Stephen Jones (Whitlam, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I present the explanatory memorandum to this bill and move:

That this bill be now read a second time.

The Public Sector Superannuation Salary Legislation Amendment Bill 2022 repeals paragraph 5(e) of the Superannuation (Salary) Regulations with effect from 1 July 1986 and provides that the effect of the repeal does not apply to individuals where limited circumstances are satisfied.

The changes in the bill are only relevant to current and former Commonwealth public sector civilian employees.

The default superannuation salary of a member of the Commonwealth Superannuation Scheme established under the Superannuation Act 1976 includes the value of any allowance that, under the regulations, is to be treated as salary under the act.

Prior to 1 March 2022 paragraph 5(e) of the regulations provided that the rent-free use of housing made available to a person by reason that they held a particular office or performed particular duties or work was an allowance that was to be treated as salary for the purpose of the act.

The value of rent-free housing as per paragraph 5(e) of the regulations flowed through to the default superannuation salary of members of the Public Sector Superannuation Scheme, and members of the Public Sector Superannuation Accumulation Plan and certain members of non-Commonwealth choice funds.

At the time the regulations were made in 1978, an employee's assessable income was taken to include the value of rent-free housing. With the introduction of the fringe benefits tax regime in 1986, the tax burden in relation to rent-free housing shifted from the employee to employer.

Following this change in 1986 the Commonwealth has typically not treated rent-free housing as forming part of superannuation salary and generally neither employers nor employees have made superannuation contributions that have taken into account the value of rent-free housing.

A recent case before the Federal Court has exposed differing views on the operation and scope of former paragraph 5(e) of the regulations. If the interpretation as argued by the applicants was accepted, it would have significant financial impacts for the Commonwealth and inequitable financial outcomes for differing cohorts of individuals.

Some individuals would receive an unexpected windfall increase in their superannuation benefits while others could incur potentially large unexpected debts for unpaid member contributions with little or no corresponding increase in their superannuation benefit.

These outcomes would be a consequence of the reliance by all relevant parties on a view that rent-free housing at the time it was provided did not form part of superannuation salary.

Retrospectively repealing paragraph 5(e) of the regulations will regularise the past administrative practice of Commonwealth employers and employees by effectively restoring the position with respect to rent-free housing that all relevant parties have treated as governing the Commonwealth civilian public sector superannuation schemes since 1986.

The repeal of paragraph 5(e) of the regulations will commence from 1 July 1986, the date of the introduction of the fringe benefits tax regime, and therefore regularise the change in practice that seemingly occurred after that time.

As the purpose of the retrospective repeal of paragraph 5(e) of the regulations is to regularise the longstanding practice of employees and employers, the bill makes provision for cases, if any, in which paragraph 5(e) was applied historically in particular employer relationships in a way that included the value of rent-free housing in superannuation salary.

The bill does this by excluding a limited cohort of individuals from the effect of the repeal of paragraph 5(e) of the regulations where no-one was acting pursuant to a mistake as shown from the actions of both Commonwealth employers and employees as evidenced by contributions having been made on the basis, in the period 1 July 1986 to 28 February 2022, that the value of the rent-free housing received by the employee was included in their superannuation salary.

The exclusion end date of 28 February 2022 reflects that paragraph 5(e) of the regulations was repealed with prospective effect from 1 March 2022.

I commend the bill to the House.

Milton Dick (Speaker) Share this | Link to this | Hansard source

The question is that the bill be now read a second time. Is leave granted to continue the debate?

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

Leave is not granted.

Milton Dick (Speaker) Share this | Link to this | Hansard source

There is no leave granted. I give the call to the member for Melbourne.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

Thank you, Mr Speaker. Leave is not granted. If I can explain why and put our position on the record to be clear about the division we will be calling, it is unusual for a bill to come to the House for a second reading with people not having time to consider it, debate happening immediately and then it goes straight to a vote. This is a bill that has financial consequences, as the minister has outlined. It is a bill that was brought to the Senate in similar circumstances yesterday and rushed through in the morning. It is not clear that there is a compelling case for urgency or that this can't be dealt with in the normal course.

I understand that, as a matter of process, it is probably the case that the government and the opposition are prepared to push this through quickly. But on bills that do have financial consequences, especially if something has been known for some time, especially where the context was carried over from the previous government, we should not be in the practice of forcing people in this House, especially when there is such a large number of crossbenchers here, to just take something at face value and push it through without the opportunity to have the usual debate. We are in a position where we don't know enough about this bill to be able to support it because the government is rushing it through.

From what the minister has said, my understanding is that this is in part about how a court interprets an enterprise agreement and what counts as salary for the purposes of superannuation. It is often the case that employees will make trade-offs in doing that and will say, 'I accept a lower wage in return for a bigger package,' and then superannuation is calculated on that whole package. If that's what's happening here, then it may be that the employees have a legitimate argument. On the other hand, it may be that there's a loophole that has been exposed, and, if we had more time to consider it, we might be in a position to agree. But given that it is being rushed through and there's been no basis put as to why it should be rushed through and, especially given that we know that this issue has been here for months and could have gone through the usual parliamentary processes, we can't support it being pushed through on the second reading. The usual practice should apply.

I understand there's a lot that the House has got to get to today, so we won't speak any further on the second reading question. We tend not to divide on the question that will now be put by the government to ensure its passage through—we've made our point about it being rushed through—but we will oppose the second reading, in large part, on process grounds because we don't think that any of us should be put in a position of having to vote on a bill that has only been introduced today when no compelling case for urgency has been made. It sets a very, very bad precedent, especially given that there were weeks in which everyone in this parliament could have been given the content of the bill, told of its significance and able to consider it with their own teams, take advice and come to a genuine position. This is bad process. It's a bad way to start the parliament, and we can't support it.

Mr Tony Burke (Watson, Australian Labor Party, Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

To facilitate debate, I move:

That so much of the standing and sessional orders be suspended as would prevent the bill being passed through all stages.

Question agreed to.

Stuart Robert (Fadden, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I thank the government for introducing the Public Sector Superannuation Salary Legislation Amendment Bill 2022, and I thank the Leader of the Greens for his concerns, some of which are quite legitimate. It is a very rare thing for a parliament to consider making a retrospective law, dating back to the 1980s, on something that is currently before the courts. It's very, very rare. I've been here for 15 years. This is only the second time I've seen it done. The other time was when I did it as the Assistant Treasurer five years ago. So I'm very cognisant of why assistant treasurers, who are responsible for super and tax, always get lumbered with the most contentious and difficult issues. It's why I appreciate the point the Leader of the Greens made because this is very, very unusual.

One of the reasons assistant treasurers find themselves in these positions—and the last time also dealt with superannuation—is that when laws were written back in the 1980s and 1990s many things were assumed. In the case I dealt with, the assumption was that everyone knew what a lump sum was in super. And it was not defined until people took it before a court to seek it to be defined.

We are facing a similar issue here, where, pre-FBT and in the absence of a definition—in this case, the condition of rent-free housing ostensibly for diplomats overseas, whilst not explicitly provided for, being a basis for salary for which super is on top of—public servants have sought to take it to court. That case—the Peace case, if you like—relates to potential windfall superannuation payments, as well as unexpected debts from unpaid member contributions, and is before the Federal Court. It has been taken there by three former diplomats who are claiming the value of their publicly funded rent-free housing should be included in their salary for superannuation purposes.

That is the basis of this discussion. It will potentially have an impact on the budget of somewhere between $8 billion and $11 billion. It is a serious issue, and it's why we should look at this seriously. I'd like to say from the outset that the opposition will be supporting the government, noting the irregularity and the rarity of this coming up. This issue has been considered by the government soberly and sensibly, and we thank them for that. The previous coalition government was keeping an eye on this, as a very high-risk public administration issue, prior to the election. So this is not something that is being rushed by either the coalition or the opposition when it was previously in government. This has been thought through. The bill is consistent with the former government's approach to addressing issues like this and how they're to be done.

For the benefit of the House, this issue about rent-free housing was generally not provided prior to the introduction of FBT in 1986 as it would have attracted income tax. From 1986 onwards it became commonplace that the tax burden shifted to the employer and that rent-free arrangements, unless explicitly stated, did not count as a salary for superannuation purposes. That was the generally considered view. Those views should be held to stand regardless if they were not included in instruments at the time or otherwise.

Since 1986 the Commonwealth has typically not treated rent-free housing as forming part of superannuation salary. Generally neither employers nor employees have made superannuation contributions that have taken into account the value of rent-free housing. That is how the system has run for 36 years.

I appreciate now that there is a court case and we're having to face a difficult issue whereby these issues weren't defined, but it doesn't mean that the definition wasn't implied and well understood for almost a third of a century. The applicants in the case before the Federal Court—Brendan Peace & Ors v Commonwealth of Australia and Anor, the 'Peace case'—are trying to demonstrate differing views on the operation and scope of paragraph 5(e) of the regs. They have argued for an interpretation which has not been consistent over the last third of a century. If accepted it would mean a large number of former and current Commonwealth employees, excluding the military, as the minister said, in their thousands would have the value of rent-free housing treated as salary for superannuation purposes.

I appreciate courts don't look kindly when the federal parliament intervenes mid-case retrospectively. Whilst I appreciate the court's sentiments it is this place's role to legislate, not the courts. It is the court's place to interpret legislation. If this place is not satisfied with what the other separated power, in that case the court, has done it is implied upon this place to seek to make it right. This is the basis of the discussion that we are having now. On that basis, noting it's a difficult issue, noting it is a very rare thing to do and noting it is done sensibly and soberly as it should be, the opposition will be supporting the government.

Zoe Daniel (Goldstein, Independent) Share this | Link to this | Hansard source

I would like to put on the public record a potential conflict of interest with regard to this legislation. Having worked for the ABC as a foreign correspondent and being posted overseas in rent-free housing in 2005 and 2006, from 2010 to 2013 in South-East Asia and from 2015 to 2019 in the United States, I would like to withdraw myself from this debate and to have it noted that if there is a division I will not be voting and I will withdraw myself from the chamber.

Sophie Scamps (Mackellar, Independent) Share this | Link to this | Hansard source

Similarly, I also have a conflict of interest with a family member in a similar situation, so I will also be withdrawing myself from the debate.

Milton Dick (Speaker) Share this | Link to this | Hansard source

The question is that the bill now be read a second time.