December 11

Lindsay Tanner is right.

It would have been unjust for the Minister of Finance Lindsay Tanner not to have waived the tax surcharge of $ 190,000 on the former Governor–General, Major General Jeffery.   It is extraordinary that the Opposition spokesman Joe Hockey is demanding an explanation. The surcharge on Major General Jeffery only arose because of an oversight by the previous government in which M. Hockey was a minister.

 

  

The surcharge of 15% on employer contributions originally only applied to those superannuation schemes where the pension would subsequently receive favourable tax treatment. It was abolished in 2005. 

The previous government had tried to extend the surcharge to non-contributory pensions. These are, mainly paid to judges who receive these as part of a package in return for the substantial reductions in income they typically experience if they accept a judicial appointment.

This would have imposed a substantial financial liability at the time of retirement, although the pension would not attract the tax treatment of most pensions.

But the former Treasurer Mr. Costello was adamant that the surcharge should apply to all classes of pensions.  

(Incidentally, the present federal Attorney-General, Robert Mc Clelland, has proposed ending this scheme, according to a report by Chris Merritt, “New judges' pensions in question” in The Australian  on 5 December, 2008)

In any event the High Court found that under the Constitution the surcharge could not be applied to state judges.

The government then abandoned attempts to extend the surcharge to judicial pensions.It is evident that subsequently applying it only to the former Governor-General was an unintended oversight.

Major General Jeffery has acted honourably. He gave his military pension to charity while he was Governor-General. He is now paying tax on his pension and does not receive the favourable tax treatment available to others.

Mr. Tanner was right. Mr. Hockey will find the reasons for Mr. Tanner's decision in the records of the cabinet discussions of the previous government concerning Mr. Costello's failed attempt to extend the surcharge to judicial pensions.

 


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