You may have seen the recent interview on Channel 7 with a couple of veterans regarding taxation of DFRDB/MSBS Invalidity pensions.   Here is a brief outline of what it is all about:


1. In 1997 the Howard Government introduced legislation that would allow people to access their super at a lower taxation rate. This included people who were in "Transition to Retirement" mode. and other groups

2. This legislation should also have allowed Defence Force Personnel on Class A and B invalidity benefits to access this but the controlling body for Defence Superannuation, Commonwealth Super, failed in their fiduciary duty to inform these Personnel that they were entitled to utilise this legislation to legitimately reduce their tax and put more money in their pocket. This failure has seen many disabled veterans paying far more tax than they should have.

3. Because some groups abused this legislation by utilising their super and then claiming the Government Old Age Pension, the government decided to remove this legislation without looking at all groups who may be affected

4. Because of the failure of the CSC to inform their Customers of legitimate legislation, many personnel only found out about this by pure luck in the latter part of 2016, leading to a flood of applications to firstly, the ATO seeking Private rulings to allow invalidity benefits to be taxed as lump sums (which in the main were all successful) and secondly, taking those rulings to Comsuper to have fortnightly invalidity payments treated correctly in accordance with legislation.

5. The Government is incorrectly claiming this is a loophole - it is not, it is Government legislation that has been in existence for 20 years and has only been recently used by invalid Defence Personnel because it was discovered by pure luck and spread by word of mouth rather than that information coming decades ago from the Organisation supposed to be looking after us, ComSuper. That is why there have been a flood of applications recently.  For Senator Cormann to suggest otherwise is not correct

6. If a civilian and a serviceman were both to suffer the same injuries and be out of the work force, the Civilian would receive a tax free lump sum pay out - cognisant with their injuries - to do with as they see fit. The serviceman is reliant on a fortnightly amount taxed at the appropriate rate – and based on a percentage of their salary at the time of discharge to exist on. In many cases, this amount can be under the poverty line.

7.    It is understandably that the Government should close loopholes that allow the illegitimate denial of taxation to the Commonwealth.  This is not one of those cases.   This was not a loophole, it was proper legislation that the ATO used to give Veteran’s a legitimate tax concession.  In most cases, the Veteran does not receive any other benefit from the Commonwealth through concessions or pensions.

I suggest that any MP or Senator that wishes to comment on what is going to become a sensitive media event and arouse a lot of public interest, be a little more up to speed with the real story and issues.  This is not a money grab by Defence Personnel who have through no fault of their own, sustained injuries and have been forced to leave the Services.    This issue also brings to light the incompetence of those handling the various Military Superannuation Schemes.  They have shown by this issue that they have failed in their duty to their Customers by not remaining at the forefront of legislation that will affect their Members and advising those members when courses of action become available and what options can be followed.

This matter is proceeding to the AAT in August.  For those interested, I will keep you up to date with what is happening

This is a new website that will focus on Veteran's Invalidity Pensions and how they are treated for taxation and family law purposes (amongst others).     It will also focus on the Commonwealth Superannuation Corporation and how it is failing Veterans under DFRDB and MSBS with regards to looking after their interests
http://veteranclawback.com.au/

Vic wrote on Jul 19^th, 2017 at 2:29pm:



The Commonwealth Ombudsman is now looking into the Commonwealth Superannuation Corporation, plus holding discussions with DVA nd the ATO.    The above website contains a lot more information, especially with the taxation treatment of invalidity pensions and splitting of those pensions.

Firstly, This posting concerns those of us that are on either DFRDB or MSBS Invalidity Pensions.  Secondly, it will have interest to those who are, or have, had those invalidity pensions taken into account when the marriage breaks up and it comes time to determine who gets what.   

In the past, invalidity pensions have been taken into account as income for the purposes of financial determinations in a legal sense.     This has always been a subject of distress to many veterans because invalidity pensions, and any lump sum compensation are not really income in the true sense of the word - it is money paid to compensate for injuries and as such should not form part of a financial split.      

I received this today:

"  We have just received notice that there has been a victory in the Family Court.

Early indications are that the Judge found that Regulation 43A does not apply to a DFRDB invalidity benefit.


Regulation 43A is what gives the Minister the Authority to make his determination and use the Methods and Factors that value these benefits.

First major win in the battle ahead.

We have just had our argument vindicated in the Family Court."

We are now trying to establish whether this ruling can be looked at for those veterans who have suffered severe financial circumstances as a result of what is a misinterpretation of the Minister's Authority