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 Note 2: People and relationships

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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

2.1A: Employee benefits
Wages and salaries 166,970 181,010
Defined benefit plans 17,661 22,797
Defined contribution plans 10,557 9,720
Leave and other entitlements 16,158 19,760
Separation & redundancies 1,667 3,645
Other employee benefit expenses
Recruitment and security vetting expenses 1,671 1,606
Health & wellbeing payments to staff 750 739
Study assistance 571 548
Payroll tax - Australian Government Solicitor 1,924 2,331
Other employee expenses 1,345 1,133
Total employee benefits 219,274 243,289

2.1B: Administered - employee benefits
Wages and salaries 38,361 34,045
Leave and other entitlements 3,258 2,481
Defined benefit plans 19 30
Defined contribution plans 4,098 3,814
Other employee benefits 753 904
Total employee benefits 46,489 41,274

2.2 Employee provisions

2.2A: Employee Provisions
Leave 61,101 60,343
2.2B: Administered - employee provisions
Leave 2,619 2,049

2.3 Superannuation provision - former Solicitor-Generals' pensions

Superannuation provision - former Solicitor-Generals' pensions
Present value of defined benefit obligations at end of the year 5,671 5,869
Personal benefits provisions expected to be settled
No more than 12 months 442 422
More than 12 months 5,229 5,447
Total personal benefits 5,671 5,869

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

As at 30 June
30 June
Defined benefit obligation 5,671 5,869
Net superannuation liability 5,671 5,869

Cumulative amount of actuarial gains and losses recognised in administered equity

For the period ended 30 June
30 June
Actuarial gains/(losses) (81) (488)

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

30 June
30 June
For the period ended $'000 $'000
Interest cost 153 199
Net superannuation expense 153 199

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 (5,869) (5,600)
Interest cost (153) (199)
Actuarial gains/(losses)
experience (315) (96)
changes in financial assumptions 234 (392)
Benefits paid 432 418
Net liability at 30 June (5,671) (5,869)

Reconciliation of the fair value of scheme assets
Opening fair value of scheme assets
Employer contributions (432) (418)
Benefits paid 432 418
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:

For the period ended 30 June
30 June
Discount rate 2.70% 3.70%
Expected salary increase rate 4.00% 4.00%
Expected pension increase rate 4.00% 4.00%

Historical information:

For the period ended 30 June
30 June
30 June
Present value of defined benefit obligation 5,671 5,869 5,600
Surplus/(deficit) in scheme 5,671 5,869 5,800
Experience adjustments gain/(loss) - scheme liabilities (81) (488) (14)

The expected employer contributions in respect of 2017-18 are $430,000.

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 2017 were:
Expected rate of return on assets (discount rate) 2.7%
Expected salary increase rate 4.0% + a promotional salary increase scale
Expected pension increase 4.0%

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 $5.6m
Interest rate (-0.5%) $5.9m
Interest rate (+0.5%) $5.4m
Pension increases (+0.5%) $5.9m
Pension increases (-0.5%) $5.4m

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.

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.

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 the Australian Government Actuary will normally undertake an actuarial assessment of the scheme.

2.4 Key management personnel remuneration 1

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 Financial Officer. Key management personnel remuneration is reported in the table below:

Short-term employee benefits
Salary 2,410
Performance bonuses 35
Other 2 35
Total short-term employee benefits 2,480
Post-employment benefits
Superannuation 396
Total post-employment benefits 396
Other long-term employee benefits
Annual leave accrued 179
Long service leave 66
Total other long-term employee benefits 245
Total key management personnel remuneration expenses 3 3,121

The total number of key management personnel that are included in the above table are 10. (This includes two officers who acted for extended periods).

1 Note 2.4 was prepared on an accrual basis.
2 Other includes motor vehicle, other allowances and reportable fringe benefits.
3 The above key management personnel remuneration excludes the remuneration and other benefits of the Attorney-General and Minister for Justice.  The Attorney-General and the Minister for Justice’s remuneration and other benefits are set by the Remuneration Tribunal and are not paid by the department.

2.5 Related party disclosures

Related party relationships

The department is an Australian Government controlled entity. Related parties to the department are key management personnel including the Portfolio Ministers, the Secretary, Deputy Secretaries, Chief Financial Officer 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 have not been disclosed in this note.

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