Katy Gallagher (ACT, Australian Labor Party, Minister for the Public Service) Share this | Hansard source

I'll start by thanking senators for their contribution. In particular, I'd like to thank Senator Hume for her cooperation and for engagement over this issue—and Senator Birmingham, prior to Senator Hume's appointment. Also, I thank the senators who had briefings yesterday afternoon.

We accept that this is an unusual way of dealing with legislation. I don't bring this legislation to the chamber lightly and have no intention of treating the chamber with any disrespect at all, but the Public Sector Superannuation Salary Legislation Amendment Bill 2022 is urgent. That is the very, very clear advice from officials to the government. The financial risk to the Commonwealth is high and in the order of billions of dollars. I have responsibilities to ensure that we are protecting the interests of the Commonwealth and balancing that with a whole range of other pressing needs.

I would say that this is not mine or the government's general way of operating—to be introducing retrospective legislation. The unique circumstances of this issue leaves us with very little choice if we are to avoid the unintended and inconsistent outcomes that would be at odds with the community's expectations about what is reasonable in terms of superannuation payments. I don't think anyone could come into this chamber and argue any other case. I want to thank senators for engaging on this, accepting that it is unusual, but I think anyone who is engaging on the content of the bill understands why we are taking this action.

The bill ensures that the superannuation entitlements of current and former Commonwealth public sector civilian employees remain as they were understood to be by Commonwealth employees and employers over many years prior to the commencement of a superannuation claim in the Federal Court. I think this goes to one of the concerns that Senator Pocock raised around the retrospective nature of the legislation. Prospectively, this issue has been dealt with under Senator Birmingham, when it was brought to his attention. The relevant section of the superannuation regulations was repealed prospectively from I think 28 February 2022, but we do have this issue going back to 1986.

The important point for the Senate to understand here is that the retrospective nature of this bill enshrines the administrative practice that has been followed since 1986. Employees were not making member contributions. Employers were not making employer contributions on rent-free housing that was provided to employees on top of their salary and conditions as free. The taxpayer pays the rent. The employee gets their salary. Super is paid on their salary but not on their rent. This is the issue here. The rental payment was over and above their salary, and this is the issue that's now in question. It has been the administrative practice of the Commonwealth since 1986 to pay super on employees' salary but not on the rent-free accommodation they were receiving as part of their posting.

Going to the question of urgency, if this matter were not resolved by this week, the different views about the operation of paragraph 5(e) of the regulations would not be definitively resolved, and that could perpetuate the possibility of widely variable and inequitable outcomes for different cohorts of employees. I have been briefed by the department and have spent some time looking at this. For example, you could have a situation where an employee, depending on their postings, the point in their career and a range of other things, which is why it does vary widely, could go from receiving a lump sum payment of $1.2 million to one of $11.7 million. That is the consequence of not dealing with this. It will also leave other employees with potentially hundreds of thousands of dollars in unpaid member contributions that would need to be dealt with. Another situation is that a person on a different posting and a different stage of their career who is receiving an annualised pension in the order of $200,000 could see that increase to over $1 million a year. That doesn't pass the pub test. It's out of line with community expectations about the adequacy of superannuation arrangements. That is why we are dealing with this today.

On Senator Barbara Pocock's concerns about numbers and how they are affected and about the analysis that she's arguing should have been done, there is some uncertainty about that because, if we were to do that level of detail, it would require going back individually from 1986 onwards for everybody who has had a posting in order to provide that analysis. That would take a lot of time and resources, and I'm not sure it's particularly useful when we know that this bill is about ensuring that the administrative practice that has been followed since 1986 is essentially reflected through this legislation.

I'm not sure we need to fully understand every individual circumstance, because every individual will be slightly different, based on length of service, posting, point in their career—things like that. We do know that we have had thousands of public servants who have served overseas and had a posting overseas in the last 30-odd years. We know that the potential reach in terms of numbers affected is in the order of 10,000 public servants, but we can't be exact on that. Again, I'm not sure that understanding every individual situation is relevant to the broader question of this legislation, which is: do we need to deal with this? We would argue yes. Is there an issue about the different impacts and the way the variable and inequitable outcomes would apply if we left this the way it is now? We would say yes. That's what this bill before you does.

Repealing the regulations regularises 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 Scheme since 1986. As the purpose of the repeal of paragraph 5(e) of the regulations is to regularise the longstanding practice of employees and employers, the bill makes provision for certain 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 contributions have previously been paid on the basis that a person's super explicitly included the value of rent-free housing. That is to say that, where your employment arrangements did explicitly include rent-free accommodation counting for superannuation purposes, those arrangements are not affected by this bill.

This is an important piece of legislation, and I do thank other senators for their contributions to this debate.