Judges’ widows ‘collateral damage’ in nest egg tax stoush

One widow of a Federal Court judge says she is ‘extremely worried’ about how Labor’s new tax could disrupt her retirement plans, and is simply waiting for the ‘guillotine to drop’ on her head.

Labor’s proposed tax on the judicial pension will unfairly slash the multimillion-dollar nest eggs judges’ widows, a coalition of retired judges and barristers say.

Labor’s proposed tax on the judicial pension will unfairly slash the multimillion-dollar nest eggs of judges’ widows, a coalition of retired judges and barristers says, arguing the lack of consultation has caused “collateral damage” to grieving spouses.

One widow, whose husband was a Federal Court judge for nearly 20 years, told The Australian she was “extremely worried and nervous” about how the new tax would affect her retirement, and how she would fund her old age, accommodation and care.

Under the proposed laws, the tax on investment earnings on superannuation balances of more than $3m will be doubled to 30 per cent, in a move that Treasury estimates would initially affect 80,000 people. It is understood the value of the judicial pension, which can total about $6m over 20 years, would be added to the judge’s super total when determining the balance above the threshold.

Australian Bar Association president Peter Dunning KC said the partners of judges had to make great sacrifices in loss of income when agreeing to let their partner take the bench.

“It does not seem fair because these were people who made a decision 10, 20, 30 years ago to sacrifice much larger incomes to perform a public service and years later, without warning and without rationale, their circumstances are being badly altered,” he said.

“It’s a really big decision to say, I’m going to sacrifice a significant income, I’m going to sacrifice my privacy, I’m going to limit some of the things I can do to do this very important job. Certainly, the sort of people you want to have as judges are careful to make sure that’s a joint decision with their life partner.”

Mr Dunning, who has been advocating against the additional tax to the judicial pensions, said the widows of judges had “the smallest voices of all” and should not be expected to speak up.

“I feel obliged to speak because, quite properly, the judges are not entering the public debate and if it’s hard for the judges to enter the public debate, imagine how hard it is for the surviving spouse of the deceased judge to get any consideration,” he said.

“That’s how we can trust judges to settle controversial public issues, because they do stay out of the public debate. You can’t expect somebody’s widow of a much regarded deceased spouse to come out and do exactly what he would never have done in his lifetime.”

Australian Bar Association president Peter Dunning KC.

He said damage to the widows “would have been avoided had there been proper consultation with genuine stakeholders, rather than the lip service we got”.

The new tax has been widely criticised by the legal community, with many arguing it would be an attack on the separation of powers if the government of the day could alter the remuneration of sitting judges. Concerns have also been raised that more federal judges would be drawn to state courts, where the tax would not apply.

The Australian has spoken to the widow of a longstanding Federal Court judge, who did not wish to be named, who said she was “extremely worried and nervous about how I am going to be taxed”.

The widow told The Australian it was a joint decision for her and her husband for him to take a pay cut when he stepped down from the Bar and moved to the bench.

“When he was appointed we discussed this as the fact he would lose a substantial cut to his income,” she said. “But we were very impressed by the judicial pension at the end.”

She said there was a “critical problem” with the tax, both for her personally and the separation of powers broadly.

“There’s nothing I can do as a little old 80-something-year-old lady except for wait for the guillotine to drop on my head,” she said.

In a submission to a Senate inquiry into the proposed tax a group of retired judges says widows and widowers “have only recently become aware” that the new laws will affect the pension, “even though they do not have or control any capital amount upon which the proposed tax on their pension may be notionally calculated”.

“The only amounts that they can or will ever receive is the pension itself,” the submission reads.

“It is already fully taxed in their hands, unlike pensions paid from a superannuation fund with capital, usually at the highest marginal rate, and any further tax must be paid from the pension.

“It is not known how much will be left on which to live for those who have no other significant income. It is not understood why they must pay much more tax, to guess, twice as much tax, as someone who receives the same pension from an accumulation fund and who has capital too.”