Tax windfall for MPs, fat cats

Hundreds of current and retired WA MPs, their media minders and the most senior public servants have each won windfalls of up to $100,000 after a tax office ruling that they had been taxed wrongly on their superannuation contributions.

In a decision which has stunned long-time Government employees, the Australian Taxation Office said yesterday it would refund the surcharge paid by people who had served at the "higher levels of governments".

It means that while MPs, ministerial advisers, governors, judges, magistrates, heads of government departments and high-ranking officials such as the Director of Public Prosecutions, the Police Commissioner and Auditor-General will escape big tax bills, thousands of lesser paid WA public servants were still liable for such bills.

The ATO ruling comes after a High Court ruling in September that the 15 per cent superannuation surcharge - which existed on all high incomes between 1996 and 2005 - could not apply to so-called "constitutionally protected funds" such as those overseen by WA's Government Employee Superannuation Board which has 313,000 members.

Some current WA MPs will be more than $80,000 better off because of the decision but the highest paid public servants stand to reap an unexpected bonanza of up to $100,000.

Retired MPs such as former Labor minister Clive Brown, a minister between 2001 and 2005 who will get a five-figure refund, said he would remain sceptical until the money was in his wallet.

Federal Superannuation Minister Chris Bowen said the ruling would cost the Commonwealth $10 million and "the strong advice I have received from Treasury is that there are no feasible options to reverse the loss in revenue".

But the Institute of Chartered Accountants warned that the cost of refunding the super surcharge may end up being much bigger because government employees challenged the ATO's definition of "higher levels of government".

The institute's tax counsel, Yasser El-Ansary, said the ATO had opened a "Pandora's box". He advised all WA Government employees and their unions to ask the ATO about the decision.

WA secretary of the Community and Public Sector Union, Toni Walkington, said the union was considering its options - including a court challenge.

The ATO's decision has infuriated some public servants in WA who will still have to pay the surcharge because they are not considered to have worked at a sufficiently high level.

"This is grossly discriminatory," said "Brian", a 65-year-old manager in the Education Department who has been a member of GESB's Gold State fund since 1962 and who is liable for a $40,000 super surcharge bill.

"Ministerial advisers are exempt from payment but they are officers seconded from Government departments at Level 8 - the same as myself and many others who are not exempt," Brian, who did not want his name published, said.