GESB Gold State and West State - How Are They Unique?

West State is a unique superannuation fund within Western Australia that closed to new members in 2007.  It is a constitutionally protected fund, meaning it is not subject to some of the same rules as standard superannuation funds.  Most people are unable to contribute more than $30,000 (2025/26) per financial year concessionally (pre tax) to their superannuation fund.  West State does not have an annual concessional contribution cap, instead it has a lifetime balance cap of $1.865 million in 2025/26 (which is indexed) that can accumulate in the fund from pre-tax funds. Employer contributions, salary sacrifice and investment earnings all contribute to this cap.

A common strategy for West State, particularly as retirement approaches, involves salary sacrificing the majority of one’s salary to the fund.  However one should not contribute funds that would otherwise be received as tax free or minimally taxed income.  For some people this can involve salary sacrifice of $80,000 per year or even more and results in tens of thousands of dollars of tax savings.

Only WA government employers can contribute concessionally to it.  Concessional contributions usually suffer 15% tax within superannuation as the contributions are made.  Another advantage of West State is that these contributions are not taxed until one rolls the funds out of West State.  This is usually on retirement but some may choose to roll out earlier.  By staying in West State and not prematurely rolling out, this allows the tax payable to remain invested over the course of one’s career and attract investment earnings on this additional 15%.  This generally warrants retaining one’s balance in the account until retirement unless one expects to exceed the lifetime cap at some point.  One just needs to be aware that 15% of the balance will be deducted from the “taxable- untaxed” portion of the account on retirement.  If one spends one’s entire career working for the WA government this could be the entirety of one’s balance that suffers 15% tax on exit.  If one withdraws the money straight from West State to one’s bank account then an additional 2% tax is payable((i.e.  17% total tax) as the Medicare Levy is also payable.  For this reason it is usually advisable to roll the funds to an alternative taxed superannuation/pension account (with GESB or otherwise) prior to withdrawal.  If one is to close a West State account, one cannot re-join at a later date.  Therefore, it is prudent to retain a balance in West State for as long as one believes there is a chance one could work for the WA government.

While retaining funds in West State allows one to benefit from the deferral of tax, this benefit maybe offset by better performance of alternative funds.  If the West State benefit is fully taxable, rollout to an alternative fund is justified if the net return of the alternative fund is expected to equal or exceed the gross return of West State.  In the ten years to June 2025, the net return of, for example, Australian Super's “Balanced” fund returned 7.94% compared with West State's “My West State Super” plan’s 6.53%.  If the taxable portion is less than 100%, the balance tips further to the alternative.  Andep can provide advice and a spreadsheet that allows examination of one's individual situation.

Most superannuation funds hold separate accounts for each member in which contributions and investment earnings accumulate to retirement, but several old funds sponsored by governments and larger employers operate in a different way and define benefits in terms of years of membership and final average salary.  For this reason, they are called 'defined benefit' funds.  Many defined benefit funds are closed to new entrants and sometimes employees have no choice but to join or remain in such funds. Inherent in defined benefit funds is a subsidy of older members by younger members and those who experience rapid promotion by those who do not.  The advantage of defined benefit funds is that one is not exposed to inflation or investment risk.  GESB’s Gold State account is a defined benefit fund that closed to new members in 1995. 

One can be a contributing member of Gold State and have one’s final balance tied to one’s final average salary or one’s benefit.  Usually this means one contributes 5% of one’s salary to the fund to qualify for a 20% contribution rate.  This is multiplied by ones length of service and salary to obtain one’s Gold State balance.  If one is no longer a contributing member of Gold State then the account is “crystalised” and the balance will increase each year in line with Perth’s Consumer Price Index (CPI) plus 1% until one turns 55 and plus 2% after that.  The 2025/26 CPI rate is 2.82% so crystalised accounts will be credited with either 3.82% or 4.82% earnings this year.

Our director, Dennis Barton, was previously the Chairman of GESB and Andep understands the unique qualities that make funds like West State and Gold State different to other funds.  Contact us today to book an appointment and discuss your retirement needs.