Commonwealth Super Invalidity Benefit Payment Changes
The tax and super treatment of specific invalidity benefit payments has changed due to the Full Federal Court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220. The courts decision affects the invalidity benefits paid under pensions provided under the Defence Force Retirement and Death Benefits (DFRDB) Scheme and the Military Superannuation and Benefits (MSB) Scheme which started on or after 20 September 2007.
If you received an invalidity pension under either of these schemes on or after this date, you may be affected by the recent court decisions. You can head to the ATO website to find out if you have been affected by these changes.
2010/11 – 2019/20 INCOME TAX AMENDMENTS
Tax returns that were lodged for the 2010/11 to 2019/20 income years, invalidity benefits would have been taxed as super income stream benefits. Where the invalidity pension commenced on or after 20 September 2007, these benefits should have been taxed as super lump sums.
The ATO will receive data from the Commonwealth Superannuation Corporation (CSC) to identify affected individuals, which will relieve individuals from having to separately obtain information from CSC for the amendments.
The length of time it takes for the ATO to process and finalise amendments will depend on how complex your case is. If the ATO doesn’t have your up-to-date information or you have outstanding tax returns, it may cause delays.
The ATO will automatically amend your income tax assessments for the 2010/11 to 2019/20 years based on the information they receive from CSC. However, you will still be able to amend your income tax assessments for the 2007/08 to 2009/10 income years through the normal objection process.
When lodging an objection, you will need to include a written request for an extension of time as these tax periods are outside the normal period of review. You will also need to provide evidence that will support any amendment being made to your assessments for these years.
IF YOU ARE AFFECTED:
- From 28 April 2021 to 31 May 2021, affected individuals were able to opt-in to the streamlined amendment process. This opt-in period has now closed and the ATO are currently contacting those who have opted-in and confirming if they would like to progress with the process. The ATO will then commence amending income tax assessments.
- From June 2021, the ATO will identify, and contact affected individuals who did not opt-in to discuss potential amendments to their income tax assessments.
- For individuals who were unable to opt-in to the streamlined amendment process by 31 May 2021 due to awaiting information from a third party government agency (e.g. a determination from CSC to treat your benefit as a disability super benefit) and would still like to opt-in, should email veterancommonwealthsuperannuation@ato.gov.au with the following information:
- Your full name
- Phone and email contact details
- A brief explanation as to why you were unable to opt-in within the opt-in period.
TIMEFRAMES AND OUTCOMES
The advice from the ATO is that simple amendments are likely to take around 56 days, however more complex cases may take longer. Examples of more complex cases include:
- Receiving disability superannuation benefits
- Receiving lump sum payments in arrears
- Receiving multiple super schemes
- Individuals who have been party to a family law split
For these cases, the ATO may require obtaining further information from CSC.
Once the ATO has completed the amendment process, they will send an amended notice of assessment to your myGov inbox.
It’s important to understand that any amendment may result in:
- A refund
- A debt where you will have to pay money
- No change overall
- Impacts to other Government payments and obligations
If the outcome of your amendments is a refund, the ATO will offset any existing debts before any remaining refund is transferred to you. If the outcome is an amount payable, the ATO will contact you to discuss your payment options.
If the amendments result in a change to your taxable income, there may be financial impacts to other payemtns you may have received, such as:
- Family Tax Benefits
- Child Care Subsidy
- Paid Parental Leave Payments
- Other Government support payments that are calculated on your taxable income.
The ATO has provided a Roadmap for individuals affected by the Military Super Litigation outcome, detailing a timeline of processing these amendments. You can also find more information on the ATO website.
