Stuart Robert (Fadden, Liberal Party, Assistant Minister for Defence) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill gives effect to this government's election commitment to fairly index Defence Forces Retirement Benefits (DFRB) and Defence Force Retirement and Death Benefits (DFRDB) pensions for recipients aged 55 and over from 1 July 2014.

This legislation amends the Defence Forces Retirement Benefits Act 1948 and the Defence Force Retirement and Death Benefits Act 1973 to deliver the government's commitment.

The government's fair indexation commitment, as reflected in the bill, addresses a long-standing grievance of the veteran and ex-service community about differing—and inequitable—indexation arrangements that apply to DFRB and DFRDB pensions compared to age and service pensions. The bill recognises the government's commitment to ensure that age and service pension indexation arrangements apply to members of the DFRB and DFRDB military superannuation schemes.

The government recognises the unique nature of military service. The government's commitment to address this long-standing grievance of the veteran and ex-service community is underpinned by this belief.

The bill will also exempt DFRB and DFRDB members from the division 293 tax for the one-off capitalised value of the benefit improvement relating to past service as at 1 July 2014. This will ensure members with significant past service but modest superannuation pensions will not incur a taxation liability resulting from the changes to indexation. However, superannuants on high annual incomes will not be excluded from an ongoing annual liability under this provision.

The new fairer pension indexation methodology is to apply to DFRB and DFRDB pensions from 1 July 2014. The measures extend fair indexation provisions to invalidity pensions, reversionary pensions and pensions for those associates in receipt of a pension as a result of a family law split, who are aged 55 and over on the current relevant indexation date.

Under the new fairer indexation methodology, which mirrors the two-step indexation process for age and service pensions, the first step would be to calculate the pension that would result if it were increased in line with the better of the Consumer Price Index (CPI) and the Pensioner and Beneficiary Living Cost Index (PBLCI). Then the second step would be to compare the resulting pension to the Male Total Average Weekly Earnings (MTAWE). If the calculated pension is greater than the specified floor percentage (27.7 per cent of MTAWE for the single pension), then no further adjustment is made. If the resultant pension is less than the floor percentage of MTAWE, it is increased so that it equals the floor percentage of MTAWE.

It is important to note that the new fairer indexation methodology will not result in a DFRB or DFRDB pension that is currently less than the MTAWE floor percentage increasing to the floor percentage (and conversely, that a pension that is currently in excess of the floor percentage reducing to the floor percentage). The proposed changes will have an immediate impact on some 45,000 current DFRB and DFRDB pensioners where the originally entitled member was aged 55 or over at 1 July 2014.

This bill gives effect to many years of advocacy by this government for fair indexation of DFRB and DFRDB superannuants and their families. It delivers a key election commitment and addresses a long-standing grievance of the veteran and ex-service community.

This bill recognises the unique nature of military service and ensures that recipients of DFRB and DFRDB pensions have their pensions indexed in the same way as age and service pension are indexed.

I commend the bill.

Debate adjourned.