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1998-1999-2000-2001
THE
PARLIAMENT OF THE COMMONWEALTH OF
AUSTRALIA
HOUSE OF
REPRESENTATIVES
GOVERNOR-GENERAL
LEGISLATION AMENDMENT BILL
2001
EXPLANATORY
MEMORANDUM
(Circulated by authority of the
Prime Minister, the Hon J W Howard MP)
ISBN: 0642 458995
GOVERNOR-GENERAL LEGISLATION AMENDMENT BILL
2001
OUTLINE
The Bill proposes amendments to the Governor-General Act 1974 and the Income Tax Assessment Act 1997.
• The purpose of the proposed amendments to the Governor-General Act 1974 is to set the official salary for the next Governor-General, the Most Reverend Peter Hollingworth, who will be sworn in on 29 June 2001, and provide that this salary will not take effect during the continuance in office of the current Governor-General.
• The amendments will also ensure that the reduction in a retiring allowance payable to a former Governor-General or the allowance to the spouse of a deceased Governor-General or former Governor-General following the payment of a surcharge liability by the trustee will not exceed 15 per cent of the allowance.
• In addition, the amendments will allow the trustee to pay surcharge liabilities arising after the retirement or death of a Governor-General or former Governor-General subject to a reduction in the retirement or spouse allowance.
• The purpose of the proposed amendment to the Income Tax Assessment
Act 1997 is to remove income tax exemptions which currently apply to
Vice-Regal representatives, defined as the Governor-General or a State Governor.
Consequential amendments to the Income Tax Assessment Act 1936 will be
necessary.
Section 3 of the Constitution provides that the salary of a
Governor-General shall not be altered during his continuance in office.
This
Bill amends the Governor-General Act 1974 to change the sum payable for
salary of the Governor-General from $58,000 to $310,000. The amount takes into
account, among other things, the effects of the proposed removal of the income
tax exemption for Vice-Regal Representatives and the fact that the next
Governor-General will not while in office receive a pension payable by the
Commonwealth or a State or Territory as has been the case with the current
Governor-General. The amendment will not take effect until the current
Governor-General has left office.
Section 51-15 of the Income Tax Assessment Act 1997 provides for
income tax exemptions if the taxpayer is a Vice-Regal Representative. The
exemptions cover official salaries and any ordinary or statutory income derived
from outside Australia. The proposed amendment will remove all income tax
exemptions for Vice-Regal Representatives by the deletion of section 51-15 of
the Income Tax Assessment Act 1997. Consequential amendments to the
Income Tax Assessment Act 1936 will be necessary.
Transitional
provisions will ensure that the amendment does not apply to the current
Governor-General nor to a State Governor who holds that office before 29 June
2001.
In 1997 the Governor-General Act 1974 was amended to provide for the
superannuation surcharge to apply to the Governor-General’s retirement
allowance.
The Bill will amend the superannuation provisions in the
Governor-General Act 1974 to ensure that the reduction in a
Governor-General’s retiring allowance following the payment of a surcharge
liability by the trustee will not exceed the maximum 15 per cent surcharge rate,
regardless of the timing of retirement. The amendments will also allow for
surcharge liabilities that arise after a Governor-General ceases to hold office
to be paid by the trustee subject to a recalculation of the retirement
allowance.
There will be a financial cost from increasing the Governor-General’s salary. There will also be additional revenue arising from the changes to taxation and superannuation arrangements.
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. However, the overall impact is expected to be negligible.
NOTES ON CLAUSES
Clause 1
Short Title
This clause provides for the Act to be cited as the
Governor-General Legislation Amendment Act 2001.
Clause
2 Commencement
This clause provides for the Act to commence on Royal
Assent.
Clause 3 Schedule
This clause provides that:
• the Governor-General Act 1974 shall be amended in accordance
with Schedule 1 and that the amendments shall have effect in accordance
with the terms of Schedule 1; and that
• the Income Tax
Assessment Act 1997 shall be amended in accordance with Schedule 2 and
that the amendments shall have effect in accordance with the terms of
Schedule 2. Consequential amendments to the Income Tax Assessment Act
1936 will also be necessary.
SCHEDULE 1 AMENDMENTS OF THE
GOVERNOR-GENERAL ACT 1974
Item 1
Section 3 of the Governor-General Act
1974 provides that the annual sum payable for the salary of the
Governor-General shall be $58,000.
Item 1 omits the annual sum of
“$58,000” and substitutes a new annual sum of
$310,000.
Item 2
Item 2 provides that amendments made by
the Governor-General Legislation Amendment Act 2001 will not have effect
until the current Governor-General leaves office. This provision is included
because Section 3 of the Constitution provides that the salary of the
Governor-General shall not be altered during his continuance in office.
Item 3
Item 3 amends subsection 2A(2) by inserting a
definition of assessment so that subsequent references in the Act
to an assessment are consistent with the Superannuation
Contributions Tax (Assessment and Collection) Act 1997.
Item
4
Item 4 replaces the current definition of basic rate with a definition that incorporates two elements of the retirement allowance for a former Governor-General that are specified in the current Act:
• 60 per cent of the salary of the Chief Justice,
• less other
pensions payable by the Commonwealth, a State or a Territory.
These
elements are currently located in paragraph 4(3)(a) and subsection 4(4)
respectively, separate from the definition of basic rate which is
in subsection 4(3B). Bringing these two elements together allows a simpler
statement of the formula for calculating a retirement allowance and this is
given effect by Item 4.
Item 4 also relocates the definition of
basic rate from subsection 4(3B) to subsection 2A(2)
Interpretation, which includes other significant definitions.
Item
5
Item 5 amends subsection 2A(2) by inserting a definition of
notice of assessment so that subsequent references
in the Act to a notice of assessment are consistent
with the Superannuation Contributions Tax (Assessment and Collection) Act
1997.
Item 6
Item 6 amends subsection 2A(2) by
inserting a definition of surcharge so that subsequent references
in the Act to a surcharge are consistent with the
Superannuation Contributions Tax (Assessment and Collection) Act
1997.
Item 7
Item 7 expands the definition of
surcharge deduction amount to include the amount of any surcharge
that the trustee becomes liable to pay as the result of a notice of assessment
given after a Governor-General ceases to hold office.
This, with the
provisions in Items 9 and 12 (subparagraph 4(3)(b)(i) and subsection
4(3B)), will provide for a system in which a former Governor-General or
surviving spouse may commute part of a retirement or spouse’s allowance to
meet a surcharge liability in respect of the allowance arising after the
Governor-General ceased to hold office.
Item 8
Item 8
amends subsection 2A(2) by inserting a definition of surchargeable
contributions so that subsequent references in the Act to
surchargeable contributions are consistent with the
Superannuation Contributions Tax (Assessment and Collection) Act
1997.
Item 9
Item 9 provides for payment of a
retirement allowance at a rate that depends on the timing of the issue (or
non-issue) of a notice of assessment and the extent to which any
payment of a surcharge liability by the trustee justifies a reduction in the
allowance. The prescribed percentage defined in subsection 4(3B)
is the mechanism by which the effect of payments of surcharge liability by the
trustee affects the allowance. An explanation of several possible situations
follows.
4(3)(a)
|
‘Standard’ situation
|
The proposed paragraph 4(3)(a) describes what could be considered a ‘standard’ situation:
• the former Governor-General (the person) is about to retire after
serving the usual 5 year term (ie the person has not retired early);
and
• the ATO has issued a notice of assessment.
The trustee
pays the liability, then calculates an appropriate reduction to the rate of
allowance (the prescribed percentage) using the
formula at subsection 4(3B) (note that the formula will be amended by Item 12).
The result of the formula is a percentage of the person’s basic
rate (ie a percentage of: 60 per cent of the salary of the Chief
Justice, less any other pensions or retiring allowances the person receives from
the Commonwealth, a State or a Territory).
The provisions proposed for
subsection 4(3) will ensure that the prescribed percentage
will be not less than 85 per cent (ie a maximum reduction of 15 per
cent).
4(3)(b)(i)
|
A notice of assessment has been issued and the surcharge debt account was not in debit when the allowance became payable |
In this situation, a notice of assessment given after a Governor-General
ceases to hold office can be taken into account to produce a result similar to
that in the ‘standard’ situation. In addition, the situation in
which a Governor-General has fully paid a surcharge debt can be dealt
with.
4(3)(b)(ii)
|
A notice of assessment has not been issued, but the trustee and the person expect that a notice of assessment will be issued |
In this situation, the rate of allowance is set at 85 per cent in the expectation that a notice of assessment will be issued later. If such a notice of assessment were to be issued, the post-retirement commutation provisions (Item 7) and the formula at subsection 4(3B) (Item 12) would lead to recalculation of the rate of the allowance, taking into account any adjustment that may be needed as a result of the reduction to 85 per cent which had already occurred due to the operation of subparagraph 4(3)(b)(ii).
4(3)(b)(iii)
|
A notice of assessment has not been issued, but the trustee and the beneficiary agree that a notice of assessment is unlikely to be issued |
In this situation, the rate of allowance is set at 100 per cent of the
basic rate in the expectation that a notice of assessment will not
be issued and there will be no surcharge liability.
If, notwithstanding the agreement under this subparagraph, a notice of
assessment were to be issued later, the post-retirement commutation provisions
(Item 13) and the formula at subsection 4(3B) (Item 12) would permit
recalculation of the rate of the allowance, taking into account the rate at
which the allowance had already been paid.
Item 10
This
provision allows for the trustee and the person (or the person’s spouse,
spouses or legal representative) to agree in writing that a notice of assessment
is unlikely to be issued. As noted in the explanation of Item 9, the effect of
this agreement will be to set the allowance at 100 per cent of the basic
rate, ie without a deduction in respect of payment of a surcharge
liability.
If, notwithstanding the agreement under this subparagraph, a notice of
assessment were to be issued later, the post-retirement commutation provisions
(Item 13) and the formula at subsection 4(3B) (Item 12) would permit
recalculation of the rate of the allowance, taking into account the rate at
which the allowance had already been paid.
Item
11
Following the change to the definition of basic rate
made by Item 4, Item 11 replaces subsection 4(3A) and substitutes a formula for
the calculation of the spouse entitlement that retains the rate of spouse
allowance previously prescribed in the Act.
Item 12
The new
formula performs the same function as the old formula; ie it calculates an
appropriate reduction in the allowance in recognition of a surcharge liability
that has been paid by the trustee.
The new formula provides a mechanism for the trustee to adjust an allowance if, for example:
• more than one assessment has been issued; or
• no
assessment was issued at the time the allowance became payable and an assessment
is subsequently issued.
By enabling the allowance to be adjusted in such
circumstances, this provision gives effect to the post-retirement commutation
provision established by Item 13.
Item 13
The proposed
subsection 4(4) will transfer to the trustee of the Scheme any liability that a
former Governor-General, spouse, spouses or estate would otherwise be liable to
pay in relation to a notice of assessment pertaining to a superannuation
surcharge in respect of the Governor-General’s retirement allowance that
is issued after a person ceases to hold office as Governor-General. The
provision would apply only if the notice of assessment is passed to the
trustee.
If a liability of this kind is transferred to the trustee, the
proposed subsection 4(6) requires the recalculation of the prescribed
percentage in accordance with the formula at paragraph 4(3B) and
thus the retirement allowance will also be recalculated as a result of the
amendment made in Item 9 (Item 12 refers).
Item
14
Item 14 ensures that any Governor-General who held office prior to
the introduction of the superannuation surcharge on 20 August 1996 will not be
affected by these amendments to the Governor-General Act
1974.
SCHEDULE 2 AMENDMENTS OF TAXATION
LEGISLATION
Item 1
Item 1 deletes from subparagraph
97(3)(c)(i) of the Income Tax Assessment Act 1936 a reference to section
51-15 of Income Tax Assessment Act 1997, because Item 3 repeals section
51-15 of Income Tax Assessment Act 1997.
Item 2
Item 2 deletes from subsection 102AAE(2) of the Income Tax
Assessment Act 1936 a reference to section 51-15 of Income Tax Assessment
Act 1997, because Item 3 repeals section 51-15 of Income Tax Assessment
Act 1997.
Item 3
Section 51-15 of the Income Tax
Assessment Act 1997 provides for income tax exemptions if the taxpayer is a
Vice-Regal Representative (the Governor-General or a State Governor). The
exemptions cover official salaries and any ordinary or statutory income derived
from outside Australia.
Repeal of section 51-15 will remove income tax
exemptions for Vice-Regal Representatives.
Item 4
Item 4 is
a transitional provision which will ensure that the repeal of section 51-15 will
not affect the current Governor-General nor State Governors who held office the
day before the commencing day.
The commencing
day for the provision is 29 June 2001 which is the day on which the Most
Reverend Peter Hollingworth is to be appointed Governor-General.