Research Paper 30 1999-2000

Remuneration of Members of the Parliament of Australia

Margaret Healy
Politics and Public Administration Group
Geoff Winter
Statistics Group
27 June 2000

Contents

After several years during which there were no changes to parliamentary salaries, a new salary fixing mechanism was enacted in late 1999, and salaries were thereby increased. The new mechanism provides for automatic adjustment to salaries in line with increases to Average Weekly Ordinary Time Earnings (AWOTE). This paper updates Background Paper No. 18 1997-98, and contains details of the legislative changes, the current salaries of Members of Parliament (MPs), Ministers and all Office-holders of the Parliament, and the projected increase from 1 July 2000.

As previously, the constitutional authority for payment of Members of Parliament and of Ministers is given, along with a short history of parliamentary salaries. There is a brief outline of the other entitlements of Members of Parliament, and of the Parliamentary Contributory Superannuation Scheme.

Members' remuneration

There are two components of the total monetary remuneration of Members of Parliament:

• the basic salary

This is paid to all Senators and Members.

• office-holder or ministerial salary

The electorate allowance

This is an allowance made for expenses associated with the electorate. It is not part of salary, and does not count towards parliamentary superannuation. However, any amount not spent on items pertaining to the electorate is treated as taxable income. The electorate allowance has therefore been included in the remuneration figures.

There are three different levels of the electorate allowance, set according to the size of the electorate. The lowest (a) applies to all Senators and to Members of the House of Representatives with electorate areas less than 2000 sq. km.; the next (b) to electorates with areas from 2000 to less than 5000 sq. km., and the largest (c) to electorates with areas of 5000 sq. km. or more. As the electorate allowance is a variable component, the electorate size needs to be known when calculating the total remuneration for any MP.

Appendix 1 shows each component separately and provides their combined total. The bolded amounts are those applying to the incumbent recipients.

Constitutional and legal basis of payment

The payment of Members of Parliament was adopted by the parliaments of the Australian colonies in the late nineteenth century, often after bitter struggles with the upper houses.⁽¹⁾ Its purpose was to ensure that membership of Parliament was open to all classes, and not only to the rich.

Payment of Senators and Members of the Commonwealth Parliament is provided for in section 48 of the Constitution, which states:

Brief history

Until 1973 Parliament itself determined the salaries of its members by legislation, either on the basis of decisions made by the government of the day, or as a consequence of recommendations of various committees of inquiry.⁽²⁾ Salary adjustments were relatively infrequent. Table 1 lists these Acts of Parliament and the salary levels they set.

Appendix 2 shows basic salaries and electorate allowances from 1952 until the present. Electorate allowances were first introduced by the Parliamentary Allowances Act 1952, which enacted the recommendations of the first committee of inquiry into parliamentary salaries, the Nicholas Report of 1952. This used four groupings of electorates based on criteria used by the Taxation Commissioner. These groupings were clearly associated with the size of the electorates. The amounts fixed in 1952 were increased by amending acts in 1956, 1959, 1964, 1968, 1970 and 1973.⁽³⁾

Table 1: Basic Salaries of Members of Parliament determined by Act of Parliament, 1901-73

The remuneration of Members of Parliament has always been a contentious issue. The last government-appointed inquiry into parliamentary remuneration, the Kerr.⁽⁴⁾ Committee, which reported in 1971, recommended that parliamentary salaries should be determined by an independent tribunal. The Whitlam ALP Government accepted the recommendation, which it implemented by passing the Remuneration Tribunal Act 1973. This established an independent Remuneration Tribunal which had the function of reporting into and determining the salaries and allowances of Senators and Members, and the allowances of Ministers and Office-holders of the Parliament. The Remuneration Tribunal was required to do this at intervals of not more than one year. The Remuneration Tribunal did not, however, set ministerial salaries: rather, it reported and made recommendations to the Minister. Thus after 1973 parliamentary salaries and allowances were determined by the Remuneration Tribunal. The Remuneration Tribunal had the additional functions of determining the remuneration of Australian Public Service (APS) departmental heads, various other Commonwealth public offices, and the Commonwealth judiciary.

Such salaries and allowances were set by means of formal determinations by the Tribunal. The Tribunal is required to furnish the Minister with a copy of each determination, and the Minister (now the Minister for Finance and Administration) is required to table such determinations in each House of the Parliament within 15 sitting days after receipt by the Minister. Unless specifically disallowed by either House of the Parliament, determinations come into effect on the date specified in the determination.

It was intended that the work of the Remuneration Tribunal would de-politicise the issue of parliamentary remuneration and conditions.

The Tribunal fixed the basic parliamentary salary, electorate allowances, travel entitlements and conditions for Senators and Members, Office-holders of the Parliament, and Ministers. Allowances for some office facilities, such as postage and telephones, were determined by the Tribunal, but the general provision and equipment of electorate offices and the staffing levels for Senators and Members, Office-holders and Ministers were, and still are, set by the Government.

By 1990 parliamentary remuneration had again become a contentious issue. The 1988 Review of the Tribunal determined, after a work value assessment of Members of Parliament by management consultants Cullen Egan Dell, that there should be a substantial phased increase in salaries. However, following strong representations by the Government, the 1990 increase was deferred. The Government proposed a linkage between the salaries of members and those of the Band 1 of the Senior Executive Service (SES) of the APS. The Tribunal opposed this linkage. The Hawke ALP Government then passed the Remuneration and Allowances Act 1990, which removed the power of the Remuneration Tribunal to determine the basic salary, and provided for a phased increase of salaries up to the level of SES Band 1. The Act provided that once salaries reached this level, subsequent adjustment of parliamentary salaries would occur in accordance with any adjustments made to SES Band 1 salaries. Since 1990 these adjustments occurred by means of wage agreements between the government and the public sector unions.

The Remuneration Tribunal continued to make determinations on electorate and other allowances and conditions of MPs, Ministers and Office-holders, and continued to determine the salaries of Office-holders of the Parliament as specified in sub-section 8(2) of the Remuneration Tribunal Act 1973.

Determinations fixing the remuneration of Office-holders of the Parliament updated and rationalised the additional salaries paid to the Chairs of Parliamentary Committees. After the establishment of the Main Committee of the House of Representatives in February 1994 and of the new Senate Committee structure in October 1994, new Offices were approved, including an increased number of Whip positions and the position of Second Deputy Speaker.

Schedule 2 of the Industrial Relations Legislation Amendment Act (No. 2) 1994 (which deals primarily with the coal industry) amended Schedule 3 of the Remuneration and Allowances Act 1990 to provide that the salary of MPs was equivalent to the minimum payable to a Band 2 level of the SES. The new subclauses of Schedule 3 provided:

2. The Members of Parliament annual salary is equal to the minimum SES Band 2 annual salary.

Schedule 2 also amended Schedule 4 of the Remuneration and Allowances Act 1990 to provide that whenever parliamentary salaries increased because of an increase to the minimum SES level, the additional salaries paid to Office-holders of the Parliament also increased by the same proportion.

After basic salaries reached SES salary levels, there were adjustments resulting from National Wage Case decisions, and then from the Agreement between the Government and the public sector unions, Improving productivity, jobs and pay in the Australian Public Service 1992-1994, and its successor agreements. The last Agreement, Continuous improvement in the Australian Public Service: Enterprise Agreement 1995-96, expired at the end of 1996, with the last adjustment taking effect from 17 October 1996.

Expiry of the 1990 arrangements

The remuneration and conditions specified in the last Agreement remained in force. However, the final adjustment having been made, after the expiry of the Continuous improvement in the APS Agreement, there was no procedure by which increases to parliamentary salaries could be made. Furthermore, with the move to agency bargaining, there ceased to be any service-wide structure in place to which parliamentary salaries could be linked so as to enable increases to be made in the future.

Since the enactment of the Workplace Relations Act 1996, SES salaries and remuneration may be set either through individually negotiated Australian Workplace Agreements (AWA), or they may be included in separate agency enterprise bargaining agreements. The party to any AWA may not be disclosed by the Industrial Registrar (although it is possible for an individual who is party to an AWA to disclose its terms). The salient point is that with the move to agency bargaining in the APS, the nexus to parliamentarians' salaries had been broken, and there was no common public sector standard by which to determine future parliamentary salary levels. Legislation was required to set another mechanism in place. The Remuneration Tribunal, in its Statement on Members of Parliament-Allowances and Entitlements, dated 8 October 1997, had drawn attention to this lack of an adjustment mechanism, and recommended that this be given early attention.

Introduction of a new mechanism to adjust parliamentary salaries

The legislation which changed the means by which parliamentary salaries were to be determined was first introduced in 1998, as a minor part of the wide-ranging legislative changes to the Public Service. The bills were potential double dissolution triggers, which then lapsed with the dissolution of the House of Representatives in 1998. They were reintroduced and passed in 1999. The Act in question, the Public Employment (Consequential and Transitional Provisions) Amendment Act 1999, inter alia, amended the Remuneration and Allowances Act 1990 and the Remuneration Tribunal Act 1973.

The Act made the following changes:

• new Section 8A was inserted in the Remuneration and Allowances Act 1990, which enables regulations to be made under the Act;
• sub-clauses 1(2) and (3) of Schedule 3 were repealed and new sub-clauses inserted, which fix the salary of MPs at the minimum annual rate of salary payable to an SES employee with a classification of SES Band 2; or at a percentage of a 'reference salary' if so prescribed by legislation. A 'reference salary' is either the annual salary of an office under a determination of the Remuneration Tribunal or an annual salary identified as a reference salary for a principal executive classification in a relevant determination made by the Remuneration Tribunal; and
• the Minister must consider advice from the Remuneration Tribunal before a regulation is made.
• The Remuneration Tribunal Act 1973 was amended to give the Tribunal the additional function of determining a classification structure for principal executive offices and to provide advice to the employing bodies of principal executive officers relating to the terms and conditions, including remuneration and allowances, on which principal executive offices are to be held.

Following the legislative changes, the new procedures were quickly put into effect.

On 7 December 1999 the Remuneration Tribunal issued a Report recommending increases in parliamentary salaries. The recommendation was for an immediate increase of 9.95 per cent. The earnings growth for comparable general community market rates in the period October 1996 to October 1999 was between 14 and 17 per cent. However in recognition of the community expectation of restraint in MPs' salary increases, the Tribunal used a different, more acceptable indicator. It recommended that parliamentary salaries be linked to Average Weekly Ordinary Time Earnings (AWOTE), issued by the Australian Bureau of Statistics, which measures general community earnings movements

In its report the Tribunal pointed out that the Government had the options of continuing with the existing SES link, prescribing a new reference salary of up to 100 per cent of either the annual salary of a public office, or a salary identified as the reference salary for principal executive officer.

The same day the Remuneration Tribunal issued Determination 1999/15. This established a Principal Executive Office (PEO) classification, and set rates of remuneration. The classification structure covers five Bands. Band A is the lowest and Band E the highest. The PEO classification may be applied by the Minister for Finance and Administration, by regulation under the Remuneration Tribunal Act 1973, to a public office or appointment, and to a person, authority or body to be a PEO's employing authority. The Tribunal set a reference salary to Band A of the new PEO structure, which has a maximum salary of $98 000 pa. The reference salary was the maximum, less $8 000, or $90 000.

The Government generally accepted the recommendations relating to the parliamentary salary increases, but decided that the increase should be made in two stages: 4.45 per cent of the recommended 9.95 per cent increase would take effect from 7 December 1999 and the remainder from 1 July 2000.

The increase in the basic parliamentary salary was effected by the Remuneration and Allowances Regulations 1990, Statutory Rule 341 of 1999. Clause 4 (2) set the annual salary of MPs as equal to 95 per cent of the reference salary, from the commencement of the regulation to 30 June 2000, and clause 4 (3) set the salary at 100 per cent of the reference salary from 1 July 2000. The regulation was gazetted in the Commonwealth of Australia Special Gazette No. 638 of 22 December 1999, having been approved by the Executive Council (ExCo) on 15 December 1999. The commencement date of the first increase was 7 December 1999.

Table 2: Basic Salary of Commonwealth Members of Parliament

State and territory parliamentary salaries

The parliamentary salaries for all States and Territories, other than Western Australia and the Australian Capital Territory, are affected by changes to the Commonwealth parliamentary basic salary. Generally the States set their parliamentary salaries by legislation with reference to the rate of Commonwealth salaries. In New South Wales, Victoria, and Queensland salaries are set at $500 per annum less than the basic Commonwealth parliamentary salary. South Australia's rate is set at $2000 per annum less, and Tasmania's is 85.19 per cent of the Commonwealth rate. The Northern Territory rate is set by legislation at $3000 per annum less than the Commonwealth rate. Western Australian salaries are set by the Salaries and Allowances Tribunal, which is required under the Salaries and Allowances Act 1975 to review salaries and allowances annually, and the latest Determination set a basic salary of $95 000 with effect from 1 January 2000-the highest rate in Australia. The Australian Capital Territory, which formerly had remuneration for its Legislative Assembly set by the Commonwealth Remuneration Tribunal, has now established its own Remuneration Tribunal.

Ministerial salaries

Section 66 of the Constitution provides that:

Parliament provided otherwise by enacting the Ministers of State Act 1952 as amended, which fixes the maximum size of the Ministry and appropriates an annual sum for the payment of Ministerial salaries. After 1973, ministerial salaries (which are additional to the (basic) salaries of Senators and Members of the House of Representatives) were set by means of the Government accepting reports of the Remuneration Tribunal. Sub-section 6 (1) of the Remuneration Tribunal Act 1973 provides:

When the Parliamentary Allowances Act 1990 was passed, the Government decided to increase Ministerial salaries by the same percentage as any increases made to the basic salary of Members, and to apply any such increases with effect from the same dates.⁽⁵⁾ This was endorsed by the Remuneration Tribunal in its Report No. 1 of 1996 on Ministers' Additional Salary.

The Howard Government decided soon after its election upon a two-tiered pay structure for the Ministry. Cabinet Ministers' salaries remained unchanged, but those of Ministers not in the Cabinet decreased by $10 000 per annum.⁽⁶⁾ This was to reflect the higher workload of Cabinet Ministers, and represented a return to previous Coalition practice. This decision was formalised firstly by the Remuneration Tribunal accepting the advice of the Minister for Industrial Relations in his letter of 18 April 1996 that there should be a salary differential of 20 per cent between the salaries of Cabinet Ministers and other Ministers,⁽⁷⁾ and secondly by the acceptance of the Tribunal's Report by the Government. The new salary structure came into effect from 7 March 1996.

1999-2000 increases

Ministerial salaries are additional to the basic parliamentary salary. The increase in Ministerial salaries was, as usual, achieved by amending the Ministers of State Act 1952 to appropriate additional funds. These are then allocated according to the percentage of basic salary recommended by the Remuneration Tribunal, and accepted by the Government. Ministerial salaries are now expressed as a percentage of the basic salary, rather than as a specific amount. The salary of the Prime Minister is set at 160 per cent of the basic salary, that of the Deputy Prime Minister at 105 per cent, and of Cabinet Ministers at 72.5 per cent.

Table 3: Ministerial Salaries

Note: Fixed by Government acceptance of Remuneration Tribunal recommendations and by Ministers of State and Other Legislation Amendment Act 2000.

Source: Ministerial and Parliamentary Services Group, Department of Finance and Administration, April 2000.

Parliamentary Secretaries

Parliamentary Secretaries between 1980 and 2000 were appointed by the Prime Minister under the Parliamentary Secretaries Act 1980. They were not entitled to receive a salary of office, as it was considered that this would have constituted an office of profit under the Crown, and therefore under section 44 (iv) of the Constitution would have disqualified the Parliamentary Secretaries from being Members of Parliament. Instead they received reimbursement for acquitted 'expenses of office reasonably and necessarily incurred'. Determination No. 3 of 1998, dated 27 January 1998, set the amount at $10 000 per annum, with effect from 1 October 1997. Determination No. 9 of 1998, dated 27 February 1998, amended this determination by setting specific conditions for travelling expenses for parliamentary secretaries.

The Ministers of State and Other Legislation Amendment Act 2000⁽⁸⁾, in addition to appropriating the additional amount required for the increases to ministerial salaries, altered the basis on which Parliamentary Secretaries were appointed. The Parliamentary Secretaries Act 1980 was repealed. A new section 4 was inserted into the Ministers of State Act 1952. This created a new category of ministers designated as Parliamentary Secretary, whose numbers may not exceed 12. The number of ministers not so designated may not exceed 30, thus there is a total of 42 ministerial positions. This legislation therefore enables Parliamentary Secretaries to receive a salary of office. Accordingly they are no longer entitled to the reimbursement of expenses of office allowance. The Ministers of State and Other Legislation Amendment Act 2000 received assent on 29 February 2000 and commenced on 10 March 2000. On this date all Parliamentary Secretaries were sworn in as ministers, and their annual salary of office of $21 375 was paid from that date. This will increase to $22 500 from 1 July 2000 (see Table 3 above).

Office-holders of the Parliament

Determination 16/1999 sets the additional salaries of parliamentary office-holders. These are additional to the basic salary, and are expressed as a percentage of the basic salary. Clause A3 of Determination 16 requires that the calculation of additional salary for the offices listed in Table 1 of Determination 16 be rounded up to the nearest ten dollars.

Table 4: Additional Salaries of Parliamentary Office-holders

Note: Fixed by Remuneration Tribunal Determination 1999/16. Salaries are rounded upwards to the next $10, under Determination 1999/16.

Other parliamentary entitlements

In addition to the provision of a privately-plated Commonwealth vehicle,⁽⁹⁾ and electorate allowances, Senators and Members are provided with electorate offices, and may engage three electorate staff, one of whom may be located permanently in Parliament House. They are entitled to transport, travelling allowances which include accommodation, and telephone and postage allowances.

Non-salary entitlements of Senators and Members are authorised by the Parliamentary Entitlements Act 1990, and by determinations of the Remuneration Tribunal.

The Remuneration Tribunal conducted a review of members' entitlements during 1997, so as to provide greater flexibility and a tighter focus on needs.⁽¹⁰⁾ As a result a new determination on members' entitlements was made. Electorate allowances, spouses', nominees' and dependent children's transport, car transport on parliamentary business, private vehicle allowances, provision of privately-plated Commonwealth vehicles, charter aircraft and drive-yourself vehicles, life gold passes, overseas travel, telephone services and postage are covered by Determination No. 1 of 1998, dated 27 January 1998. This increased the electorate allowances by 1.5 per cent with effect from 1 October 1997.

In its Report of 7 December 1999, the Remuneration Tribunal stated that it would undertake a review of electorate allowances in the first half of 2000, and that in the meantime:

The electorate allowances from 1 January 2000 are:

(a) $27 300

(b) $32 450

(c) $39 600

The Statement accompanying Determination No. 1 of 1998 outlined the range of expenses for which the electorate allowance may be used. The electorate allowance is taxable unless it can be shown that the expenditure was tax deductible. Any balance not accounted for is liable to income tax. The Commonwealth meets fringe benefits tax payable on the provision of privately-plated Commonwealth vehicles and on entertainment allowances.

Senators and Members travelling within Australia by air, rail or coach on parliamentary or electorate business are transported at the expense of the Commonwealth. So too are Ministers and Office-holders travelling on official business. Travelling allowances are payable for overnight stays for the sittings of Parliament, parliamentary and electorate business and other specified purposes.

Responsibility for the administration of travel allowances was transferred in 1997 from the Departments of the Senate and the House of Representatives to the Department of Finance and Administration.⁽¹²⁾ Following controversy in 1997 over the administration and use of travel allowances, the Government gave the Tribunal a reference to review travel allowances. The Tribunal's recommendations were accepted by the Government, and the Tribunal then issued Determination No. 8 of 1998, which took effect from 14 April 1998. In its accompanying Statement the Remuneration Tribunal said:

The text of the relevant Determinations should be consulted for detailed information on entitlements and allowances. They are available at: http://www.dofa.gov.au/remtribunal/determinations.html

Parliamentary superannuation

There is a parliamentary superannuation scheme established by the Parliamentary Contributory Superannuation Act 1948. This is administered by the Department of Finance and Administration under the direction of the Parliamentary Retirement Allowances Trust. The Minister for Finance and Administration is the presiding trustee. The Department of Finance and Administration issues an explanatory booklet on the scheme to Senators and Members entitled the Parliamentary Contributory Superannuation Handbook, which is updated as required. This is available at:
www.dofa.gov.au/super/Parliamentary/Parliamentary.html. Contributions are 11.5 per cent of monthly salary and additional salary of office for the first 18 years of parliamentary service. The contribution rate then falls to 5.75 per cent.

Endnotes

1. Parliamentary Salaries, Australian Encyclopaedia, vol. 7, Second edition, revised, The Grolier Society, Sydney, 1965, pp. 20-22.
2. There have been four such committees of inquiry, in 1952, 1955, 1959 and 1971. They were:

i. Australia, Committee of Inquiry into the Salaries and Allowances of Members of the National Parliament, Report, H. S. Nicholas, Chairman, Commonwealth Government Printer, Canberra, 1952.

ii. Australia, Committee of Inquiry into the Salaries and Allowances of Members of the Commonwealth Parliament, Report, H. F. Richardson, Chairman, Commonwealth Government Printer, Canberra, 1956, PP 7/1956/57.

iii. Australia, Committee of Inquiry into the Salaries and Allowances of the Commonwealth Parliament, Report, H. F. Richardson, Chairman, Commonwealth Government Printer, Canberra, 1969, PP 15/1959-60.

iv. Australia, Inquiry into the Salaries and Allowances of Members of the Commonwealth Parliament, Report of Inquiry by Mr Justice Kerr, AGPS, Canberra, 1971, PP 284/1971.

3. See Parliamentary Allowances Act 1956, Parliamentary Allowances Act 1959, Parliamentary Allowances Act 1964, Parliamentary Allowances Act 1968, Parliamentary Allowances Act 1970, Remuneration and Allowances Act 1973.
4. Mr Justice Kerr (later Sir John), a Judge of the Commonwealth Industrial Court, and of the Supreme Courts of the Australian Capital Territory and the Northern Territory, was the sole member of this Committee. He was Chief Justice of the NSW Supreme Court from 1972 to 1974, and was Governor-General from 1974 to 1977.
5. This decision was not given separate legislative effect, as authority exists under the Ministers of State Act 1952.
6. Michelle Grattan, in The Age of 16 April 1996, reported the salary differential. She said junior (i.e. non-Cabinet) Ministers had been told about a fortnight previously that their salaries would fall by $10 000. See also article by Peter Cole-Adams in The Canberra Times, 17 April 1996.
7. Report No. 1 of 1996 dated 14.5.96.
8. See Bob Bennett, Bills Digest No. 110 1999-2000, Ministers of State and Other Legislation Amendment Bill 1999, Department of the Parliamentary Library, for a full discussion of the legislation, and the constitutional issues relating to Parliamentary Secretaries.
9. Provision of a privately-plated Commonwealth vehicle was first made by Determination No. 24 of 1990. A deduction of $6000 per annum from the electorate allowance was required. This was changed by Determination No. 18 of 1993, so that the contribution by parliamentarians is set at the same rate and conditions as those applying to members of the SES. There is a deduction of $500-700 per annum made from salary. MPs may now be provided with a non-standard vehicle, but the additional cost is deducted from the electorate allowance or charter transport allowance. These provisions are now contained in Determination No. 1 of 1998.
10. Remuneration Tribunal, Statement on Members of Parliament-Remuneration and Allowances, 27 January 1998. See also Determinations 1, 2 and 3 of 1998, dated 27 January 1998.
11. Remuneration Tribunal, Report on Senators and Members of Parliament, Ministers and Holders of Parliamentary Office-Salaries and Allowances for Expenses of Office, Report 99/01, 7 December 1999, p. 8.
12. Determination No. 8 of 1997 of 10 July 1997 transferred administrative responsibility from the Presiding Officers of the Parliament to the Minister for Administrative Services. This Determination was suspended by Determination No. 9 dated 15 August 1997, because of legal advice. On 5 September 1997 the President of the Senate advised the Minister for Administrative Services that the Senate had agreed to adopt the new arrangements. Determination No. 11 of 1997 of 25 September re-activated Determination No. 8 of 1997 with effect from 13 September 1997.
13. Remuneration Tribunal, Statement, Members of Parliament-Travelling Allowance. 27 February 1998, p. 1.

Appendix 1: Salaries, etc. of Members of Parliament, Office-holders of the Parliament and Ministers(a), 1996-2000

Salaries, etc. of Members of Parliament, Office-holders
of the Parliament and Ministers(a), 1996-2000 (continued)