The government has moved to close off a superannuation tax strategy used by military personnel that involves treating superannuation income as a series of lump sum payments to avoid tax obligations.
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.
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 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 a 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.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 21 Aug 2016Risks flagged with real estate appraisal valuesBy Miranda Brownlee
- 21 Aug 2016Lawyer challenges ATO view on two fund strategiesBy Miranda Brownlee
- 18 Aug 2017ATO locks in details, addresses panic on real-time reportingBy Katarina Taurian
- 18 Aug 2017Data feeds unreliable for new reporting, says mid-tierBy Miranda Brownlee
- 18 Aug 2017Tax component confusion spurs potential tax liabilitiesBy Miranda Brownlee
- 18 Aug 2017Contributions triple in June quarter, survey showsBy Staff Reporter
- view all
- ATO locks in details, addresses panic on real-time reporting
The tax office has addressed several points of confusion with the new events-based reporting regime, locked in key deadlines, and outlined w...read more
- Data feeds unreliable for new reporting, says mid-tier
With an estimated 20 per cent of SMSFs still encountering errors from data feeds, one mid-tier firm believes the ATO should allow SMSF pract...read more
- view all