David Shoebridge (NSW, Australian Greens) Share this | Hansard source

On behalf of the Greens, I can indicate we support the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 but have specific concerns in relation to schedule 9, the taxation of military superannuation benefits, which deals with what has become known as the Douglas decision.

Acting Deputy President Walsh, as you'd be aware, veterans have made immense sacrifices for this country. Many have had their lives changed irreparably, and those who are impacted by this bill have sustained lifelong injuries from their service. That's what this schedule applies to, veterans who we know have permanent, lifelong injuries that are referable to their service. Those injuries often have widespread impacts on their lives and their families, and particularly impacts on their loved ones. We should be doing all we can to support what is, unquestionably, a vulnerable group of Australians.

Schedule 9 of the bill seeks to amend various taxation laws to, on one part, confirm the tax treatment of certain defined benefit pensions, following the full Federal Court decision in Douglas, but it goes beyond that. The schedule also provides a non-refundable tax offset for recipients of invalidity benefits paid in accordance with two of the schemes, the MSBS and the DFRDBS, to ensure that they do not pay additional income tax because of the Douglas decision. I note the minister's second reading speech, in which he stated:

Schedule 9 to the bill will ensure that veterans affected by the Full Federal Court decision in Commissioner of Taxation v Douglas will not face worse income tax outcomes as a result of the court's decision. The government's objective is that nobody is worse off. The legislation will preserve the preferable tax and outcomes for affected veterans as a result of the decision.

This bill introduces a new non-refundable tax offset for members of the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme. That ensures that those individuals who would face adverse tax outcomes, as a result of the court's decision, will not pay higher taxes on their superannuation invalidity benefit. That is good. This offset will also apply to spouse and children's pensions paid to a spouse or child following the death of a member if they had otherwise been affected by the Douglas decision. That too also good.

Schedule 9 provides that any benefits that the Douglas decision may apply to, beyond those two schemes, will continue to be taxed as superannuation income streams by amending the legislative definition of superannuation income streams. This is where concerns have been raised by veterans. The measures also includes a transitional provision to ensure that certain non-military invalidity benefits that received lump-sum status prior to that Douglas decision are not disturbed by the reversal.

Schedule 9 seeks to implement the government's commitment of their 25 July 2022 announcement that no veteran would be worse off as a result of the Federal Court decision in Douglas. Indeed, the government said, on introducing the bill, that that is the commitment for the government. I appreciate the government's efforts and the Greens appreciate the government's efforts to improve the taxation situation for veterans. I note the work of the minister recently in announcing a pathway to fix these convoluted, overlapping veterans entitlements schemes. That's vital work, and the Greens will continue to engage with the government to make life better for veterans—better, simpler, fairer.

With this in mind, I note, though, that there are two areas where there are significant concerns amongst the veteran community in relation to schedule 9 of the bill. They are, firstly, that schedule 9 will only apply to those whose invalidity payments commenced on or after 20 September 2007. It won't extend to members whose invalidity payments commenced before that date, so those veterans won't have access to the same tax benefits. That is an inequitable outcome. Secondly, the super schemes covered by schedule 9 are restricted to those referenced in the schedule—that is, to members of the Military Superannuation and Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme. This means that newer members of the ADF will be unable to access this beneficial tax benefit treatment, again generating an inequitable outcome.

These unjust outcomes run counter to the government's commitment that no veteran will be worse off. I strongly urge the government to, over the coming months, review where they've landed so as to extend the beneficial effect of the Douglas decision to both of those classes of veterans: those whose invalidity payments commenced before 20 September 2007, as well as newer member of the ADF who are on the ADF cover.

I also note that there are significant concerns in the veteran community that this schedule may indeed leave some veterans facing worse outcomes. I've previously raised these concerns with the minister's office and note that in the last 48 hours we've had a more detailed response from the minister that addresses some of those concerns. I'll deal with that correspondence in a moment. I want to personally thank those veterans and organisations who have engaged with my office on this bill and on related issues. I give a particular shout-out to Peter Thornton; Stuart McCarthy; Pat McCabe, who is the President of the Australian Federation of Totally and Permanently Incapacitated Ex Servicemen and Women; Ian Lindgren; Bradley Campbell; John Pauley, the President of the Australia Council of Public Sector Retiree Organisations; and John Lowis, the President of the Defence Force Welfare Association in Queensland.

Given the evidence we've heard through the ongoing Royal Commission into Defence and Veteran Suicide, it's essential that these veterans' voices are heard when legislation like this comes through parliament. It's also essential that the government responds to it, because time after time governments have failed to properly support veterans—and we know that, tragically, those failures can end in lost lives.

The Greens will support the bill because, as the government has noted, it ensures that veterans affected by the Douglas decision—the great bulk of them—will not face worse income tax outcomes as a result of the court's decision. But it doesn't answer all of the concerns. I do note Minister Keogh's communication to my office after it raised these concerns. In responding, he stated, in part, this: 'The proposed amendments in the bill currently sitting before the Senate seek to ensure that veterans negatively impacted by the Douglas decision are not left worse off and that veterans who benefited from the decisions retain those outcomes. The Australian government, through its announcement of a proposed bill, has sought to respect the court's decision by leaving the beneficial change in tax treatment for veterans in place while maintaining the integrity of the rest of the superannuation system. As such, the proposed legislation retrospectively and prospectively ensures that all other schemes and benefits, other than those specifically changed by the court's decision, will continue to be taxed as income streams as was always previously intended and understood to be the case. The implementation of this legislation will be subject to passage of the bill.' It says further: 'This approach is consistent with the intent of the current superannuation tax law and reflects the longstanding policy of successive governments that most common-law pensions should be treated in this way. There is no intention for a broader change to the tax treatment of any common-law pensions beyond the court's decision.'

I place on record my office's gratitude for the engagement with the minister on this matter, but I finish my contribution by saying this: yes, this bill resolves many of the issues that arose under the decision in Commissioner of Taxation v Douglas, and it prevents a significant number of veterans being worse off as a result of that decision, but there remain those two classes of veterans who have not received an equitable benefit as a result of this decision. I again urge the minister and the government to review what's happened to ensure that all veterans have equal and equitable access to fair military pensions when they suffer injury in the course of their duty.