Mr RUDDOCK (Attorney-General) (9:23 AM) —I move:

This bill would amend the Judges’ Pensions Act 1968 so that, where a federal judge is subject to the superannuation surcharge, reduced rates of surcharge which applied in 2003-04 and 2004-05 apply to the pension entitlements of the judge and the judge has the option of commuting a proportion of the pension to discharge a surcharge debt.

The surcharge is currently applicable in relation to the pension entitlements of judges who were appointed between 7 December 1997 and 30 June 2005 under a formula in the Judges’ Pensions Act. The surcharge has been abolished and does not apply to pension entitlements accrued from 1 July 2005.

The formula reduces a judge’s pension by averaging the rates of surcharge that applied to the judge in each full financial year of his or her service. There are, however, two technical deficiencies with the formula which need to be overcome.

The first deficiency with the formula is that it was drafted in such a way that it reduces a judge’s pension in respect of 2003-04 and 2004-05 by 15 per cent, notwithstanding that the maximum surcharge rates were reduced for those years to 14.5 per cent and 12.5 per cent respectively. The bill would amend the formula to reflect the lower maximum rates in those years. To ensure equity for any pensioner who had retired after the first of those reductions was made, this amendment would apply whether or not an affected judge retired before the amendment commenced operation.

Secondly, the formula does not recognise payments to reduce a judge’s surcharge debt made by the judge to the trustee of the Judges Pension Scheme, unless the debt is paid in full. The bill would provide an option for judges to have their pensions commuted to discharge their surcharge debts, rather than have the formula apply. Commutation would operate on the basis of actuarially-determined age based factors and would recognise the actual amount of a judge’s surcharge debt. Commutation would therefore automatically recognise payments which had been made to reduce the amount of the debt. Commutation would be available to any judge who retires on or after 1 July 2007.

The bill would also allow the trustee of the Judges Pension Scheme to draw on an existing special appropriation to pay judges’ surcharge debts to the Australian Taxation Office as they retire. Once a debt had been paid, it would be recovered from the former judge concerned under the formula or through commutation.

Finally, the bill would define salary for pension purposes. This would ensure increased flexibility for the Remuneration Tribunal in setting serving judges’ entitlements without the tribunal needing to take into account inadvertent effects that this could have on the pension entitlements of retired judges or their dependants. This arises because pension entitlements are set as a proportion of the salary of a serving judge. For example, it would mean that the tribunal could determine a cash allowance in lieu of other vehicle entitlements for serving judges, without the allowance needing to be taken into account in calculating the pension entitlements of either serving judges who retire or retired judges or dependants.

I commend this bill.

Debate (on motion by Ms Plibersek) adjourned.