DSS - Legislative instruments maintain asset test exempt integrity

The Social Security (Waiver of Debts – Legacy Product Conversions) Specification 2025  and the Social Security (Asset-test Exempt Income Stream Guidelines) Determination 2025 are companion legislative instruments that work together to manage the social security consequences of the Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024.

Here’s how they interrelate:

1. Shared Context – The Treasury Amendment Regulations 2024

Both instruments respond to the same policy reform:The Treasury Laws Amendment (Legacy Retirement Product Commutations and Reserves) Regulations 2024, which from 7 December 2024 to 6 December 2029, temporarily allow commutations of previously non-commutable legacy lifetime, life expectancy, and market-linked income streams.

That change created two unintended social security outcomes under the Social Security Act 1991:

• (a) Commuting a pension breached its “non-commutable” status, creating a debt under section 1223A; and
• (b) Merely allowing commutation under the fund rules caused the income stream to lose its asset-test exemption, creating a debt under section 1223 for recipients who did not commute

2. Distinct but Complementary Legal Purposes

• The Waiver Specification cleans up past or existing debts that arose unfairly.
• The Guidelines Determination fixes the forward-looking classification problem, ensuring the products remain exempt going forward

3. Operational Relationship Between the Two Instruments

(a) The Determination

• Provides new guidelines (s21) for determining that a legacy product—which lost exemption only because of the Treasury Regulations—continues to be asset-test exempt.
• Gives the Secretary authority to make individual determinations restoring exemption status under ss9A(5), 9B(4), or 9BA(11)

(b) The Specification 

• Covers the interim period before such reclassification is applied.
• Permits the Secretary to waive debts that arose either:
  1. From commuting an income stream (s1223A debts), or
  2. From losing exemption due to rule changes allowing commutation (s1223 debts)
• It ensures that recipients aren’t penalised for events beyond their control while the Determination framework is being implemented.

1. Debts are waived (Specification).
2. Ongoing exemptions are reinstated (Determination).

4. Policy and Administrative Alignment

• Both instruments are beneficial in nature and share the same policy intent—to protect retirees from adverse consequences of regulatory reform.
• Both rely on cross-references to the same Treasury regulations (RSA reg 1.08AA, SIS regs 1.05AA and 1.06C).
• The Department of Social Services (DSS) developed both instruments, with cross-agency consultation involving Treasury, Services Australia, and the Department of Veterans’ Affairs.

5. Timeline Summary

✅ In summary

• The Waiver Specification 2025 provides retrospective debt relief for those affected by the Treasury amendments.
• The Asset-test Exempt Income Stream Guidelines Determination 2025 provides prospective certainty, ensuring eligible legacy products retain or regain their exempt status under the Social Security Act.
• Both are part of a coordinated DSS response to maintain policy consistency and fairness for holders of legacy superannuation income streams.