Important changes to invalidity pensions commenced after 20 September 2007
Following a ruling of the Federal Court in December 2020, invalidity pensions payable under the Defence Force Retirement and Death Benefits (DFRDB) Scheme and the Military Superannuation and Benefits (MSB) Scheme (commenced on or after 20 September 2007) will be taxed as superannuation lump sum payments.
The Australian Taxation Office (ATO) has been processing amendments for past tax returns of impacted individuals who have opted-in as part of its remediation program.
Initial round of amendments
As of the end of September, the ATO has amended over 4,000 income tax assessments for individuals that either opted-in to the first phase of its amendment process or had an existing objection with them, around 60% of the individuals who opted-in to having their assessment(s) amended.
If you opted-in but have not yet had your amendments finalised, you do not need to call the ATO for an update. If your amendments have yet to be processed, it is likely because your circumstances are more complex. The ATO is working through the remaining amendments and expects to have all amendments completed shortly.
Next round of amendments
If you are affected by the Court decision and did not opt-in under the ATO’s initial amendment process, it’s not too late to have your assessments for prior years amended. The ATO will begin the next round of its amendment program from late October by contacting affected individuals who did not initially opt-in.
What do you need to do?
There are actions you should take now if you would like to have your assessments amended:
- Ensure that the contact details that the ATO has for you are up to date so you do not miss correspondence and so that you can be contacted you if the ATO requires additional information.
- Apply to Commonwealth Superannuation Corporate (CSC) for a determination if you believe you qualify for a disability concession. By doing this before you take part in the streamlined amendment process you will ensure that that the disability concession is taken into account as part of your amendments upfront.
- Lodge any outstanding income tax returns as the ATO cannot amend what has not been lodged.
- Consider seeking financial advice in relation to your personal circumstances as it is your choice as to whether you want to participate in the ATO’s amendment process.
For more information or to receive ongoing updates about the streamlined amendment process, please visit the ATO military superannuation webpage at ato.gov.au/militarysuper.