[2] Const Heads of Power - (1) TAXATION - S 51(ii)

Question 1

taxation is what type of power?

Answer 1

non-purposive power (can have underlying purpose other than raising revenue so long as it can be described as ‘a law wrt taxation’ (Windeyer J Fairfax)

Question 2

Scaffold for taxation

Answer 2

• (1) Is [Provision X] a law with respect to taxation within s 51(ii)?
• (2) Excise?
• (3) Limitations
• (4) It is clear that [Cth provision] is/is not a valid exercise of the taxation power

Question 3

a provision will impose a tax if it provides for

Answer 3

“a compulsory exaction of money by a public authority for public purposes, enforceable by law, and…not a payment for services rendered”: Matthews v Chicory Marketing Board; confirmed in Air Caledonie (but this definition has been broadened and isn’t exhaustive)

Question 4

[Matthews v Chicory Marketing Board; confirmed in Air Caledonie tax definition] a compulsory exaction prima facie constitutes a tax UNLESS

Answer 4

it falls into a special category of exaction (eg, licence, penalty, royalty, fee for service - Australian Tape)

Question 5

[Matthews v Chicory Marketing Board; confirmed in Air Caledonie tax definition] Can a non-public authority collect a tax?

Answer 5

Yes, provided that:
(1) They are authorised to do so by statute; and
(2) It is done for public purposes
= gives relevant body relevant degree of public character (Australian Tape)

Question 6

What was the dissent in Australian Tape Manufacturers (ATM) by Dawson, Toohey and McHugh JJ in respect of a private body collecting a tax?

Answer 6

stressed that an exaction cannot be a tax unless it is paid into the consolidated revenue fund (ATM position is fragile!)

Question 7

[Matthews v Chicory Marketing Board; confirmed in Air Caledonie tax definition] –> public purpose element

Answer 7

must have purpose or effect of raising revenue for gov (this isn’t a universal determinant, but absence/presence of this objective is significant!) (Air Services; Luton)

Question 8

Even if revenue raising is secondary objective will is still be a tax?

Answer 8

Based on multiple characterisation approach in Fairfax, YES (Northern Suburbs)

Question 9

In Air Caledonie, Migration Act imposed a fee for immigration clearance (when entering Australia, must pay to pass immigration, charged to citizens). - sufficient public purpose?

Answer 9

Yes, Australian citizens should not have to pay a fee to come back into their own country (couldn’t be a fee for services)

Question 10

In Australian Tape Manufacturers v Cth, • Copyright Act imposed a royalty on the vendors of blank audio tapes to provide funds to compensate copyright owners. Paid to a copyright agency for eventual distribution to copyright owners.
• If royalty was a tax it could not be put in Copyright Act (anti-tacking)
Was this a tax?

Answer 10

Yes was a Tax - Compulsory exaction of money, collected by private company (deemed fine), sufficient public purposes

Question 11

For something to not be a tax and instead be a payment for services, rendered, what is required?

Answer 11

(1) Must be exacted for particular identified services provided
(2) Merely because an exaction is labelled “payment for services rendered” does not mean it is not a tax (Air Caledonie)
(3) There must be a discernible relationship between the value of the service provided and the amount/rate of the charge – if not, then a tax

Question 12

What is an exception to something that appears to be a tax but is instead a payment for services rendered?

Answer 12

(1) where actual market value unidentifiable (ie can’t identify proportionate fee for licence/privilege etc) (Airservices Australia)
(2) high fee imposed to limit resource to avoid exploitation by public (Harper)

Question 13

Is a scheme for the enforcement/adjustment of pre-existing private liability/obligation a tax?

Answer 13

No, as there is no object of raising revenue for the Cth (Luton)

Question 14

Why aren’t royalties taxes?

Answer 14

payments made in respect of the exercise of a right granted, calculated in respect of the quantity of value of the things taken - not taxes.

Question 15

In Australian Tape Manufacturers why was the fee on vendors not a royalty?

Answer 15

Because the vendor received no right in exchange for payment of fee

Question 16

What is required of a charge to not be a tax?

Answer 16

must be reasonably appropriate and adapted to meeting legitimate costs incurred in effecting compliance with a statute (Airservices Australia)

Question 17

Why aren’t fines/penalties taxes?

Answer 17

punitive only, claimed solely as a penalty for an unlawful act or omission: (Northern Beaches; Fairfax)

Question 18

What is an excise?

Answer 18

tax on goods from production to retail sale (Ha); falls within s 51(ii); s 90 of the Constitution

Question 19

If a state law purports to impose a tax on goods is it valid?

Answer 19

No per s 90, only Cth can impose an excise (note states can’t avoid the prohibition by attempting to disguise the tax as a licence fee/fee for services etc)

Question 20

1.4 IF PROVISION DOES NOT IMPOSE A TAX, what else must you consider?

Answer 20

IS IT OTHERWISE A ‘LAW WITH RESPECT TO TAXATION?’

Question 21

What are the limitations on laws that impose taxes?

Answer 21

anti-tacking per s 55

Question 22

What does s 55 deal with?

Answer 22

anti-tacking: prevents the gov from adding on other matters onto laws that impose taxation (laws imposing tax can only do that and nothing else!!)

Question 23

what’s an exception to anti-tacking per s 55?

Answer 23

if the law imposing tax is discretely contained in an amendment to the main Act, only the amending Act will be invalid (Air Caledonie)

Question 24

s 51(ii) what does the limitation impose on laws that impose taxes?

Answer 24

cannot discriminate between states or parts of states

Question 25

s 99 what does the limitation impose on laws that impose taxes?

Answer 25

preference cannot be given to states or parts of states

Question 26

s 53 what does the limitation impose on laws that impose taxes?

Answer 26

Proposed laws (bills) imposing taxation must originate in HoR and cannot be amended by the Senate

Question 27

s 54 what does the limitation impose on laws that impose taxes?

Answer 27

Proposed law which appropriates revenue for the ordinary annual services of the Government shall deal only with such appropriation

Question 28

s 81 what does the limitation impose on laws that impose taxes?

Answer 28

All monies raised by Cth must be paid into consolidated revenue fund + s 83: in order to get money out of consolidated revenue there must be an appropriation law

Question 29

What was the outcome in Harper v Minister for Sea Fisheries?

Answer 29

Establishes qualification to the rule that for a levy to be a fee for services it must be proportionate –> where you have a limited natural resource which was liable to damage, exhaustion or destruction by uncontrolled exploitation by the public, and it is thus necessary to limit the number of people that are authorised to exploit it, then a high licence fee can be imposed.

Question 30

Even if though an an impost might meet the classic definition of a tax, esp where it appears to be a licence fee which is totally disproportionate to the value of the service being provided, it won’t be a tax if

Answer 30

it can be shown that the fee relates to a limited natural resource and the reason for it is to protect that natural resource
(Harper v Minister for Sea Fisheries)

Question 31

What happened in Airservices v Canadian Airlines

Answer 31

case concerned government charges that had been levied against compass airlines, which leased airplanes from Canadian Airlines

CA challenged validity of charges on grounds that they did not reasonably relate to the expenses incurred by the CA (since compass was a small operator and their fees were the same as large operators owning multiple aircrafts)

Question 32

Outcome in Airservices v Canadian Airlines

Answer 32

Was this a tax given there was ‘no discernable relationship’ btw the amount paid to CA and the value of the services provided by it?

Was a fee for services - evidence established that the pricing system was based on sound and rational economic principles, it remained a fee for services despite the apparent disproportionality –> was a bona fide attempt to recover costs

Question 33

What was Luton v Lessels (2002) about?

Answer 33

case related to the Cth taking over the R to sue for missed child maintenance payments, with the statute also imposing upon it the obligation to pay the precise amount recovered to the spouse who was initially entitled to those payments from the other spouse and who was thus legally entitled to sue

Question 34

Why was the Child Support (Assessment) Act 1989 [which imposes the tax] and the Child Support (Registration and Collection) Act 1988 [which is for regulation/collection] in Luton v Lessels (2002) challenged?

Answer 34

Was argued that this system operated by the way of a compulsory exaction of money for public purposes, even though the money was ultimately payable to private persons

Question 35

In Luton v Lessels (2002) was it a tax?

Answer 35

NO - whilst it looked like compulsory exaction, the legislation provided mechanism for enforcement of EXISTING private obligations (was creation of a new obligation owed by the payer to the Cth in place of an equivalent existing obligation owed by the payer to the carer, + new rights in the carer against Cth)

Question 36

How was Luton v Lessels (2002) distinguished from Australian Tape?

Answer 36

In AT, the revenue was raised for a public purpose of compensating a 2nd group but that group had no prior legal right against the group from whom the revenue was to be raised

Here, the Assessment Act created a personal liability in a parent to the carer of a child and the Registration and Collection Act gave the carer the facility to have the Cth recover the payments (and was thus no more than a mechanism for the enforcement of a pre-existing private liability)

Question 37

What was determinative in deciding that the Acts in Luton v Lessels didn’t impose a tax?

Answer 37

The fact that neither law performed a revenue raising function for the purposes of government

Question 38

What happened in Fairfax v Federal Commissioner of Taxation?

Answer 38

Income Tax and Social Services Contribution Assessment Act 1936 (Cth), aimed to clearly rpovide an incentive to invest in gov securities

was challenged on basis that the amendment was a law with respect to the investment of superannuation funds and an incentive to invest in government securities and not a law with respect to taxation

Question 39

Outcome in Fairfax v Federal Commissioner of Taxation?

Answer 39

Was held valid as was a law wrt taxation based on dual characterisation

Question 40

What were the reservations of Barwick, Menzies and Windeyer in Fairfax?

Answer 40

they were trying to say that you can have some circumstances where something appears to be a tax (and tax rights and liabilities are affected) but it won’t be with respect to taxation if, in substance, it is something else → e.g. Menzies – this would be a penalty, since you are being punished

Question 41

Which case reaffirmed the Fairfax position that a law can be w.r.t. taxation even though the taxation characterisation is secondary and the principle characterisation is a law w.r.t. a particular incentive/disincentive relating to other matters?

Answer 41

Second Fringe Benefit Tax Case
- here challenged validity of provision imposing taxation on “fringe benefits” supplied by employers to employees - tried to rely on Menzies + other judges’ concern in Fairfax

MENZIES J EXPRESSLY REJECTED

Question 42

Why could the law in Second Fringe Benefit Tax Case be characterised as being wrt to tax?

Answer 42

The law could be characterised as affecting tax liability since it operated so as to impose tax and define the extent of the liability to tax, even though its aim was to prevent fringe benefits

Question 43

What happened in Northern Suburbs General Cemetery Reserve Trust v Cth?

Answer 43

2 acts, one imposing liability and the other concerning administration, thus avoiding any potential s 55 issue (anti-tacking)

Meant that if you don’t spend money on the training, you were liable to pay that money to the Cth
- Cth earmarks these monies to provide general workforce training facilities for all eligible employees etc.

Question 44

What was argued in Northern Suburbs General Cemetery Reserve Trust v Cth?

Answer 44

if the Act achieved its purposes (i.e. all employers spent the appropriate amount), then no revenue would be raised – this was thus more akin to a “fee for service” as the fee was collected from non-corporation and thus was not a law wrt taxation

Question 45

Outcome in Northern Suburbs General Cemetery Reserve Trust v Cth?

Answer 45

affirmed Fairfax

• Even though the law could be characterised principally as a law relating to workforce training, this was irrelevant, as the law operated as a tax i.e. an employer became liable to pay the money if they failed to meet the obligations (failure = had to pay a compulsory exaction of money for public purposes, for which they did not receive any individualised services)

Question 46

principle from Roy Morgan

Answer 46

public purpose is not to be equated to public interest - instead refers to the administration of government, encompassing all that the government may do pursuant to statutes for purposes which are within its confidence

Question 47

What happened in Roy Morgan Research v FCT (2011)?

Answer 47

2 separate acts:

1) if an employer did not pay the correct amount of super to an employee, they had to pay the Cth an equivalent amount to the shortfall
2) Commissioner required to pay shortfall components to employees

Question 48

What was argued in Roy Morgan Research v FCT (2011)?

Answer 48

this was a not a tax because it conferred a private and direct benefit on an employee, meaning it was not being imposed for a public purpose

Question 49

Outcome in Roy Morgan Research v FCT (2011)?

Answer 49

Even if the Act was to ensure that employees received their superannuation entitlements, this did not mean that the law was not with respect to taxation (public purpose is satisfied if it furthers gov policy - provision of workplace superannuation generally)

Question 50

How can Roy Morgan Research v FCT (2011) be distinguished from Luton v Lessels?

Answer 50

Here bc $ was going back directly to the employee, it looked a bit like a fee for service

Different from Luton v Lessels as the obligation was not pre-existing, but established by the Act itself

Even though employees received a private and direct benefit, this was still taxation

Question 51

What are the facts in Northern Suburbs General Cemetery Reserve Trust v Cth?

Answer 51

The Cth was trying to make provision for training for workers who had been dismissed in order to make it more likely for them to find alternate employment defined the minimum amount that each employer was notionally required to expend in providing training to that employer’s own workforce imposed a liability on employers to an amount equal to the amount that an employer’s actual expenditure fell short of that minimum amount. The moneys were to be paid to the Cth

• Thus, if you don’t spend money on the training, you were liable to pay that money to the Cth
• Cth earmarks these monies to provide general workforce training facilities for all eligible employees etc.