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Tax treatment of military invalidity pensions for some veterans (continued)

The Australian Government’s action will ensure military invalidity pensioners will not pay higher taxes on their pension benefits as a result of the Court’s decision.

The new legislation will ensure these benefits are again treated as income streams rather than lump sums for tax purposes.

The changes will remove the impact on adversely affected veterans while preserving the better income tax outcome for veterans who were positively impacted by the Douglas decision.

To preserve the preferential income tax outcome for veterans impacted positively by the decision, the Australian Government will create a new non-refundable tax offset for recipients of invalidity pensions paid from the impacted schemes.

The offset will ensure that veterans who would be better off in a particular income year if the invalidity pension were still treated as lump sums would retain that tax benefit.

The Australian Government has committed to delivering this legislation before the end of the 2021-22 financial year to ensure no affected veteran will see reduced fortnightly payments in this financial year because of the Douglas decision.

The effect of the legislation and offset will be built into annual income tax assessments and the withholding system going forward once the law has been passed.

Information will continue to be updated as the legislation is developed.

Where to go for assistance

To understand how this affects your pension please contact CSC or log into Pensioner Services Online:

MilitarySuper (also known as MSBS)
Phone: 1300 001 877
Email: [email protected]
Pensioner Services Online: Log In | Members – CSC

Defence Force Retirement and Death Benefits (DFRDB)
Phone: 1300 001 877
Email: [email protected]db.gov.au
Pensioner Services Online: Log In | Members – CSC

Additional support

  • If you are a veteran and this matter is causing you distress contact Open Arms for support on 1800 011 046. 
  • The Department of Veterans’ Affairs (DVA) provides a range of benefits to support an injured veteran financially after discharge from the ADF. Additionally, there are a broad range of programs in place to facilitate a veteran’s wellness, recovery and rehabilitation after their service.
  • For serving members, you can contact your local Garrison Health Centre, the All Hours ADF support line on 1800 628 036 or the Defence Family Helpline on 1800 624 608. 
  • Lifeline is available for any Australian experiencing emotional distress on 13 11 14.

Financial Assistance

  • The ADF Financial Services Consumer Centre helps ADF members and their families achieve greater financial security by providing independent, professional financial education (not advice) to ADF members throughout their careers.
  • The Financial Information Service (FIS) through Services Australia provides free, independent and confidential information, tools and resources to help customers make informed decisions about their current and future financial needs. FIS doesn’t provide financial advice, counselling, or advocate or promote particular products or providers. 
  • Moneysmart offers financial guidance for all Australians, including tools, tips and calculators to help people of all ages, backgrounds and incomes to build a better life. 
  • Commonwealth Superannuation Corporation (CSC) offers ‘fee for service’ financial planning services, including access to certified financial planners for fund members. 

For more information go to our FAQs page.

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