LAWS1116 Lecture 8

Taxation (s 51(ii) + supporting sections)

  • Constitutional limitations on taxation and spending required by the rule of law
  • Taxation has required consent since Magna Carta & Bill of Rights in UK (though Parliamentary Supremacy in relation to taxation only dates back to the 17th Century)
  • Need a valid Act of Parliament to tax. All taxes need to paid into the Consolidated Revenue Fund (s 81) and only drawn under appropriations rules (s 83)
  • Budget bills (Ordinary Annual Services of Government) set out in s 54 – Senate cannot edit, can not tack anything else onto these bills
  • Constitutional Convention: PM resigns if they can’t pass an OASG bill.
  • General taxation power – s 51(ii) and s 99 – no state discrimination allowed
  • Customs and excises are a Cth only power (s 90)
  • Tax laws cannot conflict – theoretically they are for their own separate purposes, so Cth and States can both tax the same area (see Victoria v Cth (1957) – second uniform tax case)
  • Cth monopoly on taxes dates back to Uniform Taxation Scheme in 1942 (World War 2)
  • This was upheld in the South Australia v Cth (First Uniform Tax Case) (1942)

Procedural Limits on the Tax Power

  • The Senate CAN NOT originate or amend a tax law (s 53)
  • The Senate MAY return a tax bill to the House with requested amendments (s 53)
  • Laws imposing a tax must ONLY deal with that tax, and with only one subject of taxation or customs or excises (s 55)
  • Limitations date back to Westminster ‘tacking’ conflicts

What is a “tax” for constitutional purposes (specifically for ss 53, 55)

  • Classic definition (from Matthews v Chicory Marketing Board (1938)
    • Compulsory extraction of money
    • By a public authority
    • For a public purpose
  • Does NOT include punitive fines/penalties or payment for Government services (s 53)
  • Services rendered discussed in McCormick v FCT (1984)
  • High Court will evaluate the “reasonableness” of a fee in order to determine whether or not it constitutes a tax.


Air Caledonie v Cth (1998)

  • Issue: Was a $5 immigration clearance fee per passenger to be paid by the airline (not the passengers directly) a “tax” for s 55 purposes (making the Act invalid)
  • Held: Yes, it was a tax (applied to returning citizens, so could not be justified as a fee for services) and by amending a non-taxation Act, it became invalid under s55.
  • no identifiable service rendered
  • Other discussions: Effectively rejected Matthews definition – said that a tax could take a form other than the extraction of money, and that a compulsory extraction of money COULD still be a tax even if it wasn’t necessarily for a public purpose of by a public authority

Air Services Australia v Canadian Airlines (1999)

  • Issue: Were monopoly fees charged by a Government corporation for air services based on the Ramsey Pricing (multi-factorial method) charging more than the cost of those air services “taxes” for the purpose of s 55?
  • Held: No, the charges were reasonably related to expenses (a fee for service, rather than a tax), and the Act securing payment of them was appropriate and adapted to that purpose

Hematite Petroleum v Victoria (1983)

  • Issue: Was a licence fee with a per kilometre of pipe component actually an excise tax for the purposes of s 90?
  • Held: Yes, the size of the fee was unreasonable for a license fee, was actually a tax – and by affecting the pipeline, it also imposed an excise fee on the oil and gas the pipeline contained, making it unconstitutional

Compulsory Extraction (of Money)

  • Is compulsory if the party has no choice, and the amount has no relation to the value of what is obtained
  • Fee for service must be for a service to the Individual, not the general Public


Attorney-General of NSW v Homebush Flour Mills (1937)

  • Issue: Was the Flour Acquisition Act imposing a tax by seizing all flour as it was created, and forcing the producers to keep/store it until it was sold, unless they bought it back immediately?
  • Held: Yes, it was a tax, as producers were either forced to store large quantities or buy it back at a higher price immediately – as the money went to a public authority for a public purpose (compensating farmers), and not to provide any service to the producers, it was not a fee for services rendered.

Querishi v Minister of Immigration (2005)

  • Issue: Were charges for unwanted services (detainment of asylum seekers) a tax when those same asylum seekers were being forced to pay them in order to stay in Australia?
  • Held: Yes, the service (border control) was a public service, not one that the individual wanted – was not a fee for services rendered.

Public Purpose

  • Not used for private purposes of the rulers
  • Historical exceptions included knighting the King’s son, marrying his daughter, or paying his ransom :P


Australian Tape Manufacturers v Cth (blank tapes case) (1991)

  • Issue: Was a compulsory levy on all blank tapes sold to compensate copyright holders a “tax” for the purposes of s 55, and if not, was it ‘compulsory acquisition on unjust terms’ for the purposes of s 51 (xxxi)?
  • Held: Though the money was paid directly to the copyright society, rather than going via the Consolidated Revenue Fund, this did not prevent it from being a tax – it was for public purposes (aimed to solve the problem of abuse of copyright now that blank tapes were readily available on the market), no service was being provided to the tape manufacturers/vendors, compulsory, and empowered by a Cth Act. As it was a tax, it was not acquisition of property.
  • Other Considerations: Between Australian Tape Manufacturers and Air Caledonie, the ‘by a public authority’ can almost certainly be read down to ‘by the authority of an Act of Parliament’

One Subject Requirement

State Chamber of Commerce and Industry v Cth (1987)

  • Issue: Were multiple types of fringe benefits taxes to be considered ‘multiple issues of taxation’ for the purposes of s 55?
  • Held: It was a ‘single subject of taxation, formulated according to a broad conception of what constitutes fringe benefits’. The court will give weight to Parliaments understanding of whether its Tax Act deals with one or multiple subjects.

Substantive Limits on Tax Power

  • s 51(ii)/s99 – no discrimination between states or parts of states


R v Barger (1908)

  • Issue: Was a Cth tax scheme that offered exemptions to employers if certain labour/wage conditions existed a valid exercise of the Cth Power?
  • Held: Majority decided on reserved powers doctrine that it exceeded Cth power (since been overruled by Engineers). Also discussion over the discrimination nature, as different schemes existed in different states.

Elliot v Cth (1935)

  • Issue: Was a Cth licensing scheme that required seamen to be licensed in order to be hired out at specific prescribed ports (excluding ports in Tasmania) discriminatory in the meaning of s 51(ii)/s99?
  • Held: The law was appropriate and adapted to the local conditions of the ports. The discrimination was on the basis of port conditions, not state.

Regulating Behaviour via Economics/Taxation

  • High Court has held that no substantive limits exist on economic regulation


Fairfax v Commissioner of Taxation (1965)

  • Issue: Was economic regulation by means of taxing superannuation funds that didn’t invest at least 30% of their funds in prescribed securities a law with regards to taxation, and as such within the Cth heads of power?
  • Held: Yes, it was a taxation law. It does not matter if it also another kind

Customs and Excise Duties

  • s 55 limitation – laws can only deal with ONE of the two
  • s 90 limitation – exclusive to the Cth
  • Acknowledged as important to State revenue by the High Court
  • Ongoing conflict of states to narrow definition of excise duties to raise funds, against the businesses who try to broaden it to avoid paying state taxes

Customs Duty

  • Import and Export taxes, as goods enter or leave the country
  • Levied on goods, not on people – rates vary by good/type of good

Excise Duties

  • Imposed on goods at production, manufacture, or sale (targeted at goods, not people)
  • Narrow view: Only at production or manufacture, not any point afterwards (REJECTED BY HIGH COURT)
  • Broad View: Any charge on goods BEFORE reaching the consumer (as defined by Dixon on Parton v Milk Board (1949))
  • Needs a close (but not exact) relation to amount produced or manufactured
  • Expanding definition serves to increase Vertical Fiscal Imbalance


Parton v Milk Board (1949)

  • Issue: Was a compulsory licensing fee to dairies that charged a levy per gallon of milk an excise for the purpose of s 90?
  • Held: Yes, it was – it was compulsory, went to the State treasury, and the ‘Milk Board’ did not provide any desired service to the plaintiff. As such, it was an excise being charged by a state, and constitutionally invalid.

Dennis Hotels v Victoria (1960)

  • Issue: Was a license fee based on the quantity of liquor purchased during the previous year an excise? And was a temporary license fee based on liquor purchased during the period of the license an excise?
  • Held: The temporary license fee *WAS* an excise, as it was directly related to the quantity purchased. However the normal fee was not, as it did not relate to purchases/sales during the period for which the license was held.

WA v Chamberlain Industries (1970)

  • Issue: Was a stamp duty charged by WA on the sale of tractors an excise for the purpose of s 90?
  • Held: Yes, it served to increase the cost to the end users in the same manner as any excise would. As such it was struck down as unconstitutional

Capital Duplicators v ACT (1993) (Capital Duplicators No. 2)

  • Issue: Were license fees on video’s based on the previous few months sales an excise for the purpose of s90?
  • Held: Yes, they were – the distance between sales and fee were too close, and the Dennis Hotels exception may not even apply to videos, only alcohol and tobacco. (Due to the importance/reliance on those excises by the States)

Ngo Ngo Ha and Anor v NSW (1997)

  • Issue: As per Parton v Milk Board, but regarding licensing fee for tobacco
  • Held: Parton v Milk Board was upheld, though the court did say that a license fee equal to 100% of the cost of the goods would be too large to justify as a license fee

Appropriates and Spending

  • Must be for Cth purpose (Not just private expenditure)
  • High Court gave a broad definition of Commonwealth purpose in AAP Case and Comet
  • s 96 grants can also be tied to states doing specific things


Victoria v Commonwealth and Heyden (The AAP Case) (1975)

  • Issue: Were Commonwealth grants to regional councils established for purposes beyond the enumerated heads of power constitutional?
  • Held: Yes, s 61 gives the Commonwealth the power to exercise their spending power for the purposes ‘necessary to give effect to the Commonwealth as a national government’ (Mason J)

Appropriations for “Ordinary Annual Services of Government” (OASG)

  • 1965 – decided on certain issues NOT being OASG – it only included routine, recurrent expenditure, not “one-off” or “irregular” expenditure

Combet v Cth (2005)

  • Issue: Was the advertising on labour law reforms appropriated for “departmental expenditure” too vague – was more information on planned expenditure required?
  • Held: High Court basically washed its hands of the matter, leaving it up to Parliament to determine the appropriate level of specificity.