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Note 2: People and Relationships

This section describes a range of employment and post-employment benefits provided to our people and our relationships with other key people.

2.1 Employee benefits expense 1

2.1A Employee benefits expense

2020

2019

$'000

$'000

Employee benefits

Wages and salaries

176,747

135,983

Superannuation

Defined benefit plans

19,065

12,754

Defined contribution plans

12,334

11,276

Leave and other entitlements

28,551

18,741

Separation & redundancies

140

Other employee benefit expenses

Health and wellbeing payments to staff

668

545

Study assistance

382

369

Other employee expenses

482

466

Total employee benefits

238,229

180,274

2.1B Administered - employee benefits

2020

2019

$'000

$'000

Wages and salaries

18,941

7,682

Leave and other entitlements

1,518

464

Superannuation

Defined benefit plans

29

7

Defined contribution plans

2,286

776

Other employee benefits

372

49

Total employee benefits

23,146

8,978

2.2 Employee provisions 2

2.2 Employee provisions

2020

2019

$'000

$'000

Leave

79,558

54,010

Superannuation

12,952

8,010

Total employee provisions

92,510

62,020

2.3 Superannuation provision - former Solicitor-Generals' pensions

2020

2019

$’000

$’000

Present value of defined benefit obligations at end of the year

4,802

6,133

Personal benefits provisions expected to be settled

No more than 12 months

278

453

More than 12 months

4,524

5,680

Total personal benefits

4,802

6,133

Reconciliation of the net surplus/(deficit) to recognised assets and liabilities in the schedule of assets and liabilities administered on behalf of Government

30 June

30 June

2020

2019

As at

$'000

$'000

Defined benefit obligation

4,802

6,133

Net superannuation liability

4,802

6,133

Cumulative amount of actuarial gains and losses recognised in administered equity

30 June

30 June

2020

2019

For the period ended

$'000

$'000

Actuarial gains/(losses)

1,137

(505)

Total expense recognised in the schedule of comprehensive income administered on behalf of Government

30 June

30 June

2020

2019

For the period ended

$'000

$'000

Interest cost (See Note 5.1C)

112

176

Net superannuation expense

112

176

Accounting policy:

Actuarial gains and losses are recognised immediately in administered equity in the year in which they occur.

Scheme information:

Pension payments to former Solicitor-Generals are made under the Judges' Pensions Scheme. The Judges' Pensions Scheme is a defined benefit scheme. It provides 60% of the appropriate current judicial salary for eligible retired judges. The scheme is unfunded. Members do not contribute towards the cost of benefits.

Benefits payable (including payments of surcharge debt) under the Judges' Pensions Act 1968 and the Superannuation (Productivity Benefit) Act 1988 are paid from Consolidated Revenue on an emerging (or pay as you go) basis.

Reconciliation of the present value of the defined benefit obligation

Net liability at 1 July

(6,133)

(5,912)

Interest cost

(112)

(176)

Actuarial gains/(losses)

experience

903

117

changes in financial assumptions

234

(622)

Benefits paid

306

460

Net liability at 30 June

(4,802)

(6,133)

Reconciliation of the fair value of scheme assets

Opening fair value of scheme assets

Employer contributions

(306)

(460)

Benefits paid

306

460

Closing fair value of scheme assets

Scheme assets:

The scheme is an unfunded arrangement with no assets.

Expected rate of return on scheme assets:

As the fund has no assets, the expected rate of return on the scheme's assets is zero.

Principal actuarial assumptions at the balance sheet date:

30 June

30 June

2020

2019

For the period ended

$'000

$'000

Discount rate

1.90%

3.10%

Expected salary increase rate

4.00%

4.00%

Expected pension increase rate

4.00%

4.00%

Historical information:

30 June

30 June

30 June

2020

2019

2018

For the period ended

$'000

$'000

$'000

Present value of defined benefit obligation

4,802

6,133

5,912

Surplus/(deficit) in scheme

4,802

6,133

5,912

Experience adjustments gain/(loss) - scheme liabilities

1,137

(505)

(501)

The expected employer contributions in respect of 2020–21 are $278,000.

Funding arrangements for employer contributions

Contribution recommendations

The Scheme is unfunded. The defined benefits are not funded in advance.

Funding method

Where a benefit in the Scheme becomes payable, the Australian Government assumes responsibility for the payment from the Consolidated Revenue Fund.

Economic assumptions

The long-term economic assumptions adopted for the last actuarial review of the scheme as at 30 June 2020 were:

Expected rate of return on assets (discount rate)

1.7%

Expected salary increase rate

2.0%

+ a promotional salary increase scale

Expected pension increase

2.0%

Sensitivity analysis

A sensitivity analysis was undertaken whereby the sensitivity for salary related items was +/- 0.5 percentage points and the interest sensitivity was +/- 0.5 percentage points. Pensions are linked to the movements in the salaries paid to Judges. The results are not sensitive to changes in assumed CPI increases. The sensitivity analysis results are set out below:

Defined benefit obligation

Reported

$4.8m

Interest rate (-0.5%)

$5.0m

Interest rate (+0.5%)

$4.6m

Pension increases (+0.5%)

$4.6m

Pension increases (-0.5%)

$5.0m

The interest rate and probability weighted mean term of the liabilities is 10.0 years.

Nature of asset/liability

The department has recognised a liability in the Schedule of Administered Assets and Liabilities in respect of its defined benefit superannuation arrangements administered on behalf of the Government. The former Solicitor-General's Pension Scheme does not impose a legal liability on the department to cover any deficit that exists in the scheme.

The liability instead rests with the Australian Government. The Government has established the Future Fund for the purpose of accumulating assets to help meet this liability. The Future Fund is also intended to cover other superannuation unfunded liabilities including in relation to military schemes, Commonwealth public servants and Governors-General.

Accounting Policy

Employee benefits

Liabilities for ‘short-term employee benefits’ (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of balance date are measured at their nominal amounts.

The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability.

Other long-term employee benefits are measured as the net total of the present value of the defined benefit obligation at the end of the reporting period.

Leave

The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the department is estimated to be less than the annual entitlement for sick leave.

The leave liabilities are calculated on the basis of employees’ remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the department’s employer superannuation contribution rates, to the extent that the leave is likely to be taken during service rather than paid out on termination.

The methodology for calculating the liability for long service leave was confirmed by reference to the work of an actuary who is periodically retained by the department. The estimate of the present value of the liability takes into account attrition rates and pay increases through promotion and inflation.

Separation and redundancy

Provision is made for separation and redundancy benefit payments. The department recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations.

Superannuation

The department‘s staff are members of the Commonwealth Superannuation Scheme (CSS), the Public Sector Superannuation Scheme (PSS) or the PSS accumulation plan (PSSap), or other superannuation funds held outside the Australian Government.

The CSS and PSS are defined benefit schemes for the Australian Government. The PSSap is a defined contribution scheme.

The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported by the Department of Finance's administered schedule and notes.

The department makes employer contributions to the CSS and PSS employee superannuation scheme at rates determined by an actuary to be sufficient to meet the cost to the Government for the superannuation entitlements of the department’s employees. The department accounts for the contributions as if they were contributions to defined contribution plans.

The liability for superannuation recognised as at 30 June represents outstanding contributions.

Accounting judgements and estimates

The department recognises the present value of the superannuation provision associated with the former Solicitor-Generals‘ Pension Scheme. At 30 June each year an actuary undertakes an actuarial assessment of the scheme.

2.4 Key management personnel remuneration 3

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the department, directly or indirectly, including any director (whether executive or otherwise) of the department. The department has determined the key management personnel to be the Secretary, Deputy Secretaries, and Chief Operating Officers. Key management personnel remuneration is reported in the table below:

Name

Position

Term as KMP

Chris Moraitis

Secretary

Full Year

Michael Kingston

Australian Government Solicitor

Full Year

Iain Anderson

Deputy Secretary

Full Year

Martin Hehir 1

Deputy Secretary

From 25 July 2019

Sarah Chidgey

Deputy Secretary

Full Year

Louise Vardanega

Chief Operating Officer - AGS

Full Year

Helen Daniels

Chief Operating Officer - AGD

Full Year

1 The effective date of the transfer of staffing under the Administrative Arrangements Order of 29 May 2019 was 25 July 2019.

2020

2019

$'000

$'000

Short-term employee benefits

Salary

2,851

2,663

Performance bonuses

-

40

Other 1

142

51

Total short-term employee benefits

2,993

2,754

Post-employment benefits

Superannuation

446

348

Total post-employment benefits

446

348

Other long-term employee benefits

Long service

126

128

Total other long-term employee benefits

126

128

Total key management personnel remuneration expenses 2

3,565

3,230

1 Other includes motor vehicle, other allowances and reportable fringe benefits.

2 The key management personnel remuneration included all substantive key management personnel and extended acting arrangements for the full year.

The total number of key management personnel that are included in the above table is seven (2019: 7).

2.5 Related party disclosures

Related party relationships:

The department is an Australian Government controlled entity. Related parties to this department are key management personnel including the Portfolio Minister and other Australian Government entities.

Transactions with related parties:

Given the breadth of government activities, related parties may transact with the government sector in the same capacity as ordinary citizens. Such transactions include the payment or refund of taxes, receipt of a Medicare rebate or higher education loans. These transactions have not been separately disclosed in this note.

Transactions with related parties of the department have occurred within normal customer or supplier relationship on terms and conditions no more favourable than those which it is reasonable to expect the department would have entered into on an arm's-length basis. These transactions have not been separately disclosed.

Giving consideration to relationships with related entities, and transactions entered into during the reporting period by the department, it has been determined that there are no related party transactions to be separately disclosed.

Footnotes

  1. In accordance with the Administrative Arrangements Order of 29 May 2019, industrial relations functions and programs were transferred from the Department of Employment, Skills, Small and Family Business with assets and liabilities transferring on 25 July 2019 (Refer Note 9.2A).
  2. In accordance with the Administrative Arrangements Order of 29 May 2019, industrial relations functions and programs were transferred from the Department of Employment, Skills, Small and Family Business with assets and liabilities transferring on 25 July 2019 (Refer Note 9.2A).
  3. The key management personnel remuneration excludes the remuneration and other benefits of the Attorney-General. The Attorney-General’s remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the department. Note 2.4 was prepared on an accrual basis.