On 24 November 2021, the government announced they intended to change the tax treatment of invalidity pensions impacted by the Full Federal Court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220 (the Douglas decision).
The Douglas decision applies to veterans or their beneficiary who receive an invalidity pension which started on or after 20 September 2007, and are paid from either the:
- Military Super Benefits Scheme (MSBS)
- Defence Force Retirement and Death Benefits (DFRDB) scheme.
The measure ensures that invalidity pensions impacted by the Douglas decision will continue to be treated as superannuation lump sums for income tax purposes.
The bill also ensures that no veteran is worse off because of the Douglas decision by introducing a non-refundable tax offset for affected veterans. The amendments apply to the 2007–08 income year and later years.
This measure is now law.
For more information, see:
- Military invalidity pensions – Douglas decision
- Treasury Laws Amendment (2022 Measures No. 4) Bill 2022External Link
- Exposure draft legislation: Taxation of military superannuation benefitsExternal Link – Joint media release – Assistant Treasurer and Minister for Financial Services and Minister for Veterans Affairs' and Defence Personnel, 25 July 2022.
- Government protecting veterans' interests following court decisionExternal Link – Treasury media release, 24 November 2021.