Veterans who are medically discharged from the Australian Defence Force may receive Invalidity Benefits from their super scheme depending on extent of disability. For over 50 years, the Invalidity Benefit regimes have been designed to provide the same level of benefits to veterans and families for similar service and injury, regardless of the super scheme.
However, Veteran Invalidity Benefits are not all taxed the same way.
All Veteran Invalidity Benefits are reviewable and can be cancelled at any time up to the age of 55. The way the Invalidity Benefits are taxed should reflect that. The Federal Court, in the Douglas Case, confirmed this; however, the Government only applied the Court’s decision to the Invalidity Benefits of older super schemes where payment started on/after 20 September 2007.
Other veteran Invalidity Benefits continue to be taxed as though they are permanent benefits.
For example, the tax paid on the same Invalidity Benefits of $47,781 are:
- Older super scheme payments starting on/after 20 September 2007: $0 tax
- Older super scheme payments starting before 20 September 2007: $5,885 tax
- ADF Cover, introduced 1 July 2016 – all new and future enlistees: $5,996 tax
The Royal Commission into Defence and Veteran Suicide recommended as urgent to harmonise veteran entitlements, and recognised that veterans medically discharged were most at risk. This unequal taxation goes against the intent of the Royal Commission, and of the original design.
It discriminates against Australia’s newest and youngest ADF members at a time when attracting and retaining ADF Members is a priority for the Defence strategy.
No government would start out to design legislation that produces this inequitable outcome.
The legislation Schedule 9 of the Treasury Laws Amendment (2022 No 4) Bill addresses some issues but does not fix this problem – it entrenches unequal and unfair taxation treatment of injured veterans who receive the same Invalidity Benefits. In their haste, the Senate Economics Committee report totally ignored the veteran community submissions and evidence on this.
Schedule 9 – Taxation of military super benefits, must be withdrawn, given the consideration it deserves, and fixed to ensue all veteran super Invalidity Benefits receive the same tax treatment provided by the Douglas Case, regardless of which scheme or when payments commenced.
Contacts
National President
Del Gaudry
(02) 6152 9162
president@dfwa.org.au
Spokesperson
John Lowis
(07) 2102 9879
You can read more about Veteran Superannuation Invalidity Benefits Taxation and the Douglas Case here.