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9.3 Key dates affecting treatment of superannuation benefits and incapacity benefits

Document
Last amended 
15 September 2017

9.3.1 SRCA

  • 30 November 1988: A person who 'immediately before' the commencement of the SRCA on 1/12/1988 was in receipt of weekly incapacity payments and had ceased to be a serving member is a former employee under the SRCA and has a different set of weekly incapacity payment entitlements to that of current employees (non-former employees).

    Under the 1971 Act, superannuation was taken into account in incapacity calculations under S45(7) only where the member was retired as a result of an injury. In these cases, the Commonwealth- funded portion of the DFRB/DFRDB pension was calculated as 80% of the total and the remaining 20% (thereafter fixed as a dollar amount) was disregarded as an employee-contribution.

    In cases other than invalidity retirement (e.g. age retirement), the whole of the superannuation pension was disregarded for incapacity calculation purposes.

    In the case of the group of former employees who were caught by this expansion of the superannuation rules on 1 December 1988, the original weekly amount of the superannuation pension should be calculated as at 1 December 1988 and not at their earlier date of retirement or resignation. The effect of this policy approach is beneficial to the former employees concerned as the amount of pension disregarded as an employee-contribution (20% of the total) will be larger than if the split is based on the date of retirement.

  • 1 December 1988: the reduction provisions in S20 and S21 only apply if the person retired on or after the commencement of the SRCA on 1 December 1988. If the person was discharged before that date, their superannuation benefits are not taken into account. If a person discharges before 1 December 1988 and claims incapacity payments after this date, superannuation benefits are not taken into account.

  • 24 December 1992: S21A, which deals with the situation where a member receives both a superannuation pension and a superannuation lump sum benefit, commenced on 24 December 1992. If the member retired before that date, only the superannuation pension can be taken into account, the superannuation lump sum benefit is not caught by the reduction provisions of the Act.

  • 7 April 1994: the Military Compensation Act 1994, which commenced on 7 April 1994, provided that a person continues to receive weekly incapacity payments at 100% of normal weekly earnings for the first 45 weeks of incapacity, whether or not they are discharged from the ADF during this period. However, for a person who retired before 7 April 1994 and received Commonwealth superannuation, incapacity payments are reduced to 75%* of NWE immediately upon discharge from the ADF.
    [* the percentage of NWE may be higher if the person engages in suitable employment.]

  • 1 July 1999: MSBS Members are able to access that portion of their ‘Member Benefit’ that accrued prior to 1 July 1999. The remaining benefit is compulsorily preserved.

  • 27 April 2007: the notional Superannuation Contribution (SC) amount is 5% of NWE for all clients who discharge on and after 27 April 2007.

  • 27 April 2007: for clients who have received a superannuation lump-sum benefit – for incapacity calculations prior to 27 April 2007 the lump-sum is converted to a weekly amount by multiplying the lump-sum amount by 10% and dividing by 52.

  • For incapacity calculations on or after 27 April 2007, the lump-sum is converted to a weekly amount by multiplying the amount by an interest rate set by the Minister for employment (in line with the 10 year government bond rate) and then dividing the amount by 52.

9.3.1.1 

Example 1 – SRCA - Date of discharge before 1/12/88

Q. A person retires from the ADF before 1 December 1988 after 20 years’ service and receives a DFRDB retirement pension. The person is classified as a 'current employee' for the purposes of the SRCA.

Should the incapacity payment be reduced by the superannuation pension?

A. No. The superannuation pension cannot be taken into account. Incapacity benefits must be assessed in accordance with Section 19 of the SRCA. Sections 20 and 21 refer to retirement, be it voluntary or compulsory, which occurs 'at any time after the commencement of this section'. The commencement date for sections 20 and 21 is 1 December 1988. Since the person’s superannuation pension is paid as a result of retirement occurring before 1 December 1988, the superannuation pension cannot be taken into account in accordance with Section 20 or 21.

Example 2 – SRCA - Date of discharge before 24/12/92

Q. A person discharges from the ADF voluntarily in 1991 after 20 years’ service and receives a DFRDB retirement pension. The person elects to commute part of his pension benefit to a lump sum. After receiving the lump sum, the person’s pension benefit is reduced. The person is a 'current employee' for the purposes of the SRCA.

Should the incapacity payment be reduced by the superannuation pension?

A. Yes but only the reduced superannuation pension.

Only the reduced superannuation pension benefit can be taken into account in accordance with Section 20 of the SRCA. Although the person has received a lump sum as well as pension, Section 21A does not apply because retirement occurred before Section 21A came into force on 24 December 1992. 20% of the reduced pension is deemed to be the person’s own contributions to the pension and is not taken into account (the 20% amount deemed to be the employee's contributions remains constant for all future calculations). If the retirement had occurred after 23 December 1992, Section 21A would have applied.

9.3.2 MRCA

  • 1 July 2013: Those members receiving Commonwealth funded superannuation who have applied for incapacity payments prior to 1 July 2013 do not have their superannuation benefits reduced from their incapacity payments until they discharge from all forms of ADF employment, including the standby Reserve service or are considered to be a former member for the purposes of the MRCA via a determination under section 10.

    If a person has applied for incapacity payments prior to 1 July 2013 but subsequently ceases payment and then reapplies/submits a new claim after 1 July 2013, the persons superannuation benefits are reduced from their incapacity payments. They are not treated under the pre 1 July 2013 provisions.

9.3.2.1 

Example  – Date of claim for incapacity payments – either before or after 1 July 2013

Q. A male MSBS member retires from the Permanent Forces at the age of 55 on 1 July 2013. He receives a pension of $421.73 per week and a lump sum of $156,000. At the same time he transfers to the Reserves, having been provided with a skills waiver, and applies for incapacity payments. Is the superannuation pension and/or lump sum reduced from incapacity payments?

A. Yes because he has applied for incapacity payments on 1 July 2013 or later.

His incapacity payments will also be reduced by the amount of his actual earnings (AE) from Reserve service.