Hon CHRISTOPHER FINLAYSON (Attorney-General) on behalf of the Prime Minister: I move, That the Governor-General Bill be now read a second time. As the Prime Minister indicated when the bill received its first reading, it is very important and timely legislation. It was referred to the Government Administration Committee on 20 July; the committee has now completed its examination of the bill and has recommended that it be passed.
The bill implements the Law Commission’s recommendations in the first part of its review of the Civil List Act 1979. This bill will repeal and replace Part 1 of the Civil List Act with updated financial arrangements for the support of the office of Governor-General. The new regime will be more transparent and simpler to administer, and it will also modernise the antiquated drafting of the Governor-General part of the Civil List Act.
The bill contains a comprehensive transitional regime. With one exception, the new legislation will not apply to the incumbent. Clauses 25 and 27 contain savings and validation clauses to ensure the relevant provisions of the Civil List Act and any determinations of the Remuneration Authority or Orders in Council made under that Act relating to salary, payments on leaving office, and other benefits or privileges continue to apply to the incumbent and to previous Governors-General and their spouses. Only the annuities provisions, which remove certain outdated restrictions on the availability of the annuity, will apply to the incumbent and to his spouse.
The core of the bill is directed to reforming the financial support structure of the office of Governor-General. The present regime is, as the Law Commission recognised, cumbersome and unclear. Funding for the Governor-General is split between two sets of appropriations, one funding the official residences and part of the Governor-General’s programme of activities, and the other paying for the Governor-General’s salary and allowance, but also including aspects of the Governor-General’s programme. The bill addresses this issue by consolidating all funding for the Governor-General’s programme within a single permanent appropriation, leaving annual appropriations to account only for the Government House operational budget. To provide further transparency, the bill will also separate out funding for the Governor-General’s international travel from the appropriation providing for the Governor-General’s domestic programme.
Unlike the domestic travel programme, which the Governor-General determines himself or herself, international travel is undertaken at the request of the Government. Because this travel is often difficult to predict in advance—for example, requests to attend significant funerals—the Government has agreed with the Law Commission’s recommendation that a new permanent appropriation be established for this purpose.
A key feature of the bill is that it will remove the exemption from income tax on the Governor-General’s salary. Both the salary and the allowance are presently exempt from income tax under the Income Tax Act 2007, and the salary is calculated on that basis. As noted by the Prime Minister, there is no longer any justification for this salary to be exempt from income tax. Her Majesty the Queen has voluntarily paid income tax on her private income since 1993 and the Australian Governor-General and state governors have paid income tax on their salaries since 2001.
A further tax-related change is the removal of the Minister of Finance’s power to exempt the Governor-General from paying any public or local tax, duty, rate, levy, or fee. There are no current exemptions. The Law Commission recommended that the power be removed, and it has not been carried over into this bill.
The Government Administration Committee identified one small issue with the bill that will need to be addressed in the Committee of the whole House. The Goods and Services Tax Act 1985 presently excludes from the definition of “taxable activity” any engagement, occupation, or employment pursuant to the Civil List Act 1979. For the avoidance of doubt, section 6(3)(c)(i) will need to be amended to read “pursuant to the Civil List Act 1979 or the Governor-General Act 2010”.
Section 3(4) of the Civil List Act provides that on leaving office the Governor-General shall be paid a sum equal to 3 months’ tax-exempt salary and 3 months’ tax-exempt allowance. The purpose of this payment is to cover the outgoing administration and immediate commitments of the outgoing Governor-General. The Law Commission recommended that this payment should be retained, albeit in a new form. Following the first reading of the bill, there was a degree of misunderstanding concerning this payment, including the suggestion that it would double in size under the new bill and that it would apply to the incumbent. That is not correct. Because the legislation will subject the Governor-General’s salary to income tax and significantly reduce the quantum of the allowance, the quantum of the payment made on leaving office would be reduced if the formula from the Civil List Act were carried over to the new bill. So the Law Commission has recommended that the formula be reframed to allow for a payment of 6 months’ taxable salary only. Once the Remuneration Authority has taken into account the effect of income tax on the salary, it is expected to be a rough equivalent to the current payment. The payment will be subject to income tax administered through the PAYE system, but the change will not apply to the incumbent.
Section 4 of the Civil List Act provides for the payment of annuities to former Governors-General and their spouses or partners. The annuities are treated as taxable income. It recognises the contribution the Governor-General and his or her spouse have made to the country, and the ongoing commitments that can arise from a Governor-General’s duties even after leaving office. These commitments often include obligations such as patronage of causes that they come to be associated with during their term, considerable correspondence, delivering speeches, and attending various events. The public nature of the role often places limits on their subsequent activities and their employment choices.
The Law Commission recommended that the Governor-General Bill should provide for the payment of an annuity to former Governors-General in similar terms to the present section 4 of the Civil List Act as applied by the Remuneration Authority. This annuity will be payable from the date that is 6 months after the date on which the person ceased to hold office, rather than 3 months as provided for under the Civil List Act.
Consistent with the Civil List Act, when a former Governor-General dies, the surviving spouse or partner of that person will be entitled to annuity at half the yearly rate at which the annuity would have been payable to the former Governor-General had he or she not died. These entitlements will also apply to the surviving spouse or partner of a Governor-General who dies in office. In the case of a surviving spouse or partner, the annuity is based on recognition of the significant role played by the spouse in supporting the office holder. That being the case, the Law Commission recommended that the annuity should not end if the spouse remarries or enters into a new relationship. The other exemptions are also anachronistic and they will be removed by the bill.
This is an important bill that clarifies the position of the office of Governor-General. The office is a very important component of our constitutional framework. It is certainly one deserving of respect by everyone at all times. I commend the bill to the House.
The bill contains a comprehensive transitional regime. With one exception, the new legislation will not apply to the incumbent. Clauses 25 and 27 contain savings and validation clauses to ensure the relevant provisions of the Civil List Act and any determinations of the Remuneration Authority or Orders in Council made under that Act relating to salary, payments on leaving office, and other benefits or privileges continue to apply to the incumbent and to previous Governors-General and their spouses. Only the annuities provisions, which remove certain outdated restrictions on the availability of the annuity, will apply to the incumbent and to his spouse.
The core of the bill is directed to reforming the financial support structure of the office of Governor-General. The present regime is, as the Law Commission recognised, cumbersome and unclear. Funding for the Governor-General is split between two sets of appropriations, one funding the official residences and part of the Governor-General’s programme of activities, and the other paying for the Governor-General’s salary and allowance, but also including aspects of the Governor-General’s programme. The bill addresses this issue by consolidating all funding for the Governor-General’s programme within a single permanent appropriation, leaving annual appropriations to account only for the Government House operational budget. To provide further transparency, the bill will also separate out funding for the Governor-General’s international travel from the appropriation providing for the Governor-General’s domestic programme.
Unlike the domestic travel programme, which the Governor-General determines himself or herself, international travel is undertaken at the request of the Government. Because this travel is often difficult to predict in advance—for example, requests to attend significant funerals—the Government has agreed with the Law Commission’s recommendation that a new permanent appropriation be established for this purpose.
A key feature of the bill is that it will remove the exemption from income tax on the Governor-General’s salary. Both the salary and the allowance are presently exempt from income tax under the Income Tax Act 2007, and the salary is calculated on that basis. As noted by the Prime Minister, there is no longer any justification for this salary to be exempt from income tax. Her Majesty the Queen has voluntarily paid income tax on her private income since 1993 and the Australian Governor-General and state governors have paid income tax on their salaries since 2001.
A further tax-related change is the removal of the Minister of Finance’s power to exempt the Governor-General from paying any public or local tax, duty, rate, levy, or fee. There are no current exemptions. The Law Commission recommended that the power be removed, and it has not been carried over into this bill.
The Government Administration Committee identified one small issue with the bill that will need to be addressed in the Committee of the whole House. The Goods and Services Tax Act 1985 presently excludes from the definition of “taxable activity” any engagement, occupation, or employment pursuant to the Civil List Act 1979. For the avoidance of doubt, section 6(3)(c)(i) will need to be amended to read “pursuant to the Civil List Act 1979 or the Governor-General Act 2010”.
Section 3(4) of the Civil List Act provides that on leaving office the Governor-General shall be paid a sum equal to 3 months’ tax-exempt salary and 3 months’ tax-exempt allowance. The purpose of this payment is to cover the outgoing administration and immediate commitments of the outgoing Governor-General. The Law Commission recommended that this payment should be retained, albeit in a new form. Following the first reading of the bill, there was a degree of misunderstanding concerning this payment, including the suggestion that it would double in size under the new bill and that it would apply to the incumbent. That is not correct. Because the legislation will subject the Governor-General’s salary to income tax and significantly reduce the quantum of the allowance, the quantum of the payment made on leaving office would be reduced if the formula from the Civil List Act were carried over to the new bill. So the Law Commission has recommended that the formula be reframed to allow for a payment of 6 months’ taxable salary only. Once the Remuneration Authority has taken into account the effect of income tax on the salary, it is expected to be a rough equivalent to the current payment. The payment will be subject to income tax administered through the PAYE system, but the change will not apply to the incumbent.
Section 4 of the Civil List Act provides for the payment of annuities to former Governors-General and their spouses or partners. The annuities are treated as taxable income. It recognises the contribution the Governor-General and his or her spouse have made to the country, and the ongoing commitments that can arise from a Governor-General’s duties even after leaving office. These commitments often include obligations such as patronage of causes that they come to be associated with during their term, considerable correspondence, delivering speeches, and attending various events. The public nature of the role often places limits on their subsequent activities and their employment choices.
The Law Commission recommended that the Governor-General Bill should provide for the payment of an annuity to former Governors-General in similar terms to the present section 4 of the Civil List Act as applied by the Remuneration Authority. This annuity will be payable from the date that is 6 months after the date on which the person ceased to hold office, rather than 3 months as provided for under the Civil List Act.
Consistent with the Civil List Act, when a former Governor-General dies, the surviving spouse or partner of that person will be entitled to annuity at half the yearly rate at which the annuity would have been payable to the former Governor-General had he or she not died. These entitlements will also apply to the surviving spouse or partner of a Governor-General who dies in office. In the case of a surviving spouse or partner, the annuity is based on recognition of the significant role played by the spouse in supporting the office holder. That being the case, the Law Commission recommended that the annuity should not end if the spouse remarries or enters into a new relationship. The other exemptions are also anachronistic and they will be removed by the bill.
This is an important bill that clarifies the position of the office of Governor-General. The office is a very important component of our constitutional framework. It is certainly one deserving of respect by everyone at all times. I commend the bill to the House.
