Prime Minister Tony Abbott has revealed Governor-General Quentin Bryce offered to resign in anticipation of Bill Shorten's election as Labor leader.
Ms Bryce, who is the mother-in-law of Mr Shorten, wanted to avoid any perception of bias.
"I have thanked her for her magnanimity but declined to accept her resignation," Mr Abbott said in a statement on Sunday.
Instead the prime minister asked Ms Bryce to stay on until March 2014, when she is due to retire.
Ms Bryce's agreement to stay on was a measure of her personal commitment to provide continuity at a time of political turbulence, Mr Abbott said.
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
"She should be commended for her dedication to public service."
It was only "fit and proper" that Ms Bryce be permitted to conclude her term and be accorded the appropriate farewell that her exemplary service merited, he said.
