ADF Superannuation

THE SUPERANNUATION CHANGES FROM 1 JULY 2017 - The Fair and Sustainable Superannuation Act 2016

DFWA is seeking urgent advice to clarify some issues with the  Fair and Sustainable Superannuation Act 2016  and how the provisions are being applied to a typical unfunded untaxed DRFDB (Defined Benefits [DB]) superannuation. This superannuation income stream is fully taxed in the recipient’s hand, albeit with a 10% discount if the recipient is over 60 years of age. Yet the Commonwealth Superannuation Corporation (CSC) is including the gross amount in the calculations toward the $1.6m Transfer Balance Cap (TBC).  To any reasonable person, this seems blatantly unfair when compared to a person with a funded DB scheme; their gross and net are the same.

The intent of the Act is to impose a $1.6 million Cap on the amount of capital that can be transferred to the tax-free earnings retirement phase of superannuation – details of the Act are here.

The impact of CSC’s decision is that:

  • If a person’s CSC calculated contribution to the TBC, and their accumulation funds in the retirement phase reaches $1.6M or more, with the CSC’s calculation the members TBC will remain as $1.6M. But the amount of capital available to generate tax free earnings in the retirement phase of superannuation will be reduced by the tax paid times 16, thereby leaving less than $1.6M of assets to generate tax free earnings. This certainly cannot be the intent of the Act.  For a retired long serving mid ranked officer paying $10k tax a year on his DFRDB pension this will reduce his capital by $160K and his tax free income in retirement by $8K ($160K x 5%, the accumulation fund in the pension phase draw down rate if over 65).
  • Potentially, with this inflated figure, if the recipient exceeds the $1.6M TBC, they will have to withdraw funds from the accumulation superannuation account in the retirement phase, as the funds attached to the DFRDB unfunded untaxed DB scheme are notional and cannot be accessed, thereby reducing the tax free retirement income by thousands of dollars.  This is not an insignificant reduction, rather a major hit to a veterans’ bottom line.
  • One of our DFWA Members has been corresponding with the CSC asking why the gross DFRDB pension was being used. CSC's response was "that was their understanding" of the requirements of the ATO and Department of Finance.  When CSC was asked for specific authorities and rules of the Act that lead to this “understanding”, CSC have been less than forthcoming.  CSC have also advised in an e-mail as late as 3 March 2017 that they are still liaising with regards to the changes and will provide updates as further information is confirmed. 

We request that Government determine the following and advise:

  • Why is a gross pension being used to calculate the amount that is to be in included in the Transfer Balance Cap, for an unfunded DFRDB figure?
  • Where is the authority for this action other than CSC’s “understanding”?
  • Why is an unfunded, therefore fully taxed, retirement stream from DFRDB even included in the TBC calculations, where Section 302-2 (1) (b) of the Act seems to indicate, "the sum of all of those benefits (other than elements untaxed in the fund benefits) exceeds... "
  • Why are funded and unfunded DB schemes treated the same under the Act?  The issue relates to the fact that in funded schemes the pension is received tax free, and for unfunded schemes the pension is fully taxed at marginal rates with the 10% discount for those over the age of 60.   Any calculations using gross figures will significantly disadvantage Members of unfunded schemes.
  • We also seek advice on behalf of the War Widows League and the Partners of Veterans Association as to how Reversionary Pensions, being received by a spouse/partner of a deceased Member who was part of a DFRDB scheme, will be treated.
  • Do the rules of the Act apply to all superannuants, as we have heard that pre 2004 Politicians and Judges’ schemes will not be affected by the Act?

The Act is to be implemented on 1 July 2017 and there are still many questions in regard to its application, therefore a prompt response has been requested to enable DFRDB superannuants to take action to adjust their superannuation if required.


The new ADF Superannuation arrangements commenced on 1 July 2016.  DFWA was instrumental in lobbying for a change to the Governments original proposal for a two tiered Government contribution arrangement, to an increased contribution rate of 16.4% of salary plus all but “expense related” allowances for all ADF members regardless of their operational status. DFWA also worked to ensure ADF Cover was at least equivalent to the provisions in the MSBS scheme.


.. do you have any concerns or interest about Comsuper and the whole messy way military superannuation - your superannuation - is managed ?  You are invited to join a Facebook Group to learn more about a matter that affects us all.  Check out and join COMSUPER - MILITARY ENTITLEMENTS

Links to past related documents are shown below:

286 Update - January February 2014
ADF Super Position Paper 19Feb15
DFWA Position Paper on the proposed Military Superannuation Scheme, ADF Super
It's Time to Stump up for our Service Men and Women, and Veterans
Vol 46 No 2
Camaraderie Vol 46 No 2 July 2015