Matt Keogh (Burt, Australian Labor Party, Minister for Veterans’ Affairs) Share this | Hansard source

One of the first matters that I was alerted to when I became the Minister for Veterans' Affairs was that of what is referred to as the Douglas decision, a decision of the Federal Court, and the unintended consequences of that decision that may flow through to the veteran community. While the veteran community broadly welcomed the Douglas decision of 2020 and many veterans have benefited from that decision, we were alerted to concerns that a number of veterans were facing higher end-of-year tax liabilities as a result.

For context, the Douglas decision found that anyone who was receiving military invalidity benefits, paid under the Military Superannuation and Benefits Scheme or the Defence Force Retirement and Death Benefits Scheme, on or after September 2007 should be taxed as superannuation lump sums rather than superannuation income streams. For many, this did provide a tax benefit. There's no doubt, though, that the Douglas decision was highly complex, and it has taken time to work through some of the consequences of this decision to make sure that there are no unintended consequences left unresolved.

Labor committed to ensuring veterans were not left worse off as a consequence of the Douglas decision and the necessary legal changes flowing from it. Previously, these payments, under the MSBS and the DFRDB, were treated as asset test exemption income streams and defined as benefit income streams under both the Social Security Act and the Veterans' Entitlements Act.

A division having been called in the House of Representatives—

Sitting suspended from 16:31 to 16 : 44

As I was just explaining, the legislation that is before us today is part of Labor's commitment to ensuring that veterans are not left worse off as a consequence of the Federal Court's Douglas decision from 2020. The payments that flow to some veterans through the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme were previously, before the Douglas decision, treated under the Social Security Act and the Veterans' Entitlements Act as asset-test-exempt income streams and defined as benefit income streams. As a result of the Douglas decision, the lump-sum payments may not now qualify as benefit income streams or be exempt from asset tests. This leads to a high degree of uncertainty and risk of unintended consequences for veterans. We want to fix this problem, and that's what this legislation is all about. We want to ensure that veterans have certainty to maintain equity in the system and fairness in the way that income support recipients are means-tested and the way in which their pay rates are determined. Today, we're looking to resolve these issues once and for all to ensure that veterans are no worse off following the Federal Court's decision.

These new provisions in this bill, the Social Services and Other Legislation Amendment (Military Invalidity Payments Means Testing) Bill 2024, insert a new income stream classification and assessment regime into the Social Security Act and the Veterans' Entitlements Act. These changes in the bill are designed to ensure the same assessment of income for invalidity payments and to ensure that invalidity payments continue to be treated as exempt from the assets test, clarifying the issues identified earlier. The new provisions are designed to ensure the same assessment of income for invalidity payments and to ensure that invalidity payments continue to be treated in the same way from an assets test point of view. This means that a person's invalidity payments that they may be receiving either through social security or under the Veterans' Entitlements Act, which are provided in recognition of the need for increased support due to service related conditions, are not negatively affected by other income or assets. This is intended to ensure that veterans and/or their partners receive a level of support that is consistent with the intent of that legislation and policy, before the unexpected findings that were delivered by the Federal Court in the Douglas decision. The last thing we want is to negatively impact those who have signed up to defend our nation. This bill seeks to ensure that no veteran is worse off as a result of the Douglas decision in the Federal Court, and I commend the bill to the House.

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