ADF risks losing up to 3,000 middle to senior managers - 5 Apr 2007

The APPVA has been advised from current serving ADF members that they will be significantly taxed under the Defence Force Retirement and Death Benefits Scheme (DFRDB), should they complete 20 or more years on 1 July 2007. Members risk losing up to $10,000 - $15,000 in a newly Legislated Taxation system called the “Simplier Superannuation Taxation”.

Current arrangements are that ADF members retiring from the ADF after 20 years will be only eligible for 15% Tax on their Commuted Lump Sums.

On 1 July 2007, this figure will sky-rocket to 30% tax on their Commuted Lump Sums.

This situation is unacceptable to those who have selflessly served Australia for 20 or more years and placed their lives on the line in order to provide peace and security not only to Australia and it’s interests, but also to the World.

A signal released from Australian Defence HQ is quoted as the following:

"1. Legislation to implement the governments plan to simplify and streamline superannaution, inclunding the taxation of superannuation benefits. Has been passed by parliament. The changes will take effect from 01 July 2007. Some aspects of these changes will be given effect by regulations that are yet to be approved by the government. The draft regulations were released by the assistant treasurer for public consultation earlier this year. As with any public consultation process, the government may or may not change a draft proposal in light of comments it receives.

2. It has been brought to my attention that some information is circulating throughout defence suggesting that DFRDB members will have to pay significantly more tax on the lump sum benefit that they may receive on retirement after 01 July 2007.

3. This is not substantiated advice as the government has not approved the regulations at this time. DFRDB members will be provided with advice as soon as practicable after the government approves the regulations which may be amended to account for the representations defence has made, a decision on the regulations is expected to occur soon. In the meantime, DFRDB members should exercise a high degree of caution in making retirement decisions based on draft regulations that may change. Defence is concerned that the tax treatment of DFRDB lump sums not become the overriding reason a member decides to leave the ADF. These concerns have been conveyed to representatives from the treasury who advise that these concerns will be taken into account when finalising the regulations. Please dissemintate to all levels." UNQUOTE.

The information provided within this Signal displays a large degree of uncertainty as to the future of ADF members who are within the DFRDB Scheme, whilst it can be agreed in context of not having ADF members panic due to this latest revelation.

In a period where the ADF is trying to retain members and offer significant financial incentives to remain in the ADF, Over 3,000 middle and senior managers ranging from Sergeant to Brigadier (Equivalent), will be seriously contemplating terminating their service, particularly if they have served over 20 years, which is a Notional Retirement for members of the Defence Force Retirement and Death Benefit Fund (DFRDB). The DFRDB ended in 1991, however a large number of ADF members remain members of the scheme.

The Government is urged to change the eligibility of the higher tax rates of 30% and above for those DFRDB members who have 20+ years service and leave it remaining at 15% post 1983 contributions for Commuted Lump Sums. Failure to do so, will see a mass exodus of highly experienced service men and women from the ADF, prior to 1 July 2007. This issue will have a significant impact on the capability of the Australian Defence Force.

The Government needs to act on this situation NOW - to exempt ADF DFRDB recipients from this harsh “Simplified Superannuation Taxation Legislation”.

The future of the ADF is in the hands of the Government, in an election year it is considered a highly dangerous practice to the incumbent Government to pursue and let this harsh Superannuation Taxation Law continue.

Paul Copeland,
National President,
Australian Peacekeeper & Peacemaker Veterans' Association Inc.