Bills Digest no. 149 2008–09
Governor-General Amendment (Salary and Superannuation) Bill 2008
This Digest replaces
an earlier version dated 23 June 2008, including
some additional reference material.
WARNING:
This Digest was prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments. This Digest does not have
any official legal status. Other sources should be consulted to determine
the subsequent official status of the Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Contact officer & copyright details
Passage history
Governor-General
Amendment (Salary and Superannuation) Bill 2008
Date introduced: 18 June 2008
House: House
of Representatives
Portfolio: Prime Minister
Commencement: On the day that the Royal Assent is given.
Links: The relevant
links to the Bill, Explanatory Memorandum and second reading speech
can be accessed via BillsNet, which is at http://www.aph.gov.au/bills/. When Bills
have been passed they can be found at ComLaw, which is at http://www.comlaw.gov.au/.
To amend the Governor-General Act 1974 (the
Governor-General Act) to set the salary for the next Governor-General
who is to be sworn-in on 5 September 2008.
The office of Governor-General was created by the Commonwealth Constitution
at Federation. The Governor-General is the Queen’s representative in
the Commonwealth of Australia. The office of Governor-General has a range
of powers and functions conferred on it by the Constitution, most notably
the executive power of the Commonwealth.
Before 1974 the office of the Governor-General was regulated only by
the Constitution. Section 3 of the Constitution states that
- the Governor-General is to be paid an annual salary of ‘ten thousand
pounds’ until the Parliament otherwise provides and
- the salary of the Governor-General is not to be altered during the
period of appointment to the office.[1]
Payments remained unchanged until the introduction of decimal
currency in February 1966 when an equivalent payment of $20 000 per annum
was made.
In enacting the Governor-General Act, the Whitlam government
acknowledged that appointment to the office of Governor-General should
not depend on a candidate’s personal wealth or the availability of other
income. The former Prime Minister also put forward two principles that
are still applied when Parliament considers salary:
- salary should be dealt with in a non-partisan way and
- salary should recognise the importance and place of this high office.[2]
Under the newly enacted Governor-General Act, the salary was increased
to $30 000 for the incoming Governor-General, Sir John Kerr. Whilst the
actual salary had increased very little, it was noted that in 1925-26
the appropriations made for the Governor-General’s establishment and office
amounted to $38 150 which had increased markedly to $708 047 in 1972-73.[3]
Further background, including information about the salaries of former
Governor’s-General, can be found in Research Note
No. 12 2003-04.[4]
By convention, the Governor-General’s salary is linked to the salary
of the Chief
Justice of the High Court although the reasons for that particular
choice are unclear. The Chief Justice’s salary is determined annually
by the Remuneration Tribunal and so is determined by a statutory body
which is independent of the Government. This satisfies the requirement
that salary be determined in a non-partisan way. Although the link was
not mentioned in debate on the 1974 Bill or 1977 amendments, this convention
has been outlined in Parliament by the responsible Ministers since 1982.[5]
Prior to 2001, salary was set by calculating the after-tax equivalent
of the Chief Justice’s salary at the time of appointment. The average
after-tax salary of the Chief Justice over a notional five year term was
estimated taking into account future possible increases. The vice-regal
salary was then set to moderately exceed this average.[6] The salary is now set to moderately exceed the
estimated average before-tax salary of the Chief Justice over the notional
five year term of office.[7]
There is no legislative requirement on Governors-General to reduce their
salary to take account of any other income or allowances they may be entitled
to receive. At his own instigation, Sir William Deane’s salary was reduced
to take account of the pension he received as a former justice of the
High Court. It was reported that the current Governor-General, His Excellency
Major-General Michael Jeffery AC CVO MC would donate his military pension
of more than $50 000 per year to a range of charities during his term.[8]
According to the Explanatory Memorandum, the salary for the Governor-General
Designate, Ms Bryce, will be reduced to take account of her entitlement
to a Commonwealth-funded pension from prior employment.[9] However it should be noted that
there is neither a provision of the Governor-General Act which requires
such a reduction nor a provision setting out the method by which any reduction
is calculated.
The Income Tax Assessment Act 1997 was amended in 2001 to allow
the taxation of the Governor-General’s salary.
Governors-General had been exempt from taxation on official salary since
at least 1922 and on any overseas income since 1936.[10] The exemption was removed on
the grounds that:
- it was introduced at a time when vice-regal appointees customarily
came from the United Kingdom and were treated, for tax purposes, the
same as non-diplomatic representatives of foreign governments or organisations[11]
and
- the Governor-General is the Queen’s representative and, since 1993,
the Queen has been paying income tax in the United Kingdom.
A pension scheme for retired Governors-General was introduced with the
Governor-General Act in 1974. Earlier governments had sometimes found
it necessary to provide ex-gratia payments to former Governors-General
and their widows.[12]
The scheme is non-contributory, that is, Governors-General do not contribute
a percentage of their salary to the scheme that provides their pension.
The pension is paid out of the Consolidated Revenue Fund as an annual
allowance for life.
The annual allowance is also subject to income taxation. The amount
of annual allowance payable does not depend upon length of tenure. Similarly,
the manner in which a Governor-General leaves office does not affect the
allowance in any way.
Ms Bryce’s appointment
The Prime Minister, the Hon. Kevin Rudd announced that the Queen had,
on his recommendation, approved the appointment of Ms Quentin Bryce as
the next Governor-General of Australia.[13] Ms Bryce will succeed His Excellency Major General Michael
Jeffery on 5 September 2008. She will be Australia’s 25th
Governor-General and its first female Governor-General.[14]
Ms Bryce was appointed in July 2003 as the 24th Governor of
Queensland. She will bring to the role of Governor-General, her previous
experience as Director of the Queensland Women’s Information Service,
Queensland Director of the Human Rights and Equal Opportunity Commission,
Federal Sex Discrimination Commissioner, and CEO of the National Child
Care Accreditation Council.[15]
According to the Explanatory Memorandum there will be a financial cost
from increasing the Governor-General’s salary. However, the net financial
impact of the new arrangements is unquantifiable as it is not possible
to estimate the exact taxation liabilities which will depend on the individual
financial circumstances of the Governor-General and State Governors.[16]
Part 1 of Schedule 1
of the Bill amends existing section 3 of the Governor-General Act to increase
the annual salary payable to the Governor-General from $365 000 to $394
000.
According to Item 2 of the Bill, the increase in salary will not
apply to the current Governor-General.
Part 2 of Schedule 1 of the Bill is about superannuation. Items
3-10 amend existing subsection 2A of the Governor-General Act to repeal
eight separate definitions which relate to the superannuation surcharge
provisions. The rationale for the change is that the Superannuation Surcharge
was discontinued in 2005 in accordance with the Superannuation Laws
Amendment (Abolition of Surcharge) Act 2005. Whilst that Act did
make consequential amendments to a number of Acts to give effect to the
abolition of the surcharge, the Governor-General Act was not among them.
Item 13 deletes existing subsections 4(3) to 4(7) and inserts
proposed subsections 4(3) and 4(4). The rate of annual allowance
which is payable as a pension to a former Governor-General is 60% of the
rate of the salary payable to the Chief Justice of the High Court of Australia
at that time: proposed paragraph 4(3)(a). The rate of annual allowance
which is payable to the surviving spouse of a deceased former Governor-General
is five-eights of the amount which would have been payable to the former
Governor-General: proposed paragraph 4(3)(b).
Under proposed subsection 4(4) the amount of annual allowance
payable to a former Governor-General, or a deceased former Governor-General’s
spouse is to be reduced by the amount of any pension or retiring allowance
payable whether under any law or otherwise.
Existing section 4A is about the amount payable when a Governor-General
dies leaving more than one spouse. Under subsection 4A(1) the Commissioner
must allocate any allowance payable to a spouse of the deceased person
among the spouses. Item 14 repeals existing paragraph 4A(3)(b)
and inserts proposed paragraph 4A(3)(b) which places a cap on the
amount which can be paid. The proposed paragraph provides that the aggregate
of the allowances payable to the former spouses cannot exceed 100% of
the allowance that would have been payable to the deceased person, that
is, 60% of the rate of the salary payable to the chief Justice of the
High Court of Australia.
Item 16 repeals existing section 5A which relates to the trustee
of a scheme under the Superannuation Contributions Tax (Assessment
and Collection) Act 1997. As the superannuation surcharge has been
abolished, this provision is no longer necessary.
Item 17 provides that the repeals and amendments contained in
this Bill do not apply to any person who held the office of Governor-General
after 29 June 2001 and before the commencement of the Bill. This means
that the changes do not affect those former Governors-General to whom
the superannuation surcharge did apply.
Paula Pyburne
30 June 2008
Bills Digest Service
Parliamentary Library
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