Why does the government keep changing public servants’ defined benefits?


Dramatic Senior Woman with a Martini

Scott Morrison has moved to close a defined benefit super ‘loophole’. They might have thought they’d be left alone in retirement, but thousands of former state bureaucrats got one more blast from the tabloid press yesterday.

Social Services Minister Scott Morrison has uncovered tens of thousands of “public service fat cats” who are still riding a taxpayer-funded “gravy train” even in their retirement, according to a scoop his office presumably provided to The Daily Telegraph yesterday.

In this case, however, there is a fair point behind the hysterical headline. Through an adjustment to superannuation tax rules to take effect on January 1, 2016, no longer will a group of about 16,000 retirees on defined benefit superannuation schemes — many of them former state public servants — be able to claim age pensions they do not need.

The minister says he recently discovered that a 2007 change to tax rules was inadvertently allowing about 48,000 retirees to “fly under the radar” of means testing for the pension, which although intended as a social safety net for older people, is seen by many older Australians as an entitlement earned through a lifetime of paying taxes.

But he estimates only about one third of that group will be cut off from the pension by his move to close the “loophole”, which he estimates will save $470 million over the forward estimates.

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