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Income Tax: Alternative method for calculating the tax free component and taxable component of a superannuation benefit paid during the 2022–23 financial year for recipients of certain pensions under the Defence Force Retirement and Death Benefits Act 1973 and the Trust Deed referred to in section 4 of the Military Superannuation and Benefits Act 1991
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Turn the raw legal text into a practical explanation grounded in Income Tax: Alternative method for calculating the tax free component and taxable component of a superannuation benefit paid during the 2022–23 financial year for recipients of certain pensions under the Defence Force Retirement and Death Benefits Act 1973 and the Trust Deed referred to in section 4 of the Military Superannuation and Benefits Act 1991.
For subsection 307-125(5) of the ITAA 1997, this instrument specifies an alternative method for calculating the tax free component and taxable component of superannuation benefits specified in section 4 that are paid during the 2022–23 financial year. The alternative method is as follows:
(1) The superannuation benefit is taken to be paid in a way such that the tax free component and the taxable component of the benefit bears the same proportion to the amount of the benefit that the corresponding component of the superannuation interest identified in subsection 3(2) bears to the value of the superannuation interest.
(2) For the purposes of subsection 3(1), the superannuation interest is the superannuation interest supporting a pension specified in section 4. For the purposes of this section, assume that the pension is a superannuation income stream.
(3) For the purposes of subsection 3(1), determine the value of the superannuation interest and the amount of the tax free component and the taxable component of the interest when the relevant pension commenced.
(4) For the avoidance of doubt, the tax free component and taxable component amounts determined in accordance with the alternative method set out in subsection 3(1) are subject to any modification to the tax free component and taxable component that may arise due to the application of section 307-145 or section 307‑150 of the ITAA 1997.