EXPLANATORY STATEMENT
STATUTORY RULES 1986 NO 43
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE SUBJECT: SUPERANNUATION ACT 1976 - SUPERANNUATION (SALARY) REGULATIONS (AMENDMENT)
Section 168 of the Superannuation Act 1976 (the Act) provides that the Governor-General may make regulations, not inconsistent with the Act, prescribing all matters which the Act requires or permits to be prescribed, or which are necessary or convenient to be prescribed, for carrying out or giving effect to the Act.
The Act makes provision for and in relation to an occupational superannuation scheme for persons employed by the Commonwealth and for certain other persons.
Under the Act, the rate of fortnightly contributions payable by an eligible employee (contributor) is expressed as a percentage of the fortnightly rate of his or her salary. In accordance with sub-section 3(1) of the Act, “fortnightly rate of salary” in relation to a contributor means an amount equal to one-twenty-sixth of the amount of his or her annual rate of salary.
The rates of employer-financed invalidity, age and early retirement pensions payable under the Act are expressed as percentages of the former contributor’s final annual rate of salary. In accordance with sub-section 3(1) of the Act, “final annual rate of salary” means, in the generality of cases, the person’s annual rate of salary on his or her last day of service.
Sub-section 5(1) of the Act provides that “salary” means salary or wages and:
(a) includes any allowance, or the value of any allowance, or any fee, that is an allowance or a fee of a kind that, under the regulations, is to be treated as salary for the purposes of the Act and any partial invalidity pension payable; but
(b) does not include any part of any salary or wages that, under the regulations, is not to be treated as salary for the purposes of the Act.
Sub-section 5(2) provides that, subject to sub-section 5(3), the “annual rate of salary” of a contributor on a particular day is an amount equal to the amount per annum of the salary for the purposes of the Act payable to the contributor on that day. Sub-section 5(3) provides that the regulations may provide that, in a case specified in the regulations, the annual rate of salary of a contributor on a particular day shall, for the purposes of the Act or a provision of the Act specified in the regulations, be an amount equal to such amount per annum as is ascertained under the regulations.
Regulations for the purposes of section 5 are contained in the Superannuation (Salary) Regulations (the Regulations).
Allowances to be treated as salary are set out in Part II of the Regulations (regulations 4 to 8) and include -
(a) allowances that were treated as salary for the purposes of the Superannuation Act 1922; and
(b) allowances in the nature of additions to salary on account of the duties or work performed;
and that are received by the contributor on a regular basis. Allowances in the nature of re-imbursements or that are payable on account of location or climatic conditions are not treated as salary.
In a 1983 Federal Court case, the Commissioner for Superannuation v Carpenter, concerning the treatment of shift allowance received by Mr Carpenter as salary, it was found that the term “salary or wages”, as used in sub-section 5(1) of the Act, covers everything within the ordinary meaning of salary or wages and that the Regulations may include further allowances and fees not otherwise included in “salary or wages”. In reaching this decision the Federal Court referred to the High Court’s judgment in Commissioner for Government Transport v Kesby (1972) where the Court found that an allowance constitutes part of salary in its ordinary sense when it meets the criteria of uniformity and regularity.
As a result of that decision Part IIA (regulations 8A to 8E) was added to the Regulations to provide that shift allowance would be excluded from salary until it had been received on a regular basis.
When announcing those amendments to the Regulations the Minister for Finance stated, in accordance with a decision of the Government, that allowances to be treated as salary for the purposes of the Act would be confined to shift allowance on the basis included in Part IIA of the Regulations and other allowances that are presently recognised as salary by the Regulations. He added that where attempts were made to have further categories of allowances recognised as salary immediate action would be taken to amend the Regulations to ensure that such allowances continued not to be treated as salary.
Expenses of office allowance is paid to persons holding certain Commonwealth offices and senior positions with significant managerial responsibilities in the Australian Public Service and statutory authorities. The allowance is paid for the purpose of compensating recipients for a range of costs of a general nature which are not otherwise reimbursable. Expenses of office allowance satisfies the requirement of regularity and uniformity which is implicit in the concept of salary and wages.
As expenses of office allowance is in the nature of a reimbursement it has never been treated as salary for the purposes of the Act. In accordance with the intention that allowances to be included in salary for the purposes of the Act be limited to shift allowance and other allowances presently treated as salary it is intended that expenses of office allowance and allowances received for a similar purpose continue not to be treated as salary for the purposes of the Act.
The Superannuation (Salary) Regulations (Amendment) give effect to that intention. The amendments are outlined in the attachment.
The amending regulations operate from the date of their gazettal.
ATTACHMENT
DETAILS OF SUPERANNUATION (SALARY) REGULATIONS (AMENDMENT)
The amending Regulations insert on new part - Part IIB - in the Regulations which relates to employees in receipt of expenses of office allowances.
The provisions of Part IIB are described in the following paragraphs.
Regulations 8F provides that in Part IIB “expenses of office allowance” means an allowance payable to a contributor as compensation for general expenses incurred or likely to be incurred by the contributor in connection with the office or position held, or the duties performed by the contributor.
Regulation 8G provides that an expenses of office allowance received by the contributor is not to be treated as part of salary for the purposes of the Superannuation Act 1976.
Regulation 8H will ensure that where a person ceases to be a contributor after the commencement of the Regulations, and an employer-financed benefit is payable to or in respect of the person, the salary on which that benefit is based will not include an amount in respect of expenses of office allowance.