21 September 2020

Hundreds of millions of dollars at stake in APS super battle

| Ian Bushnell
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The bill is mounting from the alleged Commonwealth super bungle. Photo: File.

The Australian Public Service is sitting on an unpaid superannuation time-bomb that is soon to come to a head in the Federal Court.

Agencies, particularly those where staff are posted away from home either in Australia or overseas, have not included some allowances, including that for rent-free accommodation, in payments to the Commonwealth Superannuation Corporation.

The issue goes back two decades, involves thousands of staff and potentially hundreds of millions of dollars.

Canberra law firm BAL Lawyers is acting for a number of litigants and proceedings against the Department of Foreign Affairs and Trade are well advanced. That matter is expected to be decided in six months, while another action is about to be launched against Home Affairs.

BAL Legal Director – Employment Law and Investigations, John Wilson, says agencies have put their heads in the sand about the matter, about which the Department of Finance has set up an interdepartmental committee.

”I speculate that there is considerable discussion going on between Finance and individual agencies that apprehend that they’re in the gun for this and are asking where the money’s going to come from,” Mr Wilson said.

He suspects they may be using the current action as a test case.

Mr Wilson has been dealing with the issue since 2018 but it is believed to have first came to light in 2011.

He says the rent-free allowance is the principal payment in issue, but there are others such as hardship allowances that are also involved. He believes there are probably agencies not yet aware of their exposure.

Fears that the six-year statute of limitations may apply and claimants would run out time were, in his view, unfounded.

”It’s not in the nature of a contractual requirement … it’s a statutory obligation on the part of any agency to make contributions to the CSC in accordance with legislation. There is no ‘get out of jail card’ in that regard as I see it,” he said.

Although the actual amounts involved were still being calculated, Mr Wilson believes they will represent for individuals, in many instances, “tens of thousands of dollars in retirement income per annum”.

The legal action is occurring at a time when the Tax Office is taking a harder line with private sector employers who underpay super, and also identifying which of its own employees may be affected by the allowance issue so it can correct its reporting to the CSC.

”I am obviously limited in what I can say about actions that are on foot, but in general terms, the various agencies are between a rock and a hard place because on the one hand they’re [the ATO] telling everyone, certainly in the private sector, that if they don’t comply with their obligations under the separate Superannuation Guarantee Scheme, they’re going to crack down hard on them; and on the other hand, it may be they haven’t done what they are obliged to do,” he said.

One litigant told Region Media that he believes his super has been undercalculated by $120,000 which, when multiplier effects are taken into account, amounts to quite a hit to his retirement income.

”It has a really significant effect on people’s retirement situation,” he said. ”It’s potentially doubling someone’s retirement income in some cases.”

He says agencies have been delaying action and giving claimants the runaround.

The process has also revealed a lack of oversight of the CSC and that employees do not have recourse to the Tax Office, Ombudsman, or Fair Work Commission, which do not have jurisdiction when it comes to Commonwealth superannuation schemes.

The Australian Federal Police has also fallen foul of the super tangle, and appears to have conceded the point on certain allowances, but the situation is less clear on rent-free accommodation.

But its response gives some idea of the implications across the APS and the scale of the issue.

A spokesperson said that as a result of changes to the wording of the 2007-2011 Collective Agreement, some allowances became eligible for superannuation purposes which previously were not.

”This was not a conscious omission,” the spokesperson said.

The AFP estimates that the number of staff members now identified to have received an eligible allowance over the relevant period is more than 9,000.

”AFP employees who received eligible allowances have been identified and are being assessed to determine if the payment meets the eligibility requirements for the adjustment of superannuation salary,” the spokesperson said.

The estimated amount of the super adjustment reported in the AFP’s 2018-19 financial statements was $59 million.

”The figure to be reported in the 2019-20 financial statements will incorporate an additional year of accumulation within the provision estimate,” the spokesperson said.

A Home Affairs spokesperson said the Department was reviewing these claims on a case-by-case basis, and continues to consult other Commonwealth agencies to ensure a consistent approach to managing these issues.

A DFAT spokesperson said the department was also reviewing these claims and consulting with Finance and other agencies.

”As this issue is currently the subject of proceedings in the Federal Court of Australia, we are unable to comment further,” the spokesperson said.

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Would this involve the Australian aid public servants who didn’t have to pay any tax on their overseas earnings until that rort was stopped about 6 years ago? If so, frankly, they shouldn’t be compensated as some of them were on postings tax-free for years while their colleagues at the same posts paid full tax.

A now bankrupt Australian economy and therefore the tax collecting Australian government is being asked to pay additional monies to the most privileged people in Australia, the public servants who have all been on full pay. The little technical deficiencies are nothing compared to the hell everyone else in Australia outside the public sector is suffering.

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