Defining public service benefits

Anthony Albanese has done the right thing insisting that new taxation rules for wealthy superannuation holders should extend to public servants, such as himself, who receive generous taxpayer-funded defined benefits payments for life. For many people, the potential for different treatment for those who have taken risks and managed their own affairs and others who have accumulated their superannuation benefits from time served in the public sector would be untenable.

It no doubt has been an unexpected consequence for the Albanese government that Jim Chalmers’ discussion with voters about superannuation has put the spotlight on the huge cost to taxpayers of the defined benefits schemes for some politicians and public servants. Peter Dutton says Labor’s superannuation changes have been in the pipeline for months, but in the case of defined benefits the government has been caught on the hop and off guard.

The overly generous public sector schemes were closed to new entrants long ago but their legacy lives on. The annual cost of commonwealth defined benefits schemes for public servants is calculated to peak at $182.9bn in 2033-34 before declining to $60.8bn by 2060. The combined cost of the parliamentary and public service defined benefits schemes will peak at $12.7bn a year between 2044 and 2048. As we have reported, the Prime Minister and former treasurer Wayne Swan are entitled to preserved benefits pensions for life and have been reluctant to detail how much they are entitled to receive.

Despite knowing in detail how many private sector superannuation accounts would be affected by the changes that lift tax rates on balances over $3m, Dr Chalmers could not say on Tuesday how many public service pensioners would be hit. The Opposition Leader said the Treasurer had failed to model the changes, which could hit tens of thousands of current and former bureaucrats and public officials.

Both Mr Albanese and Dr Chalmers have said it is the government’s clear intention for defined benefits schemes to be included in the new tax take. Already, however, there are murmurs about the complex nature of the change and the difficulties it might entail. Classic British comedy series Yes Minister could write a script about the likely prevarications that no doubt will ensue as public servants are charged with deciding how to reduce their own entitlements. Dr Chalmers must stand firm. What is good for the goose is good for the gander. It is also a welcome reminder of the dangers of unintended consequences and the benefits of properly thinking things through.