Advice for your MilitarySuper benefit.
MilitarySuper closed to new members on 30 June 2016. Its employer benefit, pension options and access rules can depend on your service and discharge details. We can help you review the benefit and the choices available.
How discharge affects the benefit
The date and reason for leaving the ADF can affect when the benefit is payable and which options apply.
MilitarySuper has rules tied to service and discharge. The benefit may become payable before the usual retirement ages, depending on how and why you leave.
Your employer benefit is your final average salary — your super salary over your last 1,095 days of service — multiplied by your employer benefit multiple. That multiple builds faster the longer you serve: 18% of final average salary for each year of service up to seven years, 23% a year from seven to twenty, and 28% a year after twenty. Two of those step-ups are exit-timing decisions worth real money.
Leaving the ADF after age 55 generally makes the employer benefit available as a non-commutable pension. A Class A or Class B invalidity classification can also provide an indexed pension.
Invalidity classification is the part most worth understanding early. If you are medically separated you are placed in a class based on how much your injury reduces your capacity for civilian work. Class A is incapacity of 60% or more, Class B is 30% to 59% inclusive, Class C is under 30%.
What each pays is very different. Class A pays a pension built from the multiple you would have reached had you stayed until your compulsory retiring age for rank, or 55, whichever is later — not just to your actual discharge. Class B pays either half the Class A rate or a pension on your real service, whichever is greater. Class C pays no pension at all; the employer benefit is preserved instead. For Class A and B the employer benefit cannot be taken as a lump sum.
A DVA or compensation percentage is not relevant to your MilitarySuper classification — CSC says so explicitly, because the two are assessed on a different basis. And a classification can be reviewed: being moved from A or B down to C stops the pension immediately. An initial Class C classification is not subject to review.
Options to review before discharge
The benefit estimate, pension choices and access rules can be reviewed before the date is finalised.
- Your discharge date, to the day
- Your pension conversion factor is worked out on your age in years and days, so a date a few weeks apart changes your pension for life. Your multiple also steps up at seven and twenty years of service. Once the date is in the system it is hard to unwind. Model before you commit
- Invalidity classification
- If a medical separation is on the table, the class you are assigned decides whether an employer pension is payable at all — and for Class A and B, the employer benefit cannot be taken as a lump sum instead. It is a different set of decisions from a voluntary discharge, and they start earlier.
- How much of the employer benefit you convert
- Anywhere between half and all of it, from 55, once you have separated. The pension is indexed and paid for life; the part you do not convert cannot stay in the fund and is paid out or rolled over. Because MSBS can pay out decades before an ordinary retirement, the same election looks very different at 38 and at 56. Decision is permanent
- Other income and super accounts
- If you hold more than one super arrangement or receive other income, we can include them in the same retirement plan.
- DVA and compensation
- Compensation payments and super affect each other in ways that are genuinely complicated and specific to you. There is no rule of thumb worth repeating.
What members ask us
What do Class A, B and C mean?
If you are medically separated, you are placed in a class based on how much your injury reduces your capacity for civilian employment. Class A is incapacity of 60% or more. Class B is 30% to 59% inclusive. Class C is under 30%.
Class A and Class B pay an indexed pension and the employer benefit cannot be taken as a lump sum. Class C pays no pension — you receive a lump sum of your member benefit as at 30 June 1999, and the rest is preserved. If a medical separation is a possibility for you, this is worth understanding before the process begins rather than after.
Can I get a pension at 55, before I can touch a lump sum?
Yes — they are separate gates. Leaving the ADF after you turn 55 makes your employer benefit payable as a non-commutable pension, and a Class A or Class B invalidity pension does the same at any age. Neither waits for 60.
A lump sum generally does. It needs you to reach your preservation age — 60 for anyone born after 30 June 1964 — plus a change in your work status. Between 55 and then, CSC will pay you only your unrestricted, non-preserved amounts as cash, typically your pre-1999 member benefit.
I joined after 2016 — am I in MSBS?
No. MSBS closed to new members on 30 June 2016, and from 1 July 2016 ADF Super took its place. If you joined after that date you are in a different arrangement that works differently, and advice written for MSBS will not apply cleanly to you.
How is my pension actually calculated?
Take the part of your employer benefit you convert, and divide it by your pension conversion factor. The factor drops as you get older: 12.0 at 55, 11.0 at 60, 10.0 at 65, falling by 0.2 for each year in between.
The factor is worked out on your age in years and days, not whole years. CSC’s own worked example uses a discharge at 59 years and 118 days, giving a factor of 11.135. A discharge date a few weeks either side can change the pension amount.
Invalidity pensions are the exception: a Class A pension uses the factor for your compulsory retiring age rather than your actual age at discharge.
How much of my benefit can I turn into a pension?
Between 50% and 100% of your employer benefit, from age 55, once you have separated from the ADF. It is a non-commutable pension — you cannot cash it in later.
Whatever you do not convert cannot stay in the fund. It has to be paid out or rolled over, and cashing restrictions may mean some or all of it must go to another fund rather than to you. So this is not a decision you can half-make and revisit.
The option is not available at all if your compulsory retiring age for rank is under 55.
Is my MSBS pension taxed?
Part of it, for life. The majority of your employer benefit is unfunded — paid by the Australian Government when it falls due rather than built up and taxed inside the fund. That makes it an untaxed element, and an untaxed element stays assessable income even after 60.
A 10% tax offset applies to that untaxed component from age 60, and CSC applies it to your fortnightly payment without you asking. It runs out at a ceiling: for 2026–27 the concession covers defined benefit income up to $131,250 a year, capping the offset at $13,125.
Two parts of this are specific to military service. If your pension is a disability super benefit, a 15% offset applies instead of the 10%. And if you receive an invalidity pension that started on or after 20 September 2007, the veterans’ superannuation (invalidity pension) tax offset that followed the Douglas court decision may apply — the ATO works it out after you lodge your return, with no application needed, and it applies as far back as 2007–08.
I am thinking about moving to ADF Super. Can I change my mind?
No. Electing into ADF Super is permanent — you cannot rejoin MilitarySuper, and your employer benefit is compulsorily preserved in MilitarySuper until you are at least 55 and have retired from the ADF.
The election is permanent, so it is worth comparing the effect before making it.
What happens if I do nothing until 65?
You lose the choice. A preserved benefit has to be claimed by 65, and you have three months from your 65th birthday to lodge your application. After that it can only be paid as a lump sum — the pension option is gone.
What happens to my preserved benefit while I wait?
It does not sit still, and the two halves behave differently. The unfunded part of your employer benefit is adjusted each year in line with the consumer price index. Your member, productivity and ancillary benefits stay invested and move with investment returns, which can be negative as well as positive.
That split matters if you separate young: the market risk sits on one part of your benefit and not the other, and the option you are invested in is a live decision for as long as you are preserved.
Can you advise me without changing funds?
Yes. We can advise on your existing account. If another option is relevant, we will explain why and compare it with your current arrangement before recommending a change.
What does a first conversation cost?
The first conversation is free and takes about half an hour. Tell us what you would like to discuss, and we will explain how we can help.
About our advice
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About our adviser team
Nareena Aracas leads the Guideway Wealth advice practice, supported by a broader team of advisers.
- Nareena AracasSenior Financial Planner · Authorised Representative no. 398311
- Scott NanfroSenior Financial Planner in the broader adviser team · Authorised Representative no. 1255832
Authorised Representatives of Guideway Financial Services Pty Ltd ABN 46 156 498 538, AFSL & ACL 420367. Ask us for a Financial Services Guide at any time.