A superannuation tax strategy used by military personnel will be phased out by the federal government.
Military personnel and military invalidity pensioners have long been subject to tax on their superannuation income streams, with payments made before preservation age treated as income and taxed accordingly.
The government found that, before last year’s budget, some superannuants were using a loophole to reduce their tax obligations on their superannuation income streams by electing to treat their income as a series of lump sum payments.
Initially flagged as part of the 2016 budget, Minister for Financial Services and Revenue Kelly O’Dwyer has now said that a “small number” of military invalidity pensioners decided to change their arrangements to utilise the strategy and reduce their tax obligations prior to its closure.
Since September 2016, around 390 out of 11,800 military invalidity pension recipients have acted similarly.
“None of the individuals who elected to access the loophole will be subject to any back payment of tax, however they will no longer be able to use the loophole from 1 July 2017,” said a statement from Ms O’Dwyer’s office.