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

The Full Federal Court decision (Commissioner of Taxation v Douglas) in December 2020 found that military invalidity superannuation pensions payable under the Defence Force Retirement and Death Benefits (DFRDB) scheme and the Military Superannuation and Benefits (MSB) scheme commencing on or after 20 September 2007 are to be taxed as superannuation lump sums.

Whilst the decision has ensured that veterans are taxed at the correct rate by the end of the year, some veterans may be negatively impacted in the short term via withholding changes that the Commonwealth Superannuation Corporation (CSC) is required to make as a result of the Federal Court decision.

The Australian Government will legislate early in the next Parliament to ensure that no affected veteran is left worse off. This was announced in a Joint Media Release by the Minister for Defence Personnel and Minister for Veterans’ Affairs and the Assistant Treasurer and Minister for Housing on 24 November 2021.

Based on consultation with the veteran community to find the best solution, the Government legislation will affirm the Court’s decision as it applies to invalidity veterans in the DFRDB and MSB schemes, and will ensure that any veteran that may be negatively affected by the decision has solutions to remedy that position.

The Australian Government has committed $60 million to ensuring that veterans will not be negatively impacted as a result of the Douglas decision (2021-22 Mid-Year Economic and Fiscal Outlook, page 186).

The Government is continuing to consult with relevant groups and organisations from the veteran community to ensure that no veteran is worse off.

Veterans who are uncertain about the Douglas decision’s short-term implications for them may consider contacting the Australian Tax Office to seek withholding variations to maintain fortnightly payments at their current levels so they are not disadvantaged.

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]
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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