But the commission has stopped short of referring the judge to State Parliament for dismissal, finding that although his comments had "undermined confidence in the judiciary", he did not actually believe them to be true.

Judge Garry Neilson was stood down from hearing criminal matters and referred to the Judicial Commission last year after he expressed the opinion that the community may no longer see sexual contact between siblings or between adults and children as "unnatural" or "taboo".

He made the comments during the case of a 58-year-old man who was charged with repeatedly raping his younger sister in the family's western Sydney home in 1981.

The comments included the opinion that, just as gay sex was socially unacceptable and criminal in the 1950s and 1960s but was now widely accepted, "a jury might find nothing untoward in the advance of a brother towards his sister once she had sexually matured, had sexual relationships with other men and was now 'available', not having [a] sexual partner".

Following a public hearing last month, the Judicial Commission completed its findings this week, declaring that Judge Neilson's actions amounted to "inappropriate judicial conduct".

"The comments express views that are likely to lead members of the public to think that a judge of the District Court hearing a case involving allegations of criminal sexual misconduct doesn't regard the alleged offences as significant crimes," the three-member panel said in its findings.

"They diminish the significance of the victims of the relevant criminal conduct."

During the commission's hearing, Judge Neilson said he had simply meant that for modern juries, allegations of incest and paedophilia were no longer "inconceivable" or "unusual".

The commission said his evidence had been "confused and confusing", but accepted that the judge did not believe these activities were acceptable.

Nevertheless, it found that it was no longer appropriate for the judge to hear cases involving sex crimes and made this recommendation to the Chief Judge of the NSW District Court, Justice Derek Price.

Federal Senator Bill Heffernan, who was responsible for referring Judge Neilson to the commission, said the case demonstrated the need for the judiciary to be included in the investigation now being conducted by the Royal Commission into child sexual abuse.

"I will be making another approach to the Royal Commission in light of these findings asking it to expand its terms of reference to include judicial institutions," Senator Heffernan said.