GDGR and Commissioner of Taxation (Taxation)

The Administrative Appeals Tribunal considered the dispute between GDGR (the applicant) and the Commissioner of Taxation concerning the tax treatment of invalidity pension payments received by the applicant. The applicant had been medically discharged from the Army and classified as having a Class A invalidity under the *Military Superannuation and Benefits Act 1991* (Cth). The core of the dispute revolved around how these pension payments should be treated for income tax purposes for the income years ended 30 June 2010 to 2015.

The Tribunal was required to determine whether the applicant's invalidity pension payments should be taxed according to section 307-145(1) of the *Income Tax Assessment Act 1997* (Cth) (ITAA97). This involved considering whether the applicant had made any election under regulation 995-1.03 of the *Income Tax Assessment Regulations 1997* (Cth) in relation to these payments. Furthermore, the Tribunal had to ascertain whether the invalidity pension was paid in respect of an interest that qualified as a defined benefit under section 291-175 of the ITAA97. The Tribunal also noted that amending regulations were made during the review proceedings, and that at various stages of the assessment and objection process, there was no specific "superannuation benefit" defined in the Income Tax Assessment Regulations for the purposes of section 307-70(1) of the ITAA97.

The Tribunal reasoned that the application of section 307-145(1) of the ITAA97 was contingent on the existence of a defined benefit interest and the making of an election under regulation 995-1.03. The Tribunal found that the applicant's invalidity pension payments did not fall within the definition of a "superannuation benefit" as contemplated by section 307-70(1) of the ITAA97 at the relevant times. Consequently, the conditions for applying section 307-145(1) were not met. The Tribunal also noted that the absence of a specified "superannuation benefit" in the regulations at the material times was significant.

The Tribunal concluded that the applicant's invalidity pension payments were not to be treated in the manner prescribed by section 307-145(1) of the ITAA97. The Tribunal set aside the objection decisions and remitted the matter to the Commissioner to re-determine the applicant's income tax liability for the relevant income years, with the direction that the invalidity pension payments were assessable income.