DFRDB contributions
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Unless they have reached 40 years of effective service, members are required to make member contributions each fortnight from their after-tax salary.
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These contributions are paid at 5.5% of their super salary, and they can’t vary this contribution rate.
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Employer productivity contributions are 3% of their super salary, and are paid by the ADF on their behalf.
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Both member and productivity contributions are paid into the Consolidated Revenue Fund.
Two types of contributions are paid regularly for DFRDB—member contributions and productivity contributions.
- The productivity contributions form a separate benefit, paid as a lump sum.
- The member contributions do not affect the final benefit.
Member contributions
- Contributing members are required to pay fortnightly contributions of 5.5% of their super salary unless they have reached 40 years of effective service.
- Members can’t vary this contribution rate.
- Member contributions are payable each fortnight in line with the ADF paydays.
- All member contributions are paid into the Consolidated Revenue Fund (CRF). They are not invested and therefore don't attract investment earnings.
- Member contributions can be applied to either the retirement pay or commutation lump sum, to increase the tax-free component.
Productivity contributions
Defence pays productivity contributions on the member's behalf, at 3% of their super salary, each fortnight of their continuous full-time service. These contributions are not invested and therefore don't attract investment earnings; however, they do grow in line with the 10-Year Treasury Bond Rate.
Productivity contributions form a separate ‘Productivity Benefit’ for DFRDB members. This benefit becomes payable as a lump sum when a member ceases a period of eligible service or separates from the ADF (this can be paid as cash or rollover, depending on the circumstances).
Ancillary account
If a member wishes to make super contributions that can't be accepted by DFRDB, these may be payable to a MilitarySuper ancillary account.
- Ancillary contributions attract investment earnings and can only be claimed as a lump sum.
- These contributions do not count towards retirement pay.
Ancillary contributions can only be made while a member is a contributing DFRDB member, and contribution limits may apply.
MilitarySuper ancillary
Super salary
The super salary is the maximum incremental rate of pay for a member's substantive, provisional or probationary rank. With the introduction of the Military Salary in 2021, the salaries shown in the ADF pay rate tables include service allowance and uniform allowance. Prior to 2021, only service allowance was included as part of super salary.
Salary changes are reported on promotion, in the event of a pay increase or when downgraded to a lower position.
Salary reductions
If a member is downgraded to a lower position or rank, by default their super salary will be the new lower rate. However, they can elect to maintain their previous, higher salary for contribution purposes.
Members have 90 days from the date of the reduction to make this election, unless special circumstances allow for more time.
Contributions will be maintained at the higher rate until the 90 days passes. If no election is made, the contributions will be recalculated back to the date of the salary reduction and become payable at the lower rate. Any overpayment of contributions will be refunded to the member.
Non-effective service
Non-effective service is a period that exceeds 21 consecutive days where a member is:
If a member is considered to be on a period of non-effective service, member and productivity contributions are not due or payable.
During periods of leave of 21 days or less, any leave will count as effective service. This means that contributions must be paid.
Retirement Pay
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20 years of service
A contributor with more than 20 years of effective service is eligible for retirement pay, whether they separate from the ADF on the grounds of age retirement, invalidity, terminal illness, redundancy or resignation.
Retirement pay is calculated as a percentage of final super salary. The percentage is based on completed years of effective service. Effective service is the total of a member's contributory service, plus any periods of past service that have been bought back.
The contributions paid to DFRDB have no bearing on the calculation of retirement pay but can have tax implications due to the different tax components of the benefit.
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40 years of service
The percentages used to calculate retirement pay cap out at 40 years of effective service. If a member reaches 40 years of service, their member contributions must cease, and effective service will no longer accrue. However, Productivity contributions will continue to be paid.
Note: A quick guide to calculating DFRDB retirement benefits and calculations for retirement pay as a percentage of annual salary are available in the DFRDB book.
Super salary is the maximum incremental rate that applies to your substantive, provisional or probationary rank, including any recognised allowances. With the introduction of the Military Salary in 2021, salaries shown in the ADF pay rate tables include service allowance and uniform allowance. Prior to 2021, only service allowance was included as part of super salary.
Effective service is the total of your full-time contributory service, plus any periods of past service that you may have bought back. Your Annual Statement lists your accumulated effective service.
The table shows the amount of retirement pay as a percentage of super salary.
Commutation
When a member has retired and is entitled to a retirement benefit, they can elect to commute (exchange) a portion of the retirement benefit they may be paid in the future for a lump sum paid now.
It is the prepayment of part of their future retirement benefit as a lump sum. The maximum they can commute is five times their annual retirement pay.
Under Section 24 of (1AA) of the Defence Force Retirement and Death Benefits Act 1973, an election to commute must be lodged within one year of becoming entitled to retirement pay.
If a member has accessed a commutation during a previous separation and re-entered the ADF, they must elect a commutation in all subsequent separations. Their retirement pay will be permanently reduced to offset their commutation.
Productivity
We will pay Productivity Benefit to the member's MilitarySuper as an Ancillary member, or to their nominated rollover fund.
If a member has reached preservation age and are permanently retired from the workforce, they can choose to take all or part of their super Productivity Benefit as a cash lump sum.
Surcharge
Superannuation surcharge was a debt calculated by the ATO and applied to contributions where a member's adjusted taxable income (taxable income plus notional employer contributions) exceeded certain levels before 1 July 2005. These amounts are recorded in a surcharge debt account. Although surcharge does not apply from 1 July 2005 onwards, amounts recorded in surcharge debt accounts must still be paid.
Any surcharge debt remaining at the time benefits are payable is normally recovered from the productivity lump sum. Members can request that it be recovered from their commutation lump sum (if any), or retirement pay (if they do not elect to commute) instead. Members have up to one year to make this decision.
Any amount in a surcharge debt account remaining at 30 June each year is preserved and charged interest at the 10-year Treasury bond rate. Interest is only applied to surcharge debt until the debt is paid.
MilitarySuper Ancillary Benefit
A member's Ancillary Benefit may be cashed out when they reach preservation age and:
- permanently retire from the workforce;
- cease an employment arrangement on or after age 60; or
- reach age 65 (it must be claimed and taken as cash or rollover—even if they haven’t retired).
A member can roll over their Ancillary Benefit at any time to another super fund. We will not deduct tax from any amount rolled over to another fund. However, the receiving fund will deduct 15% tax from any untaxed component of the rollover.
A member can nominate two rollover funds to receive all or part of their lump sum benefit. Ensure their nominated rollover account is active and can receive money from other super funds.
Benefit estimates
To supply an estimate, we will need:
- The date a member intends to retire or transition from the ADF. An estimate can be run up to 5 years from their retirement date. If they don’t yet have a date in mind, we can provide an estimate from today’s date.
- The member's rank at transition
- The member's salary and pay increment at transition
- The member's exit type
- The member's commutation election
Call us to request an estimate.
