An article published by The Canberra Times on 23 September 2019 has identified a potential failure of the Commonwealth government to correctly calculate the superannuation entitlements of its employees.

The error

Early estimates suggest that approximately 3700 Australian Federal Police employees may be affected by superannuation benefit miscalculations. It’s likely that this number will be much greater when other government agencies, such as the Department of Home Affairs and the Department of Foreign Affairs and Trade, are included in investigations.

The alleged error has occurred where employers have failed to report entitlements, such as rent-free accommodation and hardship allowances, to the Commonwealth Superannuation Corporation.

Calculating Commonwealth superannuation contributions

For government employees, having superannuation contributions calculated on the correct salary – often referred to as a ‘superannuation salary’ – may have a marked effect on the superannuation benefits available to them when they retire.

Under the legislation that establishes the Commonwealth superannuation schemes – the Commonwealth Superannuation Scheme (CSS), Public Sector Superannuation Scheme (PSS) and Public Sector Superannuation Accumulation Plan (PSSap) – contributions are based on the superannuation salary of the employee. That ‘salary’ is governed by those earnings derived from all ordinary hours of work, and not just the base salary for that employee. This, in its simplest terms, means all earnings other than overtime payments. Those earnings can include allowances, shift penalties or fixed payments that may be outlined in any relevant enterprise bargaining agreement (EBA).

The ruling

A ruling issued by the Commissioner of Taxation confirms what makes up the ‘salary’ for superannuation purposes. It states that many employees receive various additional payments that are described as allowances or loadings and are paid to recognise or compensate for certain conditions of employment. Such payments are relevant to superannuation salary – unless they are paid to offset or reimburse an expense or are related to hours outside ordinary hours of work.

The Superannuation Salary Regulations outline the types of allowances that are treated as salary for superannuation purposes, and we can advise you of what allowances may apply to you.