Senator the Hon Katy Gallagher

Tomorrow the Government will introduce the Public Sector Superannuation Salary Legislation Amendment Bill 2022 (the Bill) to 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 does this by retrospectively repealing 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.

The Government has taken this step in response to a Federal Court case that has exposed differing views on the operation of 5(e). One interpretation could have widespread, significant, unintended and inequitable financial ramifications for Commonwealth employees and the Commonwealth, including:

• some Commonwealth employees could receive significant windfall increases in superannuation benefits that are well beyond community standards (in some cases in the millions of dollars) only because they have received rent-free housing;
• a small cohort of Commonwealth employees could incur large, unexpected debts for unpaid member contributions in return for little or no increase in their superannuation benefits; and
• the Commonwealth could incur significant additional costs to meet increased superannuation benefits and additional employer contributions.

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.

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 judgement that reverses long standing practice. The Bill follows the prospective repeal of paragraph 5(e) of the Regulations that commenced from 1 March 2022 by the former Government.