Superannuation options expand

Developments in salary sacrifice/packaging provide expanded options for members, writes ROD BROWN.

The lifting of limits on salary sacrifice/packaging and the capacity for members of the older superannuation schemes to salary sacrifice compulsory employee contributions, have been matters of negotiation between the Federation and the Department of Education and Training (DET). Salary sacrifice is intended as a tax effective arrangement between an employee and employer where an employee foregoes part of salary in return for the employer providing benefits at a similar value. In November 2005 the retiring Taxation Commissioner, Michael Carmody, delivered his last ruling whereby he lifted the limit an employee could elect to salary sacrifice. This was on the basis that any post-tax obligations must necessarily still be fulfilled, for example health fund contributions, child support payments and garnishees. NSW public sector employees had been limited to a maximum of 50 per cent of salary that could be sacrificed. Following the Commissioner's ruling, NSW public sector unions took the matter to the NSW Government resulting in the Premier issuing a circular announcing the lifting of the limit. The Premier's circular also announced a change of Government policy, indicating that casual employees would now be permitted to salary sacrifice for superannuation. The implementation of the changes has been coordinated by the Public Employment Office (PEO) for all NSW public sector employees.

Federation has been in negotiations with the DET regarding the implementation of the above changes, including the lifting of the limits and the extension of salary sacrifice to temporary and casual teachers. (Federation had previously been pursuing the availability of salary sacrifice to temporary and casual teachers for an extended period.) The Department has announced that temporary teachers will be able to package superannuation and computers while casual teachers will be limited to salary sacrifice contributions for superannuation only. On July 21 DET issued a memorandum to all schools and colleges.

While the making of the announcement is welcomed, the extended time frame for the implementation of these arrangements for temporary and casual teachers is unsatisfactory. The memorandum advised that temporary teachers would be able to salary sacrifice from the beginning of the 2007 school year and casual teachers would have to wait until the beginning of term 2, 2007. These delays are unacceptable to Federation.

The other significant issue is the capacity for members of the State Superannuation Scheme (SSS) and the State Authorities Superannuation Scheme (SASS) to be able to salary sacrifice their compulsory employee contributions, rather than pay these contributions from post tax income. As part of the settlement of the current award the Department agreed to support Federation's approach, allowing for the salary sacrifice of compulsory employee contributions. Following settlement of the award Federation continued to pursue this matter with the support of Unions NSW and the other public sector unions. Cabinet has given in-principle support for the arrangements. Negotiations occurred with the Public Employment Office (PEO) and agreement was achieved for members of SASS. The necessary legislative changes have passed and SASS members will be able to nominate whether their compulsory contributions are salary sacrificed with effect from April 1, 2007.

The PEO has raised concerns about the administrative and cost implications in relation to SSS members and has delayed implementation while a review is conducted. In doing so, the PEO has stated that some public sector employers have expressed cost and administrative concerns. Both Federation and DET have indicated a willingness to be part of a trial or phased introduction of the arrangements for SSS members, but the PEO has advised that it will only introduce the changes on a public sector wide basis. Federation continues to pursue this matter.

Note: All NSW public sector schemes as they apply to NSW teachers are covered by the changes to the taxation of superannuation benefits announced with the Federal Budget. Without going into great detail the announced changes apply to taxed schemes. While not all Australian public sector schemes are taxed, all NSW public sector schemes are taxed and hence members of these schemes will benefit from the changed arrangements.

Rod Brown is a Welfare Officer. Federation does not give financial advice regarding accepting or rejecting a salary sacrifice arrangement. Individuals should seek financial advice before entering a salary sacrifice arrangement.

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