Federal government to block billions in superannuation payments claimed by public servants

The federal government is trying to block a superannuation claim from public servants that threatens to cost the Commonwealth as much as $8 billion. 

Finance Minister Katy Gallagher this morning briefed Labor MPs on a bill that will be introduced into parliament on Wednesday in an attempt to squash a claim currently being considered in court.

The unusual move was sparked by an ongoing case in the Federal Court brought by three employees at the Department of Foreign Affairs and Trade (DFAT).

Through their lawyers, Brendan Peace, Peter Fennell and Timothy Vistarini have argued that DFAT did not correctly include their rent-free accommodation and some allowances as part of their salary, while they were posted overseas.

The government’s bill would retrospectively repeal a paragraph of existing legislation that includes the value of rent-free housing in the default superannuation salary of Commonwealth employees in certain circumstances, which the men are using to bring the case.

If the DFAT employees were successful, the government said, additional superannuation could be paid into their schemes, and could also affect around 10,000 public servants posted overseas between 1986 and 2022, costing the Commonwealth between $3 billion and $8 billion.

A spokesman added it could lead to “windfall gains” in some cases, potentially worth several millions of dollars, which the government considered “well beyond community standards”.

The implications of the case were flagged in this year’s federal budget and a number of agencies are likely to be caught up in the matter, including the Foreign Affairs Department and the Australian Federal Police.

A media release issued by Senator Gallagher on Tuesday argued the government had decided to act now to ensure “the entitlements of Commonwealth employees remain fair and reasonable and, importantly, that they continue to represent a responsible use of taxpayers’ money”.

It added the case could have unintended ramifications and mean that some Commonwealth employees could end up with unexpected debts for unpaid superannuation contributions.

Lawyers for the three men confirmed the civil case was ongoing but declined to comment to the ABC.

The Federal Opposition is likely to back the legislation and help move it swiftly through parliament.