The AAT has upheld superannuation Division 293 tax assessments against a former Vice President of the Australian Industrial Relations Commission (AIRC) after ruling that he was not a “judge” for the purposes of the exemption under s 293-190 of the ITAA 1997.
The taxpayer, the Hon Graeme Watson, is a former Vice President of the Australian Industrial Relations Commission (AIRC). For the 2014 and 2015 income years, the ATO assessed Mr Watson for an additional 15% Division 293 tax on his defined benefit contributions to the Judges’ Pension Scheme as his income exceeded $300,000. After he resigned on 28 February 2017, and became entitled to an end benefit under the Judges’ Pensions Act 1968, the ATO issued him with a Division 293 tax debt account discharge liability of $31,556.
Mr Watson objected against the assessments on the grounds that he was covered by the exemption under s 293-190(1) of the ITAA 1997 for an individual who “is a Justice of the High Court, or a justice or judge of a court created by the Parliament”. By virtue of s 63(2) of the Workplace Relations Act 1996, Mr Watson said he had the “same rank, status and precedence as a Judge of the Court”.
The exception for ‘judges’ in s293-190 has a Constitutional Basis.
- Section s72(iii) of the Constitution says that the ‘remuneration‘ of a ‘Justice of the High Court, or a justice or judge of a court created by the Parliament‘ (created under Chapter III of the Constitution) “shall not be diminished during their office“.
- For this reason, s293-190 excludes judges in exactly the same terms: Justices of the High Court and of the other courts created by the Parliament.
In upholding the Division 293 tax assessments, the AAT ruled that Mr Watson was not a “justice or judge of a court” for the purposes of the exemption under s 293-190(1). While s 63(2) of the Workplace Relations Act gave Mr Watson the same status as a judge of the Federal Court, the AAT said the exemption in s 293-190(1) of the ITAA 1997 clearly requires that the “… individual is a Justice of the High Court, or a justice or judge of a court created by the Parliament…” (emphasis added). Having the same rank, status and precedence as a judge of the Federal Court did not make Mr Watson a judge, the AAT said.
Deputy President Forgie’s reasoning is well summed up in the following passage at para 89.
89. The wording of s 293-195 carefully reflects that of s72 of the Constitution. Section 293-195 specifically provides that it applies to an individual if that individual “is a Justice of the High Court, or a justice or judge of a court created by Parliament …” (emphasis added). … The final clause of s72 would not draw into s72 a person who has not been appointed as a Justice of the High Court or of a court created by Parliament but who has the same rank, status and precedence as a Judge of a court created by Parliament under s72. That person would not possess the fundamental qualification of being a Justice of the court even though having a different status or designation.
(Watson v CofT [2018] AATA 3915, Forgie DP, 16 October 2018.)
FJM 6.11.18
[LTN 202, 19/10/18; Tax Month – October 2018]
CPD questions (answers available)
- Was Graeme Watson assessed to $31,556 of extra contributions tax, for those earning over $300,000 pa?
- Was Graeme Watson Vice President of the Australian Industrial Relations Commission?
- Did this tax have an exclusion for “Justices of the High Court and of the other courts created by the Parliament” reflection the Constitutional prohibition on reducing the ‘remuneration’ of Chapter III courts.
- Was the Industrial Relations Commission a ‘Chapter III’ court?
- Did s63(2) of the Workplace Relations Act 1996, provide that Mr Watson had the “same rank, status and precedence as a Judge of the Court”?
- Was this enough for Mr Watson to win?
