The NSW Government is committed to the implementation of equitable employment practices, and to the elimination of any employment practices which may dissuade mature-aged persons from contributing their skills and experience to the workforce.

Commonwealth superannuation law currently allows superannuation funds to accept contributions in respect of employees aged up to 70 years of age. (Prior to 1 July 1997, contributions could generally only be accepted in respect of employees up to 65 years of age. The exception to this rule was that funds could accept contributions up to 70 years of age in respect of members aged 60 or over on 1 July 1990).

Advice received from the Crown Solicitor and the Anti-Discrimination Board indicates that employers in New South Wales may commit an unlawful act of age discrimination in the terms and conditions of employment offered to employees if they do not pay superannuation contributions or provide equivalent remuneration for employees above the age limit in the Commonwealth superannuation legislation.

Given the commitment of the NSW Government to mature-age persons, a number of measures designed to eliminate any discrimination in superannuation for mature-aged employees have been implemented. These measures are explained in detail in Attachment A, and will apply only in respect of employees who are not paid under a Total Remuneration Package. Any amounts which may already have been paid to employees or former employees in lieu of First State Superannuation Scheme (FSSS) contributions or superannuation guarantee payments must be taken into account to ensure that employees are not compensated twice.

The following payments are to be made:

1. Superannuation salary loading for employees aged 70 years and over

The payment of a superannuation salary loading equal to the compulsory employer contribution percentage rate in the First State Superannuation Act 1992
(FSS Act) to all current employees aged 70 years and over. (If any industrial arrangements provide for compulsory employer contributions above those specified in the FSS Act, the higher contribution rate should be used to calculate the payment).

2. Lump sum payments to current and former employees where superannuation contributions were not paid by employers

The payment of lump sums to specified groups of employees and former employees to compensate them for periods of employment when contributions to the FSSS were not paid by employers on their behalf because of the age restrictions in the FSS Act. These age restrictions reflect the age limitations in the Commonwealth superannuation legislation.

A Determination enabling public service employers to pay the superannuation loading and lump sum payments has been made under the Public Sector Management Act 1988. Other public sector employers should make a similar Determination or other appropriate industrial instrument to implement these measures. A model Determination clause is at Attachment B to assist employers.

State Owned Corporations are also encouraged to pay the loading and lump sum payment to affected employees to ensure there is no basis for any potential claims of age discrimination involving superannuation as a condition of employment.

Lump sum payments payable to employees who are current members of the FSSS can be paid into the employee's FSSS account if the employer and employee agree to treat the payment in this way, and the trustee agrees to accept the payment. (The trustee cannot agree to accept the payment if this would contravene Commonwealth or FSSS legislation. For example, the trustee will not agree to accept payments in respect of employees aged 70 or above).

Lump sum amounts payable to employees or former employees that are not paid into the FSSS should be treated as ordinary PAYE income (ie taxed at marginal tax rates and included in employees' group certificates).

Compound interest should be included in the lump sum calculations using the annual crediting rate for the capital guarded investment option in the FSSS for the year in which the FSSS payments would have been made had there been no age restrictions in the Commonwealth superannuation legislation. The annual FSSS capital guarded crediting rates are:

1 July 1994 to 30 June 1995 9.48%
1 July 1995 to 30 June 1996 8.28%
1 July 1996 to 30 June 1997 15.72%
1 July 1997 to 30 June 1998 9.48%
1 July 1998 to 30 June 1999 5.92%

All of the lump sum payments will require interest to be paid from 1 July 1999 to the date the payments are made. It is suggested that this date be no later than 1 January 2000. Agencies should calculate interest for the period from 1 July 1999 to the date of payment by pro-rating the crediting rate for the 1998/1999 financial year (refer Attachment C).

The compulsory FSSS employer contribution percentage rates required for the loading and lump sum calculations are those prescribed in Section 12 of the FSS Act, and are currently:

1 July 1994 – 30 June 1995 5%
1 July 1995 – 30 June 1996 6%
1 July 1996 – 30 June 1997 6%
1 July 1997 – 30 June 1998 6%
1 July 1998 – 30 June 1999 7%
1 July 1999 – 30 June 2000 7%
1 July 2000 – 30 June 2001 8%
1 July 2001 – 30 June 2002 8%
1 July 2002 – 30 June 2003 9%

The formulas to be used to make the superannuation loading and lump sum calculations, and some examples of the way in which the formulas are applied, are contained in Attachment C.

Payments made into employees' FSSS accounts by Budget dependant employers will be reimbursed by the NSW Treasury in the same way that other FSSS employer contributions are reimbursed.

Payments made as PAYE income by Budget dependant employers should be paid out of the usual allocation for employee salary costs. If the existing Budget allocation is insufficient to meet these additional costs, and there are no offsetting savings available, agencies should request supplemental funding. Any queries in this regard should be directed to your agency's Agency Relationship Manager in Treasury.

All other employers (ie non-Budget dependant, GTEs etc) will be required to meet their own costs associated with these payments.

C. Gellatly
Director-General