Explanatory Memorandum(Circulated by authority of the Prime Minister, the Hon J W Howard MP)
Outline and financial impact
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.
Official salary for the Governor-General
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.
Removal of income tax exemptions
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.
Amendments to superannuation provisions
In 1997 the Governor-General Act 1974 was amended to provide for the superannuation surcharge to apply to the Governor-Generals retirement allowance.
The Bill will amend the superannuation provisions in the Governor-General Act 1974 to ensure that the reduction in a Governor-Generals 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-Generals 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.