18/02/2009 - 22:00

GESB plans on hold indefinitely

18/02/2009 - 22:00


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Has the government superannuation fund GESB's mutualisation stalled for good?

HAS the economic downturn handed state treasurer Troy Buswell the opportunity to kill off the biggest Western Australian privatisation since Alinta Gas was sold in 2000?

In opposition, Mr Buswell was a cautious supporter of the mutualisation of GESB, the former Government Employees Superannuation Board, which his predecessor Eric Ripper planned to hand over to its 300,000 or so members on July 1 last year.

It would have freed from government control the 13th biggest fund manager in the country, creating an entirely new private sector operator and giving members choice for the first time.

It's the stuff that any Liberal would be proud of.

Staggeringly, with the legislation in place, Mr Ripper pulled the plug on the deal at the 11th hour, citing issues around the use of reserves and other administrative matters.

Now Mr Buswell is in charge he is confronting the same issues.

Last week, he revealed a little more detail on the matter, suggesting that tax issues were one of the administrative problems that prevented the mutualisation.

Mr Buswell said a big problem was the status of the biggest part of GESB, West State Super, which was created as an untaxed scheme, meaning that funds going into it were not taxed like those going into rival industry or retail products.

Mutualising West State Super may change that status and trigger a tax payment.

Mr Buswell is right, perhaps, to delay the mutualisation until he is advised if the cost may somehow be borne by the state.

That is very prudent, you would think.

But some observers see the tax issue as a furphy in the overall scheme of things.

The main reason is that while the untaxed status of the fund is unusual, it doesn't mean that its members are any better off in the longer term.

In effect, members of untaxed schemes are simply taxed when they withdraw the money, rather than when it goes in. Apart from timing issues there is little distinction.

Mr Ripper had sought a federal waiver from the contributions tax, to allow West State Super members to migrate to the private GESB-run fund without copping a tax liability.

He was turned down by former federal Treasurer Peter Costello, who said the matter was one of equity.

It is unlikely that Mr Buswell will get any different answer from Mr Costello's successor Wayne Swan.

But some argue that Mr Buswell could still do West State Super members a favour by allowing them to choose to shift individually - that is mutualise their own funds - when they wanted.

That would simply give them what other employees have, superannuation choice.

In one way the financial crisis offers a silver lining to West State Super fund members if they could elect to go other funds because, just as their superannuation savings have fallen, so has the associated tax bill.

The funds of members who elected to stick with the current untaxed status could remain with a slimmed down GESB or, if the government really wanted to save money, it could put that business up for tender and outsource it.

The state would be giving up nothing, as the privatisation was not going to earn them anything.

In fact, it was going to cost millions or even tens of millions, depending on who you talk to.

In these days of austerity, that sounds expensive and a treasurer taking a tough line on costs might find it easier to put off the GESB mutualisation, indefinitely.


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