Treasury Laws Amendment (Measures for Consultation) Regulations 2023: Military superannuation benefits

The government is consulting on Treasury Laws Amendment (Measures for Consultation) Regulations 2023: Military superannuation benefits (the draft regulations) that are related to the Commissioner of Taxation v Douglas (Douglas) decision.

These regulations complement the Taxation of military superannuation benefits measure that was introduced into Parliament on 23 November 2022 as Schedule 9 to Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 (the Bill).

The draft regulations address three matters to ensure the Bill operates as intended:

1. establish a permanent approach to the proportioning rule for Douglas‑affected veterans in line with the Australian Taxation Office’s current interim legislative instrument, which is due to expire on 30 June 2023. To avoid any unintended adverse outcomes for this group, the draft regulations will ensure that the current approach to calculating tax‑free and taxable components of Douglas‑affected invalidity benefits paid under the Defence Force Retirement and Death Benefits (DFRDB) and Military Superannuation Benefits (MSB) schemes will continue.
2. will ensure that benefits (other than those affected by the court’s decision) that are reverting to income stream treatment due to Schedule 9 to the Bill, continue to receive Capped Defined Benefit Income Stream treatment if they lost this status due to the Douglas decision.
3. seek to ensure that death benefits relating to DFRDB and MSB reversionary pensions affected by the Douglas decision retain their status as non‑assessable, non‑exempt for income tax purposes.