O'Meara v Commissioner of Taxation

Whether the GST Act is a law imposing Taxation? 11 For a law to be one "imposing" taxation, it must be one which creates a liability to tax: Re Dymond (1958-1959) 101 CLR 11, 19. Each of the three Imposition Acts is unquestionably a law imposing taxation: see s 3 of each Act. Each of these sections provides, in terms, for "the actual imposition of tax": Collector of Customs (NSW) v Southern Shipping Co Ltd (1962) 107 CLR 279, 288. The provisions of the GST Act referred to in pars [9] and [10] above are an express legislative recognition that the GST is imposed by the three Imposition Acts. 12 The GST Act deals with a variety of matters. It begins with the basic rules about the GST, it provides for exemptions from the GST and sets out the special rules that can apply in particular cases. The structure of the Imposition Acts, on the one hand, and the GST Act on the other, is in accord with what Fullagar J described in Re Dymond (supra) at 18 as follows: "By reason of the provisions of s. 55 it has been the invariable practice since the establishment of the Commonwealth, when Parliament has proposed to levy a tax on any subject of taxation, to pursue that object by means of two separate Acts, the one of which actually imposes the tax and fixes the rate of tax, and the other of which provides for the incidence, assessment, and collection, of the tax and for a variety of incidental matters. It is common to refer to the latter Act as the Assessment Act, and to the former as the Taxing Act." 13 Mr O'Meara relies upon the following provisions of the GST Act in support of his contention that the GST Act is one which "imposes" taxation: "Subdivision 9-B - who is liable for GST on Taxable supplies? 9-40 Liability for GST on taxable supplies You must pay the GST payable on any taxable supply that you make … Subdivision 9-C How much GST is payable on taxable supplies? 9-70 The amount of GST on taxable supplies The amount of GST on a taxable supply is 10% of the value of the taxable supply … 90-20 Liability after amalgamation for GST on amalgamating company's supplies (1) An amalgamated company must pay the GST payable on a taxable supply if: (a) apart from the amalgamation, the GST would have been payable by any of the amalgamating companies; and (b) the GST was not attributable, before the amalgamation, to a tax period applying to the amalgamating company. (2) This section has effect despite section 9-40 (which is about liability for GST)." 14 The authorities (eg Re Dymond (supra) at 19) recognise that there is a distinction between: (i) a law imposing taxation; (ii) a law dealing with the imposition of taxation; and (iii) a law dealing with taxation generally. A law which prescribes, for example, the persons who are to pay the tax and the classes of income in respect of which they are to be taxed, are not laws which impose taxation, but they are laws dealing with the imposition of taxation "because the specification of the persons who are to be liable to taxation and the definition of their liability is part of the denotation of the term "imposition of taxation": Re Dymond (supra) at 20. Laws within classes (i) and (ii) above could be included in the one taxing Act without offending against s 55 of the Constitution. However, "dealing with the imposition of taxation" is a different thing from "dealing with taxation", and the former expression does not mean or include "dealing with matters incidental to the imposition of taxation". 15 But the important thing for present purposes is that a law may deal with the imposition of taxation and yet not, in itself, directly impose taxation. As Latham CJ noted in Cadbury-Fry-PascallPty Ltd v Federal Commissioner of Taxation (1944) 70 CLR 362 at 373: "It has been held on several occasions that various Assessment Acts do not impose taxation, and it has been so held though such Acts contain provisions that a person should be liable to pay tax or be chargeable with Tax." This passage was applied and approved by Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ in State Chamber of Commerce & Industry v Commonwealth (The Second Fringe Benefits Tax Case) (1987) 163 CLR 329 at 341. 16 The GST Act proceeds upon the basis that the tax known as the GST is imposed by the Acquisition Acts. The very definition of the goods and services tax ("GST") incorporates a reference to that fact. Section 9-40 of the GST Act identifies who is liable to pay the tax. The heading to subdivision 9-5 which, by s 182-1, forms part of the Act confirms that this is so. Section 90-20 is a measure which is ancillary to the identification of who is liable to pay the tax in the case of company amalgamations. Section 9-70 identifies the quantum of tax that is payable by providing that the rate imposed by s 4 of the Imposition Act is applied to the value, as defined in s 195-1 of the taxable supply. Thus the reproduction of the rate (10 per cent) is no more than a reference to the rate imposed by s 4 of the Imposition Act and restates the effect of s 4 so that the amount of tax may be calculated. Each of these provisions is a law dealing with the imposition of taxation, but the tax is imposed by the Acquisition Act. The GST Act is not a law imposing taxation, hence s 55 of the Constitution has no operation in relation to the GST Act.

Does the Imposition Act or the GST law deal with more than one subject of taxation? 17 Mr O'Meara contends that the GST law deals with more than one subject of taxation as it deals with: (i) goods, and (ii) services as subjects of taxation. 18 GST is payable on the value of a taxable supply. "Supply" is defined in s 9-10(1) as meaning any form of supply whatsoever. Subsection 9-10(2) provides: "(2) Without limiting subsection (1), supply includes any of these: (a) a supply of goods; (b) a supply of services; (c) a provision of advice or information; (d) a grant, assignment or surrender of real property; (e) a creation, grant, transfer, assignment or surrender of any right; (f) a financial supply; (g) an entry into, or release from, an obligation: (i) to do anything; or (ii) to refrain from an act; or (iii) to tolerate an act or situation; (h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g)." 19 In Mr O'Meara's submission each of the eight matters referred to in pars (a) to (h) of s 9-10(2) is a different subject of taxation. That cannot be right, as GST is payable on the value of a taxable supply and "supply" encompasses any form of supply whatsoever. The matters referred to in pars (a) to (h) are no more than illustrations of types of transactions which are within the concept of "supply". 20 In Austin v The Commonwealth of Australia [2003] HCA 3 at 81, Gaudron, Gummow and Hayne JJ extracted the following propositions from earlier cases dealing with s 55: "(i) in construing the expression "subject of taxation" in s 55 it is not to be supposed that there exists some recognised classification of taxes according to subject matter; (ii) s 55 is not directed to categories concerned with economic consequences or operation upon the creation, transfer and devolution of legal rights; (iii) rather, s 55 is concerned with political relations and contemplates "broad distinctions between possible subjects of taxation based on common understanding and general conceptions, rather than on any analytical or logical classification; (iv) it is for the legislature to choose its own subjects of taxation unfettered by existing nomenclature or by categories adopted for other purposes; and (v) the test is whether, looking at the subject of taxation selected by the Parliament, it can fairly be regarded as a unit rather than a collection of matters necessarily distinct and separate." 21 The Court gives weight to the Parliament's understanding that its Tax Act deals with one subject of taxation only. That is because the application of the test involves what is in substance a question of fact or value judgment. The Court should not resolve such a question against the Parliament's understanding with the consequence that the statute is constitutionally invalid unless the answer is clear: The Second Fringe Benefits Tax Case (supra) at 344, Austin v Commonwealth (supra) at [191]. 22 The report of the Taxation Review Committee (the "Asprey Committee") of 31 January 1975 included an appraisal of the main kinds of tax that already exist in, or which might be introduced into Australia. One of the kinds of tax the subject of that appraisal was a "broad-based" tax levied on very a large range of goods and services, even if not quite all consumption. The British and Continental European systems of value-added taxes were given as examples of that kind of tax. 23 At the time of enactment of the GST law, a goods and services tax was a tax familiar from the experience of many jurisdictions: see eg Value-Added Tax Act 1983 (UK) and Value Added Tax Act 1994 (UK); Excise Tax Act, RSC 1985 (Canada) and Goods and Services Tax Act 1985 (NZ). There is, as the report of the Asprey Committee confirms, a "common understanding" as to the nature of a broadly-based goods and services tax. That is reflected in the Explanatory Memorandum for A New Tax System (Goods and Services Tax) Bill 1998 (p 5): "Broadly speaking, the GST is a tax on private consumption in Australia. The GST taxes the consumption of most goods, services and anything else in Australia, including things that are imported." 24 In the present case, Parliament has according to "common understanding and general conceptions" imposed a tax on a single subject of taxation, namely on final private consumption in Australia. That is one subject of taxation for the purposes of s 55 of the Constitution. The applicant has failed to discharge the heavy burden of demonstrating that Parliament's understanding that its taxing Act deals with one subject of taxation only was clearly mistaken. 25 Mr O'Meara also submitted that the Imposition Act is invalid because it "fails to deal with any subject of taxation". If that were so, then s 55 of the Constitution could have no relevant operation.

Conclusion 26 The application should be dismissed with costs. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hely.

Associate: Dated: 25 March 2003 The applicant appeared in person

Counsel for the Respondent: Mr A Robertson, Mr M Leeming

Solicitor for the Respondent: Australian Government Solicitor