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The tribunal which reviews decisions made by the federal government will be abolished, with Australia's highest law officer slamming it as a "disgraceful exhibition of cronyism".
Attorney-General Mark Dreyfus announced on Friday the Administrative Appeals Tribunal would be replaced by a new body.
The AAT has operated since 1976 but in recent times has been heavily criticised for being stacked with people with connections to the former coalition government.
"The AAT's public standing has been irreversibly damaged as a result of the actions of the former government over nine years," he said.
The body had been "fatally compromised" by the coalition, in terms of its independence and quality of decision making.
"This was a disgraceful exhibition of cronyism by the Liberal Party," Mr Dreyfus said.
The new body is expected to be operating by the end of next year.
He said the government wanted to ensure new appointments made were "merit based" and were "appropriately qualified".
"Australians rightfully expect honesty, accountability and integrity in government," Mr Dreyfus said.
"The Albanese government is committed to restoring trust and confidence in Australia's system of administrative review".
The attorney-general said current members of the existing tribunal will need to reapply for their positions once the new body has been created.
He defended the decision to scrap the AAT as a result of long consideration, and said the government was proposing to appoint about 75 additional members to deal with the "shocking backlogs" of the current tribunal.
When asked if people who had associations with the former coalition government would be barred from being appointed, Mr Dreyfus said the process would be merit based.
On Labor-connected appointments, Mr Dreyfus said a set of criteria would be applied to every individual considered for a role.
Mr Dreyfus said over the coming months a task force led by former High Court judge Patrick Keane will consult on the design of the new body, with legislation to be introduced next year.
Matters currently before the tribunal will be unaffected.
