09/07/2009 - 00:00

Public servants get a super advantage

09/07/2009 - 00:00

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UP to 100,000 state government employees will continue to have access to a major superannuation tax break, as the rest of the population adheres to strict new laws.

Public servants get a super advantage

UP to 100,000 state government employees will continue to have access to a major superannuation tax break, as the rest of the population adheres to strict new laws.

Members of constitutionally protected funds (CPFs) - including WA politicians and some public servants - have sidestepped the federal government's decision to halve the maximum limit on concessional contributions, which came into force on July 1, through a legislative provision.

Brett Davies, of Perth superannuation specialist law firm Brett Davies Lawyers, said the provision was clearly unfair.

"This is yet another level of discrimination," Mr Davies said.

"In my view, it is corrupt and unfair. Discrimination is rife in the state of Western Australia."

A CPF is a fund established under an act of state parliament, which means it is taxed differently than other super funds because the Commonwealth cannot tax state assets. Members also adhere to different rules governing contributions.

The federal government halved the maximum limit on concessional contributions from $100,000 to $50,000 for those aged 50 or more and from $50,000 to $25,000 for younger investors this financial year.

Workers use concessional contributions, or pre-tax money, to boost their retirement accounts. Super guarantee payments, salary sacrifice and tax-deductible personal contributions (for the self-employed) are all types of concessional contributions.

Mr Davies said existing CPF members could skate around the new contribution restrictions while new members would have to adhere to them. This means two public servants working in the same office would potentially have their super contributions treated differently.

Also, a state government employee doing a similar job to a worker in a private company would have different opportunities to save for retirement.

While the caps are argued to only affect high-income earners, small business owners are among those whose uncertain cash flow means it can be advantageous to make irregular large contributions, which are restricted under the new rules.

The office of Treasurer Troy Buswell told WA Business News it was a matter for the federal government.

Mr Davies said public servants in WA and South Australia could avoid the caps, and benefitted from having special tax treatment on their retirement savings.

''WA and SA governments love them as it gave their employees a financial advantage over us mere mortals,'' he said.

It is understood that about 100,000 out of government superannuation fund GESB's member base of 300,000 can avoid the new contributions caps.

Perth financial planner Wayne Leggett, co-principal of Paramount Wealth Management, said politicians were legislating rules they didn't need to adhere to.

"The rules the rest of us have to play by, they don't," Mr Leggett said.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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