Why stoush over tax hit to judges’ nest eggs reaches tipping point

A stoush between sitting judges and the Albanese government over dramatic cuts to the judicial pension has reached a tipping point, with the head of the nation’s barristers condemning the plans.

Australian Bar Association president Peter Dunning KC. Pictures: Jack Tran/The Courier-Mail

A stoush between sitting judges and the Albanese government over cuts to the judicial pension has reached a tipping point, with the head of the nation’s barristers slamming Labor for corroding the independence of the judiciary, and condemning the government’s ­response to criticism as “wholly inadequate”.

Australian Bar Association president Peter Dunning told The Australian if Labor was able to impact judicial remuneration, Australians could not be confident in taking the government to court.

His comments come after Labor’s broken promise to change taxation of nest eggs above $3m sparked tension between the government and the legal community.

Under proposed new 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.

Mr Dunning wrote to the ­Attorney-General, Mark Dreyfus, Jim Chalmers and Assistant Treasurer Stephen Jones about the issue in early May, saying the ABA had been blocked from the consultation process, but he never received a response.

This week, he sent a follow-up letter demanding Labor drop the proposal that would be “corrosive of judicial independence”.

“I refer to my letter to each of you of 10 May, 2024. In the now more than two months that have elapsed, I have not received a reply from any of you,” he wrote in the letter, obtained by The Australian.

“I wish to reiterate the deep concern of the Bar nationally in relation to the capricious and unfair manner in which this proposed additional tax on the remuneration of commonwealth and territory judges would operate, if enacted in the terms outlined.” Mr Dunning, who says he is raising the issue because sitting judges “can’t enter the public arena” and weigh in themselves, says judicial remuneration should not be imperilled by the state, or else risk damaging the separation of powers.

Federal Treasurer Jim Chalmers. Picture: NewsWire/Martin Ollman

Attorney-General Mark Dreyfus. Picture: NewsWire/Martin Ollman

“In my opinion, the proposed legislation would have the most corrosive institutional impact on a court that I have witnessed in my 32 years as a barrister, far beyond any controversy about the selection of individual judges,” he wrote to the Labor ministers.

Mr Dunning said the ­salaries of Federal Court judges were used as a benchmark for those across the states and territories, and the process would be “significantly disrupted” by the proposals. This issue, he said, would “direct ­judges” to state supreme courts, where the tax would not be imposed on judges’ earnings from superannuation interests.

In his new letter, Mr Dunning also made reference to comments from former High Court judge Susan Crennan, who said the proposed changes “would be to disproportionately tax female judges … over male judges, because in the present circumstances there are a dis­proportion­ately larger number of females over males who have had very long judicial careers”.

“That is, frankly, disrespectful of a cohort of women who were willing to make the sacrifice to leave early other valuable careers in the law to become judges, and within the space of a generation, to take female judicial officers from a rare exception to an unremarkable incident of orthodox judicial appointments,” he said.

Judges who retire after 10 years receive a pension of 60 per cent of the salary of sitting members. For a Federal Court judge, who earns more than $480,000, that totals about $6m over 20 years.

Changes to judges’ salaries and benefits are typically determined by the independent Commonwealth Remuneration Tribunal.

Mr Dunning told The Australian Labor’s attitude and consultation process has been “wholly inadequate”, and criticised the government for paying “lip service” to the separation of powers.

A Treasury spokesperson said: “We’ve done three rounds of consultation over more than a year and have taken that feedback seriously as we seek to legislate this modest change that only applies to people who have more than $3 million in super.”