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Cite as: (2003) 77(4) LIJ, p.8

We welcome letters to the editor of no more than 400 words.
Email: Fax: 9607 9451.
Mail: LIJ, Managing Editor Mick Paskos, GPO Box 263C, Melbourne 3001; or DX 350 Melbourne.
We reserve the right to edit letters and to republish them in their original or edited form on the Internet or in other media. Letters must include a phone number and address for authentication.

The Family Law (Amendment) Bill: a bland potpourri

Cite as: (2003) 77(4) LIJ, p.8

The Family Law (Amendment) Bill 2003 was introduced on 13 February purportedly to continue to reform the family law system and to integrate aspects of the Pathways Report, yet it does not implement most of the recommendations.

Generally, with one exception, these reforms seem to comprise slight non-controversial changes that attempt to keep the family law system up to date. For example, Schedules 2 and 3 provide for the use of audio and video link-ups in court and amend the management of the Family Court.

Other schedules implement obviously needed reform, taking into account current practice. For example, Schedule 1 removes the requirement to register parenting plans. On a practical level, this is sensible as the requirements were so rigid that almost none were registered. Schedule 5 proposes to take out the requirement that legal practitioners are responsible for providing financial advice to parties to a financial agreement. This removes an issue which created reluctance by some solicitors to sign the certificate. Readers may remember that our professional indemnity insurer issued a caveat that cover would not extend to solicitors purporting to give financial advice. That impediment is now removed.

Possibly the most controversial proposed amendment is in Schedule 6 where the Family Court is given the power to make orders and injunctions to bind third parties.

While this reform may seem to unnecessarily embroil third parties in matrimonial property proceedings, it attempts to overcome the perennial problem of how to deal with third-party transactions without duplicating proceedings in state jurisdictions. This was first attempted by the cross-vesting legislation which was struck down by the High Court decision in Re Wakim. It remains to be seen if this latest legislative excursion will be any more successful.

Overall, it could be said that the Bill does not go far enough to implement the real recommendations of the Pathways Report.

Paul Staindl
Managing director, Clancy & Triado

For providing the letter of the month, Paul Staindl has won a $50 book voucher from the Law Institute bookshop, redeemable for the next 12 months.

Judicial Conference of Australia

Cite as: (2003) 77(4) LIJ, p.8

A number of media outlets have misreported the High Court’s decision in Austin v Commonwealth that found the “superannuation surcharge” applied to state judges’ pension entitlements is unconstitutional.

The point of the case was that the surcharge applied to state judicial pensions was not the equivalent of the 15 per cent levy affecting other “high income” earners. If it had been, the judges who brought the case would not have been able to mount the arguments on which they succeeded.

To understand why the surcharge on judges’ pension entitlements is entirely different to the surcharge applied to other high-income earners, it is necessary to go back to the beginning.

The principal rationale put for the superannuation surcharge when introduced in 1996 was that high-income earners had an unfair advantage over other taxpayers because they could claim a tax deduction for their superannuation contributions. Since the state judicial pension schemes were non-contributory, judges did not come within that rationale.

As the joint judgment says, the announcement of the surcharge did not address the apparent incongruity in singling out for the same impost those high-income earners who had had the benefit of concessional deductions for contributions and those in the public sector who had non-contributory arrangements.

The incongruity was tackled by legislation which imposed an annual surcharge on the “notional contributions” that would have to be made by a judge to produce his or her pension entitlement. In the case of plaintiff Justice Austin, the notional contribution was assessed at over 61 per cent of his annual remuneration.

So far this sounds like a burdensome tax, but perhaps defensible on equity grounds. But as the judgments make clear, the surcharge was applied to judges in a manner that subjected them to disadvantages that applied to nobody else subject to the surcharge.

The judgments show that the problems included the following:

  • The surcharge was payable by the judge personally. For members of superannuation funds, the surcharge was payable by the superannuation fund.
  • The notional contributions on which the tax was based were calculated on actuarial assumptions without relationship to the circumstances of individual judges.

    This meant that, in any given case, the pension actually received might be significantly less valuable than the actuaries had assumed in making the calculations.
  • A judge who did not retire at the earliest opportunity would face the prospect of a tax debt increasing year by year as compound interest accumulated. The tax debt would continue to mount notwithstanding that, for every year of additional judicial service, the value of the pension would decrease.
  • On retirement, a judge would be faced with a considerable tax debt payable at a time when his or her pension was just starting. In the case of Justice Austin, it was estimated that it would take four years of net pension after retirement (the pension being taxed at full marginal rates) to pay off his debt.

    If he died before the four years was up, without leaving a widow, the tax would be greater than the pension. Therefore, it was quite possible for the supposed 15 per cent tax to amount to more than 100 per cent of entitlements. The fundamental problem, as Chief Justice Gleeson pointed out, was that the superannuation surcharge legislation treated state judges differently from the manner in which other “high-income earners” are treated and different again from the manner in which federal judges are treated.

In conclusion, the constitutional arguments adopted by the High Court are a matter for legitimate public debate. But that debate should be informed by an accurate understanding of the facts.

Justice Simon Sheller
Chairman, Judicial Conference of Australia

Benefits of the domestic building insurance regime

Cite as: (2003) 77(4) LIJ, p.9

I refer to Suzanne Kirton’s article “The new domestic building insurance regime” in the March 2003 edition of the LIJ (page 34). I believe this article is remiss in not considering the benefits of the new insurance requirements.

Without changes being made to mandatory requirements for builders warranty insurance for domestic building work, it is likely that Victorian domestic builders and consumers would have been left with no insurance to cover home building work.

It was a necessary and responsible move. It was a matter of urgency that the government respond to ensure consumers continued to be covered, the building industry kept working and so there continued to be an insurance market in existence.

The changes to builders warranty insurance are not to the detriment of home owners. Under the new insurance arrangements, the minimum amount of insurance cover for building work has increased from $100,000 to $200,000.

Consumers also now have access to a free service through Building Advice and Conciliation Victoria (BACV) for managing all domestic building disputes. Prior to this service being introduced, consumers often approached insurers with building disputes. Insurers not only required an excess to be paid with the claim, but were also not skilled in building dispute conciliation.

The BACV dispute resolution system has a team of trained conciliation staff who work with both parties to resolve the dispute free of charge.

It promotes early intervention and minimises the likelihood of a serious intractable dispute occurring between a builder and consumers.

BACV is also adopting a proactive approach to reducing the number of building disputes by:

  • initiating better tracking of builders with records of poor performance;
  • ensuring consumers obtain more guidance about the building process;
  • promoting improved builder/consumer communication;
  • improving complaint handling procedures by builders; and
  • improving builder education to raise building standards.

It is important to clarify that BACV does not offer legal advice or a mediation service. Rather, it offers a conciliation service where expert advice is given but no ruling is made as to the outcome of the dispute.

If BACV is unable to facilitate resolution of a dispute through conciliation, the parties may take the dispute to the Victorian Civil and Administrative Tribunal for a legal hearing. BACV can issue objective inspection reports that can be relied on at the Tribunal.

BACV is a free, one-stop-shop for managing all domestic building disputes. It yields faster and better results by providing a single point for information and advice on domestic building issues for both builders and consumers.

It is a positive development for both groups as it minimises the likelihood of a serious, intractable domestic building dispute occurring.

Tony Arnel
Building Commissioner


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