iscoverThe government has moved to close off a superannuation tax strategy that was being used prior to the 2016 federal budget, which will see a small number of military personnel affected.
Government acts on super, tax ‘loophole’
10 July 2017
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3 minute read
Military personnel and military invalidity pensioners have long been subject to tax on their superannuation income streams, with payments made before preservation age treated as income and taxed accordingly.
The government found that, before last year’s budget, some superannuants were using a “loophole” to reduce their tax obligations on their superannuation income streams by electing to treat their income as a series of lump sum payments.
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As part of the 2016 federal budget, the government announced this loophole would be closed. The government said there were no military invalidity pensioner or military personnel using this strategy at this time.
Since then, according to an announcement from Minister for Revenue and Financial Services Kelly O’Dwyer, a “small number” of military invalidity pensioners decided to change their arrangements to utilise the strategy, and reduce their tax obligations, prior to its closure.
Since September 2016, around 390 out of 11,800 military invalidity pension recipients have acted similarly.
“None of the individuals who elected to access the loophole will be subject to any back payment of tax, however they will no longer be able to use the loophole from 1 July 2017,” said the statement from Ms O’Dwyer’s office.
“This change only impacts the way benefits provided by the Commonwealth Superannuation Corporation are treated, not benefits provided by the Department of Veterans' Affairs,” the statement said.
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