Draft Bill ‘Taxation of Military Superannuation Benefits’ released for consultation

The Australian Government is proposing to introduce legislation to ensure no veteran pays higher income tax because of the Federal Court decision in Commissioner of Taxation v Douglas. A draft bill, Treasury Laws Amendment (Taxation of Military Superannuation Benefits) Bill 2022 and associated draft explanatory material, have been released for public consultation.

According to the Australian Government’s media release issued on 25 July 2020:

The draft legislation confirms the lump sum tax treatment for affected members of the DFRDB and MSB. The Government’s approach means that affected veterans in the DFRDB and MSB schemes will not only retain the income tax benefits of the Douglas decision but also retain the resulting benefits of changes in their taxable income, such as Family Tax Benefit entitlements and the childcare subsidy.

The Government has also decided to extend these changes to Spouse and Children’s pensions paid to a spouse or child following the death of a member of a DFRDB or MSB scheme affected by the Douglas decision to ensure these beneficiaries are no worse off.

A draft bill, Treasury Laws Amendment Bill 2022: Taxation of military superannuation benefits, and associated draft explanatory material, have been released for public consultation and information about the consultation process is available on the Treasury website.

RSL Australia is encouraging members to make a submission. Submissions are invited by email to superannuation@treasury.gov.au. The timeline to make a submission is tight and will close on 5 August 2022.

Defence Force Welfare Association (DFWA) will be reviewing the draft legislation and making a submission. DFWA has maintained an active interest and advocacy in the Douglas Case. You can read the background here.