Campbell v Superannuation Complaints Tribunal [2016] FCA 808

18 July, 2016

The above judgement was handed down by Logan J at the Federal Court on 15 July 2016.
The matter related to the MSBS Scheme and in particular whether an invalidity pension under that scheme was superannuation. The Appellant had sought information regarding his MSBS interest in accordance with s.90MZB(2) of the Family Law Act 1975. The Appellant had an interest in the growth phase as well as an invalidity pension. The Trustee (the Commonwealth Superannuation Corporation) which was the Second Respondent in the appeal, provided two superannuation information forms in respect of both interests. The Appellant objected to the information being provided in respect of the invalidity pension arguing it was not superannuation and that therefore the Trustee had not provided the correct information as required under the regulations.
The nub of the case was whether an invalidity pension is a defined benefit interest for the purposes of the Family Law Act 1975 or whether it is superannuation at all.
The court held that an invalidity pension IS NOT a defined benefit interest. However it also held that the pension was nevertheless superannuation. The result therefore is that an invalidity pension is an accumulation interest and on that basis the trustee had not provided the correct information as required under the regulations. The Appellant should have provided information on the basis that the invalidity pension was an accumulation interest.
This is the first reported case where this issue has been considered by the Courts. It affects all current matters before the Family Court and Federal Circuit Court involving pensions which are being received due to invalidity. It also relevant to any superannuation splitting agreements.
If you have any matters that may be impacted by this decision you should contact us.
Given the importance of this decision it will be the subject of this year’s SuperSplitting Masterclass on 25 October 2016.

A copy of the judgment has been uploaded to our caselaw database.

9 responses to “Campbell v Superannuation Complaints Tribunal [2016] FCA 808”

  1. Christine West says:

    Why do we have to pay tax out of super pension from invalidity retirement?

    • SS_admin says:

      Hi Christine,

      This is largely a question of government policy. Invalidity pensions which are paid out of superannuation are taxed the same way as superannuation generally. Invalidity pensions which are paid out of schemes like the MSBS are paid out of taxable untaxed money (that is, no tax has been paid on the way in) so the policy is to tax it on the way out. It would of course be open to government to amend the law to not tax invalidity pensions in the same way they do not tax superannuation paid from taxable taxed or tax free sources after the member reaches 60 years of age. It should be noted that superannuation paid from taxable untaxed sources are still taxed after age 60 as well.

      • Bradley Campbell says:

        what about modification under 307.145 of the itaa

        • Bradley Campbell says:

          is it even a superannuation income stream? IF not should it not have different taxation treatment?

          • SS_admin says:

            The Federal Court has said it is superannuation and is an income stream so under the Income Tax Assessment Act is taxable if received under the preservation age with a 15% offset.

        • SS_admin says:

          That section applies to lump sums. A invalidity pension is an income stream.

          • Bradley Campbell says:

            An invalidity pension that is reveiwable does not meet the definition of a pension under the SIS act though. This is a requirement of the tax act to be deemed a Superannuation Income stream. Therefore by default, the invalidity benefit becomes a series of lump sums.
            Look @ 1.06 9(A) of the SIS regs 94. Payments need to be made at least annually, for it to be a pension. With a reviewable benefit that can cease altogether, how is this possible? Reg1.06 is a torturously written document…….. however, it cant be an income stream if it is not a pension under the SIS act. It says so in the ITAA 97.

          • Bradley Campbell says:

            It is an income stream by definition, however it is not a superannuation income stream.
            To be a Super income stream it must meet the definition as per 1.06 (9A) of the SIS Regs. Under these requirements, the rules do not ‘ensure’ the relevant requirements are met. It is a non account based payment so must meet 1.06 (9A) (b) (i) or (b) (ii). If you look at the MSBS?DFRDB acts, there is a residual capital value payable if the ‘benefit’ ceases. Here it fails (9A) (b) (i). Given it is reviewable, it is not payable for life. The ATO has already recognised the payment is variable outside CPI adjustments so fails to meet the requirements of (b) (ii).
            The members employer benefit is foregone for the member to receive the invalidity benefit. When the member is reviewed and the invalidity benefit ceases, the superannuation foregone is returned to the member. (MSBS is with interest, DFRDB receives their ordinary pension or 150% of member contributions if they don’t qualify for retirement pension). It is quite clear the rules do not ‘ensure’ certain things don’t happen in relation to the payment of the benefit, as per 1.06 (9A) of the the SISR. Therefore the benefit can not meet the definition of a pension.
            By virtue of the ITAA, an invalidity benefit then meets the definition of a Superannuation Lump sum and the modification for disability (307.145 ITAA) applies.
            I would really like a response as to how the rules ensure the requirements are met?

  2. Bradley Campbell says:

    This was my case and it appears with the recent tax case, the information that has been provided by the CSC is incorrect and the way you have been valuing these benefits is also incorrect.

    What happens now?

Leave a Reply

Your email address will not be published. Required fields are marked *