In October 2015 the GSA agreed to support a pre-annuitant member employed in the health sector who was challenging the Government Superannuation Fund Authority (GSFA)on their interpretation of what elements of his salary package were eligible for superannuation, or “superable”. The member’s salary is made up from a number of building blocks, some of which are termed “allowances”. The member and his employer have been contributing on the major part of his remuneration, including these “allowances”, for over 20 years. However, when this member wrote to Datacom in 2015 to ascertain what his annuity would be should he choose to retire at some stage over the next few years he received a major shock.
Applying a very strict ruling on what allowances were superable, the GSFA determined that a large portion of his remuneration would not count in the final salary calculations which woulddetermine his annuity, even though he and his employer had been contributing for all these years. The GSFA argued that the Act gives the GSFA the authority to determine what allowances can be regarded as salary. In this case they applied a definition, of their own invention, that allowances could not be classified as salary if “they are not correlated in any way to base salary”. In other words, unless an allowance moves in step with salary it cannot be counted as salary.
The GSA sought legal advice and we mounted a serious challenge to the GSFA ruling. We also received support from the Association of Salaried Medical Specialists (ASMS). Our case was based on the fact that some of the allowances that had been disallowed had been paid to this member since he commenced his employment 20 plus years ago and they have always been part of his total salary package. We argued that the law does not require allowances to move in step with salary, therefore this arbitrary definition of what constituted an allowance was not in accordance with the Act.
The case came before the Government Superannuation Appeals Board in August 2016. Three of the four allowances in question were ruled to be eligible for superannuation. The one which was excluded was an allowance being paid for additional duties being performed for a year at another DHB. Its temporary nature was the issue.
All in all, our member is delighted with the result. As is the GSA, which, at considerable expense, chose to support this member.
This case has highlighted something we believe all those still in the workplace should be aware of. There are many members still in employment who are now on a variety of remuneration packages. Some packages are built up like building blocks with all kinds of different “allowances”. In many cases these include additional remuneration for taking on more responsibility or extra duties for lengthy periods of time.
Those in this situation need to be aware that the GSFA may challenge parts of their remuneration when calculating final salary for superannuation purposes. It is always to the employee’s advantage to have their remuneration classified as salary. If your remuneration is made up of building blocks labelled “base salary” and allowances, it is to your definite advantage to have your remuneration in the former category. Members should be aware of this issue and take appropriate steps to safeguard their retirement interests by examining their existing employment contract and getting as much into salary as possible.
We note also that the GSFA continues to reject any suggestion that what it terms as "Higher Duties Allowances" are superable. We have had cases where members and employers have been paying their GSF contributions on remuneration only to discover at retirement that significant elements of the remuneration did not qualify in the calculation of the final annuity. Members are advised to check with their employers to see exactly what GSF contributions are being paid.