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Division 2: Gratuities on retirement and invalidity

2.3.8 What is a gratuity?

  1. A gratuity is a one-off payment made by the Defence Force Retirement and Death Benefits Authority (DFRDB) to ADF members.

  2. The payment is made to the member when all these conditions apply.

    1. They are leaving the ADF.

    2. They are an eligible former member for the purposes of the Defence Force Retirement and Death Benefits Act 1973 (the DFRDB Act).

    3. They are not eligible to retirement pay, invalidity benefit or preservation benefits under the DFRDB Act.

      Exception: In certain cases a gratuity is payable to a member who is retired with a class C invalidity benefit under the DFRDB Act but who is not entitled to invalidity pay.

    4. Related information:
      The DFRDB has an Internet site, www.dfrdb.gov.au.
      Many sections in this Division refer to the Defence Force Retirement and Death Benefits Act 1973.

2.3.9 About gratuities

  1. The gratuity is payable to a member on the basis of the number of completed years of eligible service.

  2. When a member is eligible for a gratuity at different rates for different periods of eligible service, the member receives the appropriate rate per annum for the exact period of service completed for all except the most recent period, which is calculated to the last completed year of eligible service.

  3. The DFRDB Authority may pay a gratuity to a person other than the member only in these cases.

    1. The member is mentally ill and incapable of managing their affairs.

    2. The member is in prison.

    3. The member has a disability.

2.3.10 Member this Division applies to

  1. This Division applies to eligible former members, as defined under the DFRDB Act. The DFRDB scheme is a closed scheme and therefore this Division has a limited life.

  2. For the definition of eligible service, a person is taken to be a member on continuous full-time service for a period if both these conditions apply.

    1. Under subsection 63 (1) of the DFRDB Act, that Act applies to the person as if the person had not retired, and as if the person were on leave without pay, for the period.

    2. Deferred benefits were applicable to the person under the DFRDB Act and cease to be applicable under section 83 of that Act.

2.3.11 Definitions

This table outlines the definitions used in this Division.

Definitions
Term Meaning in this Division

Eligible service

Continuous full-time service by the member, when a contributor under the DFRDB Act.

Exception: Eligible service does not include a period of previous service if a member made an election to purchase previous non-contributory service under subsection 27(1) of the Defence Force Retirement Benefits Act 1948 or under subsection 83(3) of the Defence Force Retirement Benefits Act 1959.

Note: In the total workforce model, a member on continuous full-time service may be described as a member in Service category 6 or 7. A member who is in Service category 3, 4 or 5 and also on Service option C is also on continuous full-time service.

Non effective service

A period of eligible service exceeding 21 consecutive days when a member is:

  • on leave without pay.
  • absent without leave.
  • in custody, under suspension, awaiting or undergoing trial on a charge in which the member is later convicted and imprisoned, or otherwise detained or undergoes field punishment.
  • serving a period of imprisonment or other detention or undergoing field punishment

Officer

In this Division, officer includes Midshipmen and Officer Cadets.

Retirement

Retirement as a member of the Defence Force. This includes termination of appointment as an officer of, or discharge from, the Defence Force.

2.3.12 Gratuity for officers

  1. This section applies to an officer who meets all these conditions.

    1. The officer is not eligible on retirement to retirement pay, or invalidity benefit, under the DFRDB Act.

    2. They have completed 10 years' eligible service and retire on or after attaining the compulsory retiring age for rank.

    3. They have completed 12 years' eligible service and retire to meet the needs of the Service before attaining the compulsory retiring age for rank.

  2. On retirement, the member is eligible to a gratuity at the rate of $240, for each completed year of eligible service.

  3. A member's period of eligible service may include a period served as a member other than an officer. In this case, the gratuity is $100 a year, for the completed years of eligible service as a member other than an officer.

2.3.13 Gratuity for certain fixed tenure appointment officers and others

  1. This section applies to an officer who meets these conditions.

    Exception: An officer in this section does not include a medical officer or dental officer.

    1. The officer is a member of the Permanent Forces.

    2. The officer is serving under a fixed tenure appointment, including an extension of a fixed tenure appointment.

      Note: A fixed tenure appointment was formerly known as a short service commission.

  2. On retirement, the member is eligible to a gratuity worked out at the rate of $100 for each completed year of eligible service.

  3. A member's period of eligible service may include a period served as a member other than an officer. In this case, the gratuity is the sum of these amounts.

    Gratuity amount
    Item If the officer... then the benefit is...

    1.

    completed 12 years eligible service before appointment as an officer

    $100 for each year of eligible service completed before appointment.

    2.

    has not completed 12 years' eligible service before appointment as an officer

    • $40 for 1 completed year of eligible service.
    • $80 for 2 completed years of eligible service.
    • $120 for 3 completed years of eligible service.
    • $160 for 4 completed years of eligible service.
    • $200 for 5 completed years of eligible service.
    • $240 for 6 completed years of eligible service.
    • $340 for 7 completed years of eligible service.
    • $440 for 8 completed years of eligible service.
    • $540 for 9 completed years of eligible service.
    • $760 for 10 completed years of eligible service.
    • $980 for 11 completed years of eligible service.

2.3.14 Gratuity for other ranks

  1. This section applies to a member (other than an officer) who is not entitled to retirement pay, or invalidity benefit, under the DFRDB Act.

  2. The member is eligible on retirement to a gratuity set out in this table.

    Retirement gratuity
    Item If the member has... then the benefit is...

    1.

    completed 12 years' eligible service

    $100 for each completed year of eligible service.

    2.

    not completed 12 years' eligible service

    • $40 for 1 completed year of eligible service.
    • $80 for 2 completed years of eligible service.
    • $120 for 3 completed years of eligible service.
    • $160 for 4 completed years of eligible service.
    • $200 for 5 completed years of eligible service.
    • $240 for 6 completed years of eligible service.
    • $340 for 7 completed years of eligible service.
    • $440 for 8 completed years of eligible service.
    • $540 for 9 completed years of eligible service.
    • $760 for 10 completed years of eligible service.
    • $980 for 11 completed years of eligible service.

2.3.15 Invalidity benefits

  1. This section applies to a person who becomes eligible to an amount of invalidity benefit under subsection 32 (2) of the DFRDB Act. This refers to retirement of a member on the ground of invalidity, or of physical or mental incapacity to perform their duties.

  2. If the person was an officer immediately before retirement, the person is entitled to a gratuity worked out at the rate of $150 for each completed year of eligible service.

  3. If the member's period of eligible service includes a period served as a member other than an officer, the gratuity is $100 a year for the period of eligible service as a member other than an officer.

  4. A person will receive the gratuity amount in section 2.3.12, Gratuity for officers, if both these conditions apply.

    1. The person retired on or after attaining the compulsory retiring age for rank.

    2. The person would have been eligible for a gratuity if they had not retired on the grounds of invalidity.

  5. If the person was a member other than an officer immediately before retirement, the person is eligible to a gratuity of $100 for each completed year of eligible service.

  6. A person may become eligible for a gratuity under this section on reclassification as Class C, under section 34 of the DFRDB Act. In this case, the amount of gratuity must be reduced. The reduction amount is the difference between these two amounts.

    1. The total amount of invalidity pay received by the person under the DFRDB Act.

    2. The amount that would have been payable under subsection 32(2) of the DFRDB Act, if the person had been classified Class C on retirement.

  7. If a member is already paid a gratuity under this Division, the invalidity benefit will be reduced by the gratuity amount already paid.

2.3.16 Gratuity not payable

A member is not entitled to a gratuity under this Division in these cases.

  1. The member is not paid invalidity benefit because of the operation of section 27 or 29 of the DFRDB Act.

  2. For a period of eligible service where transfer value is payable under section 77 of the DFRDB Act.

  3. For a period of eligible service where deferred benefits are applicable.

    Exception: When Deferred benefits cease to be applicable because of the operation of subsection 78 (6) of the DFRDB Act.

2.3.17 Reduction of amount for non-effective service

  1. The amount of retiring gratuity payable to a member will be reduced pro-rata if their period of eligible service includes one or more periods of non-effective service. The retiring gratuity which would otherwise be payable to the member will be reduced under the formula set out in this section.

  2. This section applies when both these conditions are met.

    1. A member's period of eligible service includes periods of non-effective service.

    2. A member's period of eligible service is no more than the sum of these two periods.

      1. The member's completed years of eligible service.

      2. The total of the periods of non-effective service.

  3. The amount of gratuity to which the member would, but for this section, be eligible for under this Part must be reduced under this formula.

    A x (B - C) ÷ B

    A is the amount of gratuity to which the member would, but for this section, be eligible for under this Part.

    B is the member's completed years of eligible service.

    C is the period by which the sum of the periods in subparagraphs 2.b.i and ii exceeds the member's period of eligible service.

2.3.18 Repayment if a member rejoins

  1. This section applies if a person meets any of these conditions.

    1. They have been paid a gratuity under this Division.

    2. Before 6 January 2000 (the date when Determination 2000/1, Conditions of Service, commenced), under Determination 0705, Gratuities, either of these situations applied.

      1. The member was entitled to invalidity pay under section 37 of the DFRDB Act or on a review or appeal under Part XI of that Act.

      2. The member was a person to whom the DFRDB Act applies because of the operation of section 63 of the Act.

      Example:
      A member joins the ADF on 1 May 1991 under the DFRDB scheme.
      The member is discharged on 30 April 2004, after 13 years' service. The member receives their member's contributions and gratuity.
      The member re-enlists on 1 July 2004. Section 63 of the DFRDB Act provides that a member who rejoins within 90 days of leaving becomes a DFRDB member again. The DFRDB Authority allows the member's retirement to be disregarded. The Act applies as if the member had not retired and the period 30 April to 1 July 2004 had been leave without pay.

  2. The member must repay the gratuity to the Commonwealth.

  3. The amount recoverable may be paid in a lump sum. The CDF may also approve the amount to be paid in instalments. The CDF must consider these criteria.

    1. The person's salary.

    2. The total amount to be repaid.

    3. Any remaining period of service.

2.3.19 Related provisions of the DFRDB Act

This table outlines the DFRDB Act provisions related to this Division.

DFRDB Act provisions
Part Part title Section

I

Preliminary

  • 3 Interpretation

III

Contributions

  • 21 Purchase of previous non-contributory service

V

Invalidity benefits

  • 27 Incapacity due to wilful action
  • 29 Invalidity or incapacity arising during absence without leave exceeding 60 days
  • 32 Class C invalidity benefit
  • 34 Reclassification in respect of incapacity
  • 37 Service Chief may inform authority of grounds of retirement

VII

Candidates at Parliamentary elections

  • 52 Effect of election under section 51 (Election by re-instated candidate)
  • 53 Refund of benefits by re-instated candidates to whom this Part applies
  • 55 Rights of contributing members who resign to contest elections and are not re-instated

VIII

General provisions applicable to contributions and benefits

  • 59 Instalments of pension benefits
  • 63 Non-recipient retired member who again becomes an eligible member within 90 days

IX

Division 3 (Preservation of rights of contributing members ceasing to be eligible members of the Defence Force)

  • 77 Circumstances in which transfer value is payable
  • 78 Circumstances in which person entitled to deferred benefits
  • 83 Person is entitled to deferred benefits again becoming a member etc. before benefits payable

X

Contributors under previous benefits scheme etc

  • 89 Purchase of previous non-contributory service
  • 90 Elections to become contributors by certain members

XI

Review of decisions of Authority

  • 99 Review of decisions of Authority