Public Sector Superannuation Salary Legislation Amendment Bill 2022 [2022] AUSStaCSBSD 60 (7 September 2022)

• Public Sector Superannuation Salary Legislation Amendment Bill 2022
• Retrospective commencement37

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Public Sector Superannuation Salary Legislation Amendment Bill 2022

Purpose	This bill seeks to amend the Superannuation (Salary) Regulations to regularise the long-standing administrative practice of Commonwealth employers and employees by ensuring that rent-free housing does not form part of an eligible employee's salary for the purposes of superannuation calculations under the Superannuation Act 1976.
Portfolio	Finance
Introduced	Senate on 3 August 2022

Retrospective commencement^[37]

1.56 Item 1 of Schedule 1 to the bill repeals paragraph 5(e) of the Superannuation (Salary) Regulations (Superannuation Regulations). Paragraph 5(e) previously provided that the value of rent-free housing made available to an eligible employee during the course of their work could be treated as part of that employee's salary for the purposes of the Superannuation Act 1976 (Superannuation Act). The explanatory memorandum explains that some individuals have consequently claimed the right to additional superannuation contributions on the basis of this income calculation.^[38]

1.57 Schedule 1 to the bill commences on 1 July 1986. This ensures that paragraph 5(e) of the Superannuation Regulations is repealed from the date of the introduction of the fringe benefits tax regime. The explanatory memorandum explains that the introduction of fringe benefits tax 'meant that it was no longer necessary for employers to identify the value of rent-free housing in pay slips issued to their employees'.^[39] As a result, superannuation contributions based on income received from the value of rent-free housing would likely not have been made after this point.^[40] By retrospectively repealing paragraph 5(e), the bill provides that eligible persons can no longer claim they are entitled to have the value of rent-free housing treated as salary for the purposes of the Superannuation Act where that housing was provided on, or after, 1 July 1986.

1.58 The committee has long‑standing scrutiny concerns about provisions which apply retrospectively. Such provisions challenge the basic rule of law principle that the law should be capable of being known in advance. Underlying this principle is the importance of enabling people to rely on the law at the time of a relevant action or decision and protecting those affected by government decisions from arbitrary decision-making. These concerns will be particularly heightened if the legislation will, or might, have a detrimental effect on individuals.

1.59 Generally, where proposed legislation will have a retrospective effect, the committee expects the explanatory materials to set out the reasons why retrospectivity is sought, whether any persons are likely to be adversely affected and, if so, the extent to which their interests are likely to be affected. If an individual's interests will, or may, be affected by the retrospective application of a provision, the explanatory memorandum should set out the exceptional circumstances that nevertheless justify the use of retrospectivity.

1.60 In this instance, the explanatory memorandum states that:

Retrospectively repealing paragraph 5(e) of the Regulations regularises the past administrative practice of employers and employees by effectively restoring the position with respect to rent-free housing that all relevant parties have treated as governing these highly complex schemes since 1986. It avoids the unintended and inconsistent outcomes for the Commonwealth, Commonwealth entities and individuals that would arise if the Federal Court decides in Peace that rent-free housing provided to the applicants is a superannuable allowance. Specifically, it will ensure that Commonwealth employees in otherwise similar circumstances do not receive wildly disparate superannuation outcomes, with some employees receiving large windfalls, others incurring unexpected debts, and still others experiencing poor returns as a result of the need of the CSS and PSS to cover the lost earnings on late paid employer contributions.
The repeal of paragraph 5(e) of the Regulations will commence from the date of the introduction of the fringe benefits tax regime, and therefore to regularise the change in practice that apparently occurred after that time. Employees who received rent-free housing before 1 July 1986 would have been required to pay income tax on the value of that housing, which would have minimised the potential for the value of rent-free housing to be overlooked.^[41]

1.61 Based on this advice, the committee notes that the retrospective repeal of paragraph 5(e) of the Superannuation Regulations effectively removes a right to bring a claim before the court in relation to superannuable income accumulated as a result of that provision. However, in accordance with the committee's expectations, the explanatory memorandum explains that interfering with this right is justified because retrospectively repealing paragraph 5(e) cures what would otherwise be an unintended, arbitrary and disparate result.

1.62 The committee further notes that Schedule 2 to the bill modifies the retrospective application of Schedule 1 with respect to certain individuals. This exemption will apply where both the employer and employee understood that the value of the rent-free housing received by the employee was to be included in their superannuation salary and acted accordingly.^[42] The explanatory memorandum states that this is appropriate because:

...unlike the cases in which the repeal of paragraph 5(e) will apply, if the paragraph applied in those cases, rather than correcting a mistake it would disturb the basis upon which the parties to the employment relationship actually conducted that relationship.^[43]

1.63 Consistent with rule of law principles, this exemption ensures that the reasonable expectations of affected individuals are not frustrated by the retrospective commencement of Schedule 1 to the bill.

1.64 Finally, the committee welcomes the inclusion of the relevant provisions within a bill, rather than regulations, to ensure an appropriate level of parliamentary scrutiny of these issues.

1.65 The committee reiterates its long-standing view that provisions with retrospective commencement challenge the basic rule of law principle that, in general, laws should be capable of being known in advance. Retrospective commencement, when used too widely or insufficiently justified, can work to diminish respect for the rule of law and its underlying values.

1.66 In this instance, the committee welcomes the detailed justification provided in the explanatory memorandum outlining the exceptional circumstances that are said to justify the use of retrospectivity and the inclusion of the exemption set out in Schedule 2 to the bill.

1.67 As the bill has already passed both Houses of the Parliament, the committee makes no further comment on this matter.

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[37] Schedule 1. The committee draws senators’ attention to these provisions pursuant to Senate standing order 24(1)(a)(i).

[38] Explanatory memorandum, p. 3.

[39] Explanatory memorandum, p. 3.

[40] Explanatory memorandum, p. 7.

[41] Explanatory memorandum, pp. 5–6.

[42] Explanatory memorandum, p. 6.

[43] Explanatory memorandum, p. 8.