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Is the taxpayer entitled to a rebate under section 159SM of the Income Tax Assessment Act 1936 (ITAA 1936) on his pension?

No, the taxpayer is not entitled to a rebate under section 159SM of the ITAA 1936.

The taxpayer obtained two medical reports to support his discharge on medical grounds from service as a police officer.

The taxpayer was medically discharged, aged less than 55, and began to receive a pension from the employer sponsored superannuation scheme.

The taxpayer subsequently obtained additional medical certificates.

In order to determine if the taxpayer is entitled to a rebate it is necessary to consider the meaning of a number of the terms used in section 159SM of the ITAA 1936.

Pension income in a year of income must include a 'rebatable 27H amount' for any rebate entitlement to arise under section 159SM of the ITAA 1936.

'Rebatable 27H amount' is defined in subsection 159SJ(1) of the ITAA 1936 as: 'in relation to a rebatable ETP annuity or a rebatable superannuation pension and in relation to a year of income, means: (a) if: (i) the 55th birthday of the recipient of the annuity or pension occurred before the year of income; or (ii) the annuity or pension is a death or disability annuity/pension for the recipient; an amount included in assessable income under section 27H in respect of the annuity or pension; or (b) in any other case - so much (if any) of an amount included in assessable income under section 27H in respect of the annuity or pension made on or after the recipient's 55th birthday;'

As the taxpayer, in this case, is under the age of 55 the issue raised by the applicant is if the pension is a disability pension. Subsection 159SJ(1) of the ITAA 1936 defines a disability pension as: 'in relation to a person, means: (a) ... (b) an annuity or superannuation pension provided to the person: (i) ... (ii) if the first payment date for the annuity or superannuation pension is on or after 1 July 1994 - in the event of the disability of the person, where 2 legally qualified medical practitioners have certified that the disability is likely to result in the person being unable ever to be employed in a capacity for which the person is reasonably qualified because of education, training or experience;'

Two medical practitioners must have certified the disability is likely to result in the taxpayer being unable ever to be employed in a capacity for which the taxpayer is reasonably qualified because of education, training or experience.

Under the rules of the relevant superannuation scheme a person is entitled to a benefit if the trustee certifies they are incapable of performing the duties of their office after considering medical advice. Therefore, a person can be entitled to an invalidity benefit from the scheme without satisfying the requirements of a disability pension in subsection 159SJ(1) of the ITAA 1936.

The applicant has provided copies of two medical reports obtained in support of his medical discharge. Both reports state the taxpayer is not fit for normal police duties without any comment on his ability to undertake other appropriate employment. These reports do not satisfy the requirements for a disability pension under subsection 159SJ(1) of the ITAA 1936.

This is supported by the fact the trustee of the fund has advised the pension is not eligible for a rebate for Reasonable Benefit Limit (RBL) purposes. It should be noted the definition of a 'disability superannuation pension' in the RBL provisions contains the same requirements as in subsection 159SJ(1) of the ITAA 1936.

The applicant has subsequently provided additional medical certificates.

The additional certificates provided by the applicant still do not satisfy the requirements for the pension to be regarded as a disability pension for the purposes of subsection 159SJ(1) of the ITAA 1936.