A message for MSBS and DFRDB invalidity beneficiaries

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For the latest information about the recent Commissioner of Taxation v Douglas [2020] decision we recommend you visit the following pages on the ATO website:

• Roadmap - New
• Treatment of military invalidity benefits following Full Federal Court decision - Updated
• Individuals receiving military invalidity benefits – impact of court decisions - Updated
• Decision Impact Statement
• Tax on benefits - Updated

Remediating prior tax years

The ATO is responsible for reviewing all impacted benefit payments and the prior taxation treatment of those payments. Information on the processes to be followed can be found at the above links. At this stage, we understand that the ATO will identify those impacted by the decision and there is no need for anything to be provided to the ATO, or to CSC, in this regard.

This tax year (2020-21)

CSC has begun updating its systems to apply the lump sum withholding rate to fortnightly payments. This is a complex, technical change and may take some months to implement - in the meantime tax will continue to be withheld at the current rate.  This does not mean you will be taxed incorrectly this year.

CSC does not calculate your tax payable.

It is important to note that CSC does not calculate your tax payable. Rather, CSC withholds amounts from your benefit payments each fortnight and remits these to the ATO. The ATO then calculates your tax payable at the end of the financial year through the tax return process.

In order to make sure you are taxed correctly this year, where applicable, CSC will report impacted payments made this year as lump sum payments (including payments made prior to the Decision in December). This will enable the ATO to apply the right tax to your tax returns and, if required, return any excess funds remitted by CSC during the year to you as part of the ATO’s regular tax return procedures.

The ATO is regularly updating the resources listed above, please visit these pages for detailed information.