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Q1. Why were Warrant Officers not considered for Retention Bonuses?

A. The AERRB was aimed at reducing the discharge rates and identified shortfalls within those ranks indicated by the work force planners. At the time of the review no shortfalls had been identified at the warrant officer rank.

DGPERS-A are progressing ideas and policies to advantage WO, the main effort being directed toward remuneration reform. While this takes longer to sort out, it becomes more sustainable in the long term. We are in the midst of remuneration reform with the DFRT, but the key now is to muster the arguments for our WO.

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Q2. Who decided on the bonus amounts of $10k, $25k and $30k?

A. The bonus amounts were discussed in length by DGPERS-A staff and also went through a series of reviews before eventual approval by government.

Over the last few years the Personnel Executive have done a number of studies examining the factors involved in personnel separating from the ADF.

These studies have been conducted through a number of trades and ranks under a process known as the Human Resource Decision Support System. As a result, there is considerable data to indicate that a sum of $10,000 is a figure that, in general, has a significant influence in someone's decision to separate from the ADF. DGPERS-A staff also took practical figures to government based on funds available the requirement to keep within a reasonable budget.

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Q3. Why have the issues raised by members not been included in the policy documents?

A. The Director of Military Salary and Allowances (DMSA) was provided a list of questions raised by soldiers in regard to the AERRCB, CECRB and TTB, by DGPERS-A staff. Some of the questions have been included within the framework of the determination and others have not been considered because of current legislation in regard to bonuses and allowances.

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Q4. Are the bonuses tax exempt?

A. For those members serving in Australia No, they are not tax exempt. Those members who accept and are paid the bonus whilst deployed under war like conditions (23AD) of service only, are tax free. If you are serving under non warlike (23AG) conditions (Timor, Sinai etc) bonuses are taxed.

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Q5. Are members on deployment with Op ASTUTE who have not served sufficient time in country to achieve tax free status, but who will at their 91 day mark, entitled to be paid the retention bonus at the taxed rate and then have the tax refunded once they gain tax free status, as per their salary?

A. The bonuses are exempt from tax only if the member is deployed under a section 23AD certificate (ie, warlike service) and is still on duty. Members deployed to EM are covered by a tax free ruling 23AG (ie, non-warlike). Members who are under the tax free ruling (23AG) are assumed to be paying tax in the country that they are working in. This is not the case though, in EM.

Members who are deployed on Op ASTUTE are under a section 23AG, which means that their bonus will be taxed whether they have completed more than the 90 days or not and regardless of the tax zone they are in.

This has been confirmed by Defence Taxation Management Office (DMTO) for previous retention bonuses paid under section 23AG.

It is up to the member to approach the Australian Taxation Office and receive an individual ruling in order to receive a tax credit from the bonus. Tax credits are not guaranteed due to the fact that this bonus has not been earned in relation to the eligible duty (deployment).

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Q6. If someone elects to put their bonus into an approved superannuation scheme, how will it appear on their group certificate and what effect will there be in relation to fringe benefits?

A. Bonus payments are included as part of gross earnings (salary) on annual payment summaries (Group Certificate). If a member chooses to salary sacrifice, the total amount of gross earnings will be reduced by the sacrificed amount ie, the bonus amount or sacrificed amount will not appear as a specific individual item on the payment summary. There are no fringe benefits applied to the bonuses.

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Q7. Can I salary sacrifice my bonus into my spouse's superannuation fund?

A. NO, a member cannot sacrifice the bonus into their spouse's superannuation fund, they must sacrifice it into their own approved superannuation fund. It is based on the following:

  1. Contributions for spouses are treated differently and are considered a taxable contribution in the fund, which would incur 15% tax payable by the fund. Defence would not be eligible for a tax deduction, since the spouse is not an employee.the contribution would be a fringe benefit and would incur fringe benefits tax. It is Defence policy to pass on any FBT to the member. It would be reportable on the member's payment summary as a fringe benefit.

That said........There is the ability for superannuation to be split between spouses in certain circumstances and if the member is looking at this option they need to contact MSBS to see if this is available to them.

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Q8. Can I access my MSBS pension at 55 years of age now that the CRA has been extended to 60 years of age?

A. You will still be able to access your pension at 55 if you leave the permanent work force, even though the CRA is now extended to age 60. For this to change it would need to be passed through Legislation, and this is not on the agenda at this time. This is not to say that it won't change in the future. Members will still be able to choose whether they wish to continue to the extended CRA of 60 or discharge at 55, cease employment, and receive a pension/payout.

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Q9. With specific regard to the superannuation guarantee, would salary sacrificed contributions from any of the recent retention benefits - Division 7 (various pay categories), 19 (AERRC) and 20 (CECR) schemes count towards the annual 9 per cent employer contributions?

The 'Employees guide to salary sacrificing for superannuation' cannot be located on the ATO website; however, it contains information that is pertinent to those members wishing to salary sacrifice part of their salary to superannuation on a fortnightly basis. The ATO website states that - 'Salary sacrifice is an arrangement by which an employee agrees to forego part of their future salary or wages in return for their employer providing benefits of a similar value.' 'A contractual agreement with your employer to alter your salary package by exchanging part of your future salary or wages for another benefit is called a 'salary sacrifice arrangement'. http://www.ato.gov.au/individuals/content.asp?doc=/content/38172.htm&page=1&h1 Open in new window

The member is not sacrificing or forgoing any future salary or wages for superannuation as per the ATO website examples. That is, the member has not entered into a contract with Defence to lower their salary and increase their superannuation contribution. The members are being given a bonus and are in effect rolling this payment into Superannuation, which is being treated as a salary sacrifice in regards to concessional and non-concessional superannuation contributions. Members are to contact SmartSalary if they wish to salary sacrifice for superannuation on a fortnightly basis, thereby ensuring they have an 'effective salary sacrifice arrangement'.

In regards to the superannuation guarantee, the payment of any of the recent retention bonuses will not have an effect on the employer contributions which are paid by the Government, to Defence members. The Employer Benefit consists of two parts, a funded component (the 3% Productivity contributions) and an unfunded component (the difference between the total Employer Benefit and the funded component). The Employer Benefit is calculated on the member's salary in the last three years of service. In most schemes the employer contribution is about 9 per cent of salary at any given point in time. In MilitarySuper the employer contribution ranges between 18 and 28 per cent of the average salary in the last three years of service. The Employer Benefit is a notional amount on paper until a member exits the fund and is withdrawn from Consolidated Revenue. Phone advice from COMSUPER and MilitarySuper book, located on the website. http://www.militarysuper.gov.au/publications/pub_msbook.html Open in new window


Q10. There appears to be no reference or definition within the relevant sections of PACMAN on bonuses or superannuation contributions. Can a clear definition of this situation, and reason, be provided for this faux pas?

A. NO, there is no reference in the PACMAN as it is up to all members to seek individual financial advice when receiving additional bonuses/payments. This is clearly an individual issue if members are contributing large portions to their super funds and it would not be possible to cover all scenarios. Defence are not in a position to financially advise members and this is why it was clearly articulated in the Members Guide to the AERRCB/CECRB that they were to seek individual financial advice. Information can also be obtained from the COMSUPER website or by phoning 1300 006 727.

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Q11. Will I be able to place my entitled bonuses into MSBS or another superannuation portfolio of my choice?

A. YES, eligible members will be entitled to elect how they wish to be paid. Into your nominated superannuation account (this is a lump sum taxed at 15%), into your normal pay account (taxed at your nominal tax rate) or a mix of both as per Part D of both determinations. If you wish, you will also be able to change your payment election for the completion bonus element (ie, $30,000) prior to the expiration of your additional three year undertaking. Your respective career management agency will have a process in place for this to occur.

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Q12. If I elect to sacrifice into my DFRDB Account does Smart Salary have any involvement with the salary sacrificing of retention bonus funds?

A. A member cannot salary sacrifice to DFRDB, however can salary sacrifice to another approved superannuation scheme, or an offset account with MSBS. The option provided by DEFPAC is to put the bonus straight into super, not salary packaging on a fortnightly basis, therefore Smart Salary are not involved.

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Q13. When will my bonus be paid?

A. Members will be paid between one and two fortnights from receipt of acceptances at DEFPAC. This will depend on the number of acceptances received at DEFPAC at any one time.

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