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  • Treatment of military invalidity benefits following Administrative Appeals Tribunal decisions

    The ATO has appealed to the Full Federal Court against the decisions of the Administrative Appeals Tribunal (AAT) in the matters of Douglas v Commissioner of Taxation [2020] AATA 494External Link, Burns v Commissioner of Taxation [2020] AATA 671External Link, and GDGR v Commissioner of Taxation [2020] AATA 766External Link.

    The Douglas decision relates to whether invalidity benefits paid by the Defence Force Retirement and Death Benefits (DFRDB) Scheme are taxed as superannuation income stream benefits or as superannuation lump sums.

    The Burns and GDGR decisions relate to whether invalidity benefits paid by the Military Superannuation and Benefits (MSB) Scheme are taxed as superannuation income stream benefits or as superannuation lump sums.

    Until the appeals process is completed, the ATO will continue to administer the taxation of invalidity benefits paid by the DFRDB Scheme and the MSB Scheme in line with our current view that the invalidity benefits are superannuation income stream benefits.

    The PAYG withholding tax rate for superannuation income stream benefits apply to invalidity benefits paid by the DFRDB Scheme and the MSB Scheme.

    If you are receiving invalidity benefits from the DFRDB Scheme or the MSB Scheme, you will need to declare this as superannuation income stream benefits in your income tax returns.

    If you are affected by this litigation, we encourage you to refrain from seeking amendments, applying for a private ruling or objecting to your income tax assessments until the appeals process is finalised.

    Any applications for a private ruling, objection or amendment will be put on hold until the appeals process is completed. You will retain your full rights to seek review of your income tax assessments in the future.

    You won't be disadvantaged if you don't lodge an objection now. You'll be able to lodge an amendment request once the appeals process is completed. In the event that your amendment period has expired, the Commissioner will give favourable consideration to any requests to extend the time for lodgment of an objection.

      Last modified: 05 May 2020QC 62497