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Australian Government Coat of Arms

Budget | 2014-15

Budget 2014-15
Australian Government Coat of Arms, Budget 2014-15

Part 2: Expense Measures (continued)

Defence

Australian Defence Force Gap Year Programme — re‑establishment

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
Department of Defence 18.3 37.5 57.5 78.5

The Government will provide $191.8 million over four years to re‑establish the Australian Defence Force Gap Year Programme.

The programme will give school leavers the opportunity to experience the Australian Defence Force for one year.

Australians aged 17 to 24 years who have completed year 12 or equivalent studies will be eligible to apply for the Gap Year, with the first intake of the programme to occur in January 2015.

This measure delivers on the Government's election commitment.

Further information can be found in the Coalition's Policy for Stronger Defence.

Australian Defence Force Support to the G20 Summit

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
Department of Defence

The Government will provide $8.0 million in 2014‑15 for the Australian Defence Force to provide security support to the G20 Summit.

The cost of this measure will be met from within the existing resources of the Department of Defence.

Defence Forces Retirement Benefits and Defence Force Retirement and Death Benefits superannuation payments — indexation

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
Department of Defence 318.1 332.2 344.1 356.7
Total — Expense 318.1 332.2 344.1 356.7
Related revenue ($m)
Australian Taxation Office * * * *
Total — Revenue * * * *

The Government will allocate $1.4 billion over four years as a result of improvements to the indexation of payments made under the Defence Forces Retirement Benefits (DFRB) and Defence Force Retirement and Death Benefits (DFRDB) superannuation schemes. The impact of this measure is $135.1 million in underlying cash terms over the forward estimates.

From 1 July 2014, DFRB and DFRDB superannuation scheme members aged 55 and over will have their superannuation benefits indexed by the better of the Consumer Price Index and the Pensioner and Beneficiary Living Cost Index, with reference also to a benchmark level of Male Total Average Weekly Earnings.

Additionally, the Government will exempt DFRB and DFRDB members from any Division 293 tax liability for the one‑off increase in the capitalised value of the benefit arising from the new indexation arrangements. Division 293 tax is imposed under the Income Tax Assessment Act 1997 on concessional contributions made by individuals whose income and relevant concessionally taxed contributions exceed $300,000. This measure delivers on the Government's election commitment.

Further information can be found in the Coalition's Policy for Stronger Defence and the Coalition's Policy for Veterans and their Families.

Middle East Area of Operations — continuation of Australia's military contribution

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
Department of Defence 131.3 ‑33.7 18.5
Total — Expense 131.3 ‑33.7 18.5
Related revenue ($m)
Department of Defence 3.3
Australian Taxation Office ‑8.0 ‑6.5
Total — Revenue ‑4.7 ‑6.5
Related capital ($m)
Department of Defence ..

The Government will provide $116.2 million over three years for the net additional cost (including remediation costs) of continuing Australia's military contribution to international stabilisation and counter‑terrorism efforts in the Middle East Area of Operations (MEAO) in 2014‑15. The cost will be reduced by the recovery of $3.3 million from other Coalition forces for logistic support provided by the Australian Defence Force (ADF).

In 2014‑15 Australia's military contribution will be delivered through three operations: Operation Slipper — the ADF contribution to the International Security Assistance Force (ISAF) campaign in Afghanistan; Operation Manitou — the ADF contribution to the international Combined Maritime Forces' operations to counter terrorism, piracy and related illegal activities in the MEAO; and Operation Accordion — the ADF's activities in the Gulf States of Bahrain, Qatar and the United Arab Emirates in support of Operation Slipper, Operation Manitou and the ADF's broader activities in the MEAO. In previous years all the above activities were included in Operation Slipper.

Funding has been provided for Operations Slipper and Accordion for the six months ending 31 December 2014, the end date for the current ISAF mission (see also Statement 8: Statement of Risks in Budget Paper 1).

Military Superannuation — establish new accumulation arrangements

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
ComSuper 1.5 0.8 ‑1.5
Department of Defence ‑98.3 ‑165.3
Total — Expense 1.5 ‑97.6 ‑166.8
Related revenue ($m)
Australian Taxation Office 6.7 14.2
Related capital ($m)
ComSuper 1.5 1.5

From 1 July 2016, the Government will establish a modern fully funded, accumulation superannuation scheme for new members of the Australian Defence Force (ADF). The existing Military Superannuation and Benefits Scheme (MSBS) will be closed to new members from this date.

The introduction of new fully funded arrangements will reduce the Government's unfunded superannuation liability by an estimated $126 billion by 2050.

Existing MSBS members who leave and then rejoin the ADF are able to rejoin their existing MSBS arrangements.

There will be no change to the superannuation arrangements for existing MSBS members, but they may elect to be covered by the new arrangements.

Under the new arrangements, the Government will pay a 15.4 per cent contribution to a member's chosen superannuation fund. The contribution rate will increase to 18 per cent for any period in which members are serving in war‑like operations.

Serving ADF personnel covered by the new arrangements will also be covered by statutory death and disability arrangements consistent with the defined benefit arrangement currently in place under the MSBS.

The new arrangements will be more flexible than the MSBS, as members will be able to transfer superannuation benefits to a fund of their choice.

Operation Resolute — extension

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
Department of Defence 59.7 0.6

The Government will provide $60.3 million over two years for the net additional cost of continuing Operation Resolute until June 2015. Operation Resolute is the Australian Defence Force's contribution to the whole‑of‑government effort to protect Australia's borders and offshore maritime interests.

Funding beyond June 2015 will be considered in the 2015‑16 Budget consistent with Government consideration of expenditure for all Defence operations.

Further information can be found in the Coalition's Operation Sovereign Borders policy.

Savings and efficiencies

Expense ($m)
  2013-14 2014-15 2015-16 2016-17 2017-18
Department of Defence
Defence Materiel Organisation
Total — Expense

The Government will achieve savings of $1.2 billion over four years in the Defence portfolio through initiatives to increase efficiency, reduce spending in lower priority areas, and defer lower priority projects. All savings from this measure will be reinvested in Defence capability, resulting in no impact on overall Defence funding.

The major components of this measure are:

  • a reduction in Defence civilian staff numbers, resulting in 1,200 fewer Australian Public Service staff and 300 fewer service provider staff by 2017‑18, saving $606 million over four years;
  • a deferral of Phase 3 of the Single Living Environment and Accommodation Precinct project, saving $300 million;
  • a reduction in Smart Sustainment initiatives, saving $63.6 million over four years; and
  • a reduction in the use and support of the Australian Defence Force's fleet of General Service B‑Vehicles, saving $60 million over four years.