Note: This Division is designed to give an overview of the taxation implications of service on a deployment. It does not try to deal with members' individual tax liability. Members should seek independent tax advice, taking account of relevant tax law and rulings.
See: Tax alerts
A member's ADF salary and salary-related allowances are exempt from income tax while on warlike service.
This exemption only applies to taxable income from ADF sources during deployed service, ie ADF salary and allowances earned for service in the operational area. Other sources of income are not covered by this exemption.
An assignment procedure must be completed to ensure that only those members who have been assigned for eligible service with a specified organisation in the specified area receive the taxation exemptions.
See: Part 1, Overview
Tax exemption continues during all forms of leave accrued in the operational area.
Recreation leave and war service leave do not need to be taken immediately after a period of warlike service to remain tax exempt. Unlike the normal calculation for leave, two days instead of weekends is not added for each five days of leave.
A member's salary and relevant allowances remain exempt from income tax during hospital treatment for an injury or illness received during warlike service.
The member can claim full tax exemption on ADF salary and allowances for further periods of hospital treatment for an injury or illness received during warlike service.
For the period that a member earns exempt income, any benefits received by the member that were directly related to the warlike service are not subject to fringe benefits tax. However, benefits received by the member irrespective of the warlike service continue to be subject to FBT. Defence pays the FBT.
Example: Ongoing benefits such as loan subsidies, Higher Education Contribution Scheme payments etc, continue to be subject to FBT, while benefits directly related to the warlike service, such as meals and certain annual leave travel would not be subject to FBT.
Since 1999-2000, all employers (including Defence) are required to report the 'grossed up taxable value' of fringe benefits on all employees' payment summaries if the total taxable value of fringe benefits in a FBT year (1 April to 31 March) is more than AUD 1,000.
If a member considers that the 'reportable fringe benefits amount' on their annual payment summary (formerly called group certificate) was incorrectly reported, they should contact the Defence Tax Management Office.
See: Tax alerts Division 1, Defence Tax Management Office
Application to Reservists: Yes, on continuous full-time service.
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