Michael Lawler.

Michael Lawler. Photo: Supplied

Public service unions have lost an appeal against an industrial tribunal decision they say threatens the job security of 25,000 Australian Taxation Office workers nationwide.

The full bench of the Fair Work Commission has upheld the tax bosses' right to force eight junior employees in Melbourne to reapply for just four positions, with no guarantee of jobs for the losers in the process.

The Australian Services Union (ASU), backed by the Community and Public Sector Union (CPSU), argued that the decision set a precedent that the Tax Office could use to cull its workforce while dodging the requirements of its collective agreement.

The Tax Office says four of the eight facilities management workers are now ''excess'' as the management moves 2500 Melbourne CBD-based bureaucrats from five separate locations into the city's massive Collins Square development.

The eight staff members were encouraged to apply for the reduced number of jobs or to consider voluntary redundancy.

The union took its fight against this to the Fair Work Commission, arguing the move was in breach of the Tax Office's obligation to find alternative work and retraining for staff deemed to be excess to requirements.

But commission vice-president Michael Lawler found in April that the Tax Office's approach was a ''practical, sensible and fair'' response to a ''classic redundancy situation'' where the eight Melbourne staff did not have technical taxation skills needed if they were to be moved around the organisation.

Following Mr Lawler's judgment, the two unions joined forces, with the CPSU worried the decision could have repercussions right across the public service, and appealed to the full bench of the Fair Work Commission.

But the full bench dismissed the appeal, finding that the Tax Office was entitled to offer redundancies to workers deemed to be excess and to do all it could to retain the best people for the available jobs.

ASU Melbourne tax officers branch secretary Jeff Lapidos said the union was now considering a further appeal, arguing the precedent gave the Tax Office too much power in deciding ''who will stay and who will go''.

''The ATO can offer voluntary redundancies even if employees could be readily redeployed,'' the union official said.

''It will waste public money.

''The ATO can use reverse orders of merit whenever it wants to get rid of employees that managers do not like.

''The ASU will appeal this decision if counsel agrees it has sufficient merit.''

A Tax Office spokeswoman declined to comment.