 'original investment') is converted into a market-linked
investment, whether or not it was able to be so converted because of a
provision of the agreement relating to the making of the original investment,
then, for the purposes of this Division:

   (a)  the market-linked investment shall be taken to have been made on the
        day the original investment was so converted; and

   (b)  the original investment shall be taken to have been realised on that
        day. Determinations of entitlement of persons holding market-linked
        investments

"37G. (1) When a determination of entitlement is made in relation to a person
who has a market-linked investment that was made on or after 9 September 1988,
the Commission shall:

   (a)  make that determination having regard to the current product rate of
        return for that market-linked investment; and

   (b)  re-assess the rate at which pension or allowance under this Act should
        have been payable to the person in respect of any period since the
        immediately preceding determination of the person's entitlement during
        which the product rate of return for that market-linked investment was
        less than the product rate of return that was used for the purposes of
        that immediately preceding determination of entitlement.

"(2) Where, under paragraph (1) (b), the Commission re-assesses the rate at
which pension or allowance under this Act should have been payable to a person
in respect of a period, there is payable to the person the amount worked out
using the formula:
A1 - A2 where:
A1 is the amount of pension or allowance that should have been payable to the
person in respect of the period;
A2 is the amount of that pension or allowance that was paid to the person in
respect of the period. Treatment of costs of investments

"37H. (1) Where, under another provision of this Division, a person is to be
taken to receive a rate of return on an investment as income, the amount that
the person is taken to receive shall, during each week in the period of 12
months after the day from which the person is to be taken to receive a rate of
return on the investment as income, be reduced by one fifty-second of the
total amount of the investment costs.

"(2) Subsection (1) does not apply in respect of investment costs incurred in
respect of investments made before 9 September 1988.

"(3) In this section:
'investment costs', in relation to an investment made by a person, means such
reasonable costs as would be required to be paid by any person making an
identical investment as a condition of being permitted to make that
investment. Certain capital amounts taken to be received over 12 months

"37J. (1) Where a person becomes entitled, whether before or after the
commencement of this section, to receive an amount of income, being an amount
of a capital nature but not being:

   (a)  income from remunerative work undertaken by the person;

   (b)  a return from an accruing return investment; or

   (c)  a return from a market-linked investment made on or after 9 September
        1988; the person shall, for the purposes of this Part, be taken to
        receive one fifty-second of that amount as income of the person during
        each week in the period of 12 months commencing on the day on which
        the person becomes entitled to receive that amount.

"(2) A reference in subsection (1) to a person becoming entitled to receive an
amount includes a reference to the person becoming entitled to receive an
amount under an arrangement of the kind referred to in the definition of
'accruing return investment' in section 37B to the extent that subsection 37C
(1) or (2) does not apply to that entitlement.". Commencement: 1 December 1988