RSL Welcomes Protection of Veteran Entitlements

The Returned & Services League of Australia (RSL) has welcomed the Federal Government’s announcement it has acted to protect veterans’ superannuation, retirement and death benefits.

Following the December 2020 decision of the Full Federal Court concerning the tax treatment of certain invalidity payments under Defence superannuation and retirement schemes, the RSL took a lead in responding to the Australian Taxation Office (ATO) regarding changes in order to protect veteran entitlements.

The Government has now acted to ensure no veteran will be worse off as a result of the Court decision.

RSL Australia President, Greg Melick, said that in its decision in late 2020 the Federal Court found that military invalidity benefits paid under invalidity pensions that commenced on or after 20 September 2007 would be taxed as superannuation lump sums and not as superannuation income stream benefits. 

This decision would have impacted up to 11,000 members of the Defence retirement schemes.

Greg Melick said the Government decision to legislate will ensure these benefits are again treated as income streams rather than lump sums for tax purposes, so removing the impact on adversely affected veterans while also preserving the better tax outcome for veterans who benefited from the Court decision.

“The RSL consulted extensively with the ATO to protect the interests of veterans,” he said.

“The Government has advised that if a veteran would have been better off when invalidity pensions were treated as lump sums, the changes will ensure that veterans retain their tax benefits.

“In effect, whichever tax treatment provides a better outcome will apply to each affected Veteran. 

“From this point onwards, invalidity pension recipients who would have been positively affected by the Court decision, will automatically receive the tax offset when they lodge their tax returns.  

“Importantly, the Court decision will not result in any veteran receiving reduced fortnightly payments. The offset will be incorporated into the fortnightly 'Pay-As-You-Go' withholding system.”

Mr Melick said the RSL was pleased that a satisfactory outcome had been achieved and that the retirement benefits of veterans’ who had served our nation had been protected and preserved.