The Secretary to the Department of the Treasury has forwarded for advice the following memorandum:

With reference to the Solicitor-General's opinion of 25 January 1921⁽¹⁾ on the above subject, I shall be glad if you will kindly advise me further on the following points:

1. In many cases where a war gratuity bond is issued to an invalid or old-age pensioner, the holder will be able to exchange it for cash. Frequently these pensioners will already have some banking account into which the proceeds of the gratuity will be paid. These banking accounts will of course be operated on, and in most instances they will become considerably depleted in time. The question will then arise as to whether, since the gratuity has been merged in the pensioner's other property, it will have lost its distinctive character, or whether it or some portion of it should still be exempted from calculation as property.
2. Other cases will arise in which the proceeds of the gratuity will be devoted to the purchase of property etc. It is desired to know what exemption, if any, will have to be allowed in such cases in respect of the gratuity.

Section 18 of the War Gratuity Acts 1920 provides that the amount of any war gratuity shall not be deemed to be property within the meaning of the Invalid and Old-age Pensions Act 1908-1919. That is to say where war gratuity is paid to a pensioner it shall not be taken into account in calculating the deduction to be made from his pension under section 24 (2) of the Invalid and Old-age Pensions Act. The fact that a pensioner pays the amount of the war gratuity into a banking account does not, in my opinion, affect the application of section 18 of the War Gratuity Acts.

As regards the question as to how the amount of the war gratuity in the account will be affected by the pensioner operating on the account, while the matter is not free from doubt, I am inclined to the opinion that the moneys first paid into the account should be considered to be those first withdrawn. Thus when a pensionerhas £20 in his banking account and pays in a war gratuity of £100 and subsequently withdraws £30, that amount of £30 must be regarded as consisting of the original amount of £20 and £10 of the amount of the war gratuity. Any amounts subsequently drawn will, I think, notwithstanding that other amounts have been paid in, be part of the amount of the war gratuity until the whole of the amount of the war gratuity is withdrawn.

As regards cases in which property has been purchased with the amount of the war gratuity such property in my opinion is not exempt from the provisions of the Invalid and Old-age Pensions Act relating to accumulated property, but forms part of the accumulated property of the pensioner.

[vol.17, p. 241]

1. Not Published [vol.17,p.210]