EXPLANATORY STATEMENT
STATUTORY RULES 1988 NO 171
ISSUED BY THE AUTHORITY OF THE MINISTER FOR FINANCE
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 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 subsection 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 subsection 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.
Subsection 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 fee of a kind that, under the regulations, is to be treated as salary for the purposes of the Act; 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.
Part II of the Regulations (regulations 4 to 8) sets out the allowances that are to be treated as salary for the purposes of the Act and the conditions under which certain of those allowances are to be treated as salary. The allowances 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 for the purposes of the Act.
In a 1983 Federal Court case, Commissioner for Superannuation v Carpenter, concerning the shift allowance received by Mr Carpenter, it was found that the term “salary or wages”, as used in subsection 5(1) of the Act, covers everything within the ordinary sense of the term. It was not therefore necessary to refer to the Regulations in deciding whether Mr Carpenter’s shift allowance should be included as salary as, in its ordinary sense, the term “salary and wages” covered the remuneration regularly received by Mr Carpenter over the normal four weeks roster of his duties. 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 for the purposes of the Act until it had been received on a regular basis as defined in the Regulations.
When announcing the amendments to the Regulations which inserted Part IIA, the Minister for Finance also announced the Government’s decision 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.
In accordance with this announcement Part IIB (regulations 8F to 8H) was added to the Regulations in 1986 to clarify that expenses of office allowance is not to be treated as salary for the purposes of the Act.
District and field allowances are paid to officers in compensation for such things as isolation, climate, lack of amenities and cost of living while serving in certain remote localities. These allowances are not related to the particular duties performed by the person but to the location in which those duties are performed. These allowances satisfy the requirement of regularity and uniformity which is implicit in the concept of salary or wages. As district and field allowances are payable on account of location and climatic conditions they have never been treated as salary for the purposes of the Act.
Overtime payments are payable where a person performs duty for a period in addition to duty performed during the normal hours of duty of his or her particular employment. Such payments may, if received with a sufficient degree of regularity and uniformity, satisfy the requirement of regularity and uniformity which is implicit in the concept of salary and wages. Overtime payments have never been treated as salary for the purposes of the Act except where received as an allowance in lieu of overtime as described in paragraph 4(e) of the Regulations or, in some circumstances, when recognised as “shift allowance” as defined in Part IIA of the Regulations.
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 mentioned in the Regulations as allowances to be treated as salary, it is intended that district allowance and field allowance and allowances received for a similar purposes continue not to be treated as salary for the purposes of the Act. It is also intended to confirm that overtime payments are not to be treated as salary for the purposes of the Act.
The Superannuation (Salary) Regulations (Amendment) give effect to those intentions. 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 a new part - Part IIC - in the Regulations which relates to eligible employees (contributors) in receipt of certain payments.
The provisions of Part IIC are described in the following paragraphs.
Regulation 81 provides that in Part IIC:
• “location allowance” means an allowance payable as part of salary or wages to a contributor because of special disadvantages or hardships associated with working or performing duties in a particular geographical locality; and
• “overtime payment” means an amount by way of salary or wages payable to a contributor as compensation for the performance of work or duties during hours additional to the hours specified under his or her terms and conditions of employment as the contributor’s normal hours of duty and that is not a “shift allowance” as defined in Part IIA of the Regulations or an allowance in lieu of overtime as referred to in paragraph 4(e) of the Regulations.
Regulation 8J provides that any part of the salary or wages of a contributor that consists of a location allowance or an overtime payment is not to be treated as salary for the purposes of the Superannuation Act 1976.
Regulation 8K 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 location allowance or overtime payment.