On 12 April 2022, the Commonwealth Superannuation Corporation (CSC) announced that it would follow the law and implement the tax changes following the 2020 Federal Court Douglas decision.
The changes will be implemented for the 19 May 2022 pay-day.
The Douglas decision impacted the tax treatment of DFRDB and Military Super invalidity benefit pensions that commenced on or after 20 September 2007. The pensions became a series of superannuation lump sum payments.
The major benefit to this change is the Disability Superannuation Benefit (DSB). This is where a veteran has been certified by two doctors as unlikely to ever be gainfully employed in their trade or profession. Where this is the case, part of their pension becomes tax free. The tax-free proportion depends on how long they served and how old they were at the time of discharge.
In some cases, veterans who do not qualify for the DSB may have a higher amount of tax withheld each fortnight but receive a refund after submitting their tax return. There are several options available to veterans who fall into this category. CSC advises those affected to consider:
- claiming the Medicare levy exemption,
- claiming the tax-free threshold,
- claiming the disability super tax benefit, and/or
- seeking a private determination from the ATO to decrease withholding
Following CSC’s implementation on 19 May 2022 there will be some veterans who will be worse off in the short term. It will take some time for those veterans to work though the options available to them. With current cost of living pressures mounting, it is disappointing that CSC didn’t implement the change 18 months ago, and proactively manage those disabled veterans who will be negatively affected.
Regardless of the spin, it was CSC senior executives who made the decision to not to apply the law regarding the Douglas case. Their obligation to follow the law has not changed, and it is unlikely CSC or anyone at CSC will ever be held to account for delaying implementation. Meanwhile, many veterans who have claimed DSB have had thousands of dollars of tax withheld over the last year that should have been in their pockets.