Finance Minister Senator Katy Gallagher: case could have widespread, significant, unintended and inequitable financial ramifications. Photo: Region Media.
The Federal Government has moved to head off a potential $8 billion public service superannuation bill, introducing retrospective legislation in response to a looming court case.
Finance Minister Senator Katy Gallagher said the Public Sector Superannuation Salary Legislation Amendment Bill 2022 would ensure that the superannuation entitlements of Commonwealth employees remain as they have been understood, by Commonwealth employees and employers, over a long period.
The Bill retrospectively repeals paragraph 5(e) of the Superannuation (Salary) Regulations, which included the value of rent-free housing in the default superannuation salary of Commonwealth employees in particular circumstances, with effect from 1 July, 1986.
It comes as three Department of Foreign Affairs and Trade staff claim in the Federal Court that DFAT did not correctly include their rent-free accommodation and some allowances as part of their salary, while they were posted overseas.
The government believes that a successful claim could also affect about 10,000 public servants posted overseas between 1986 and 2022, costing the Commonwealth between $3 billion and $8 billion.
Senator Gallagher said if the court accepted this interpretation of 5(e) it could have widespread, significant, unintended and inequitable financial ramifications for Commonwealth employees and the Commonwealth.
She said some Commonwealth employees could receive significant windfall increases in superannuation benefits amounting to millions of dollars that were well beyond community standards only because they have received rent-free housing.
This would expose the Commonwealth to significant additional costs to meet increased superannuation benefits and additional employer contributions.
A small number of Commonwealth employees could also incur large, unexpected debts for unpaid member contributions in return for little or no increase in their superannuation benefits.
“The Bill protects against these potential unintended outcomes and ensures that the entitlements of Commonwealth employees remain fair and reasonable and, importantly, that they continue to represent a responsible use of taxpayers’ money,” Senator Gallagher said.
“The retrospective repeal will not apply to Commonwealth employees, if any, with a default superannuation salary that explicitly included the value of rent-free housing provided to them from 1 July, 1986 to 28 February, 2022, as evidenced by contributions having been paid on that basis.
“The Bill is the most effective way of protecting against the unintended, and inequitable consequential impacts of a potential judgment that reverses long standing practice.”
The Bill followed the prospective repeal of paragraph 5(e) of the Regulations that the former government commenced from 1 March, 2022.
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