Queensland v Commonwealth

Queensland v Commonwealth - [1987] HCA 2 - HCA 1987 case summary — Zoe

[26]

that application or availability of the car shall be taken to constitute a benefit provided on that day by the provider to the employee or associate in respect of the employment of the employee. Sub-sections (2) and (3) then provide that in certain circumstances a car shall be taken to be available for the private use of the employee or associate as the case may be. A car is "held" by a person if it is owned by, leased to or otherwise made available to that person: s. 162 of the Assessment Act. The taxable value of a car fringe benefit is to be calculated in accordance with a formula set out in s. 9 of the Assessment Act, unless the employer elects that s. 10 of that Act shall apply in relation to all the car fringe benefits in relation to the employer in relation to a year of tax that relate to that car; if such an election is made s. 10 will apply. The provisions of these sections are convoluted, and an understanding of them necessitates constant recourse to the definitions in s. 136(1), but their effect may be stated simply, and ignoring irrelevant detail, as follows. The formula provided by s. 9 starts by taking the "base value" of the car, which, if it has been owned for no more than four years, will be the cost price (as defined in s. 136(1)), and if it has been owned for a longer period, is two-thirds of the cost price. The base value is multiplied by a "statutory fraction", prescribed by s. 9(2)(c); the fraction (in relation to a standard year of tax) decreases by stages from 0.24, in a case where the car has travelled less than 15,000 kilometres in a year, to 0.06 where the car has travelled more than 40,000 kilometres in a year, apparently on the assumption that the greater the distance travelled, the smaller the proportion of private use is likely to be. The statutory fraction is reduced by an appropriate proportion if the car has been held for less than a year. Similarly a proportion of the total reached by applying the statutory fraction to the base value is taken if the car fringe benefit has been provided for less than a year. From the total so reached the amount, if any, of the payment made by the recipient is deducted to give the taxable value of the fringe benefit. Under s. 10 the taxable value is based on the operating cost of the car, which is the sum of all relevant expenses and includes, in a case where the car is owned by the provider, the amount of depreciation that is deemed to have been incurred by the provider in respect of the car in respect of the year of tax and the amount of interest that is deemed to have been incurred by the provider in respect of the car in respect of the year of tax. Section 11 provides for the calculation of depreciation (at a rate of 22.5 per cent) and interest on the depreciated value of the car; these items are likely to be comparatively large.

[31]

Goods as such cannot pay taxes: there must be a person to pay them. And what is meant by saying that a tax is a tax upon goods is that the person by whom the tax is payable is charged by reason of, and by reference to, some specific relation subsisting between him and particular goods. A tax will be rightly regarded as a tax upon goods if the person upon whom it is imposed is charged by reason of and by reference to the fact that he is the owner, importer, exporter, manufacturer, producer, processor, seller, purchaser, hirer or consumer of particular goods. In H. C. Sleigh Ltd. v. South Australia [2] , I expressed my complete agreement with that statement. It is consistent with the view which was expressed in Attorney-General (Saskatchewan) v. Canadian Pacific Railway Co. [3] , where the Privy Council held that a statutory provision that certain property of the Canadian Pacific Railway Company should be "forever free from taxation " operated to relieve the railway company from a business tax assessed at a rate per square foot of each building used for business. Viscount Simon said [4] : Notwithstanding that the exemption provided by the clause is conferred on the physical property there mentioned, all taxes are exacted from and paid by persons, and the question comes to be whether the respondent company, as the owner and user of the properties mentioned, is free from taxation in respect of them. Mr. Leslie and Lord Hailsham argue that the business tax imposed by the City Act, 1947, of Saskatchewan was imposed on persons and companies carrying on a business and not upon their property or upon their ownership or user of property. On this view, the provision that the liability to business tax of a taxpayer was measured by the floor-space or area which he used while carrying on his business was nothing more than a "yardstick" to ascertain the amount for which the taxpayer was liable under the tax. There are, no doubt, many instances in which it is important to distinguish between the nature of the tax imposed and the measure of the amount of tax to be paid. But where the measure of the tax is the extent of the taxpayer's property used in his business, and this property when so used is "forever free from taxation" the tax so measured cannot be regarded as something lying outside the exemption. 1. (1960) 104 C.L.R. 529, at p. 554. 2. (1977) 136 C.L.R. 475, at p. 491. 3. [1953] A.C. 594. 4. [1953] A.C., at pp. 615-616.

[50]

The critical question then is whether the Tax Act and the Assessment Act impose a tax on the State in respect of the use of its property. As I have said, the tax imposed by those Acts on the State, as employer, is measured by the taxable value of the fringe benefits provided to its employees. The tax is attracted by the giving of the benefits. Not all of those benefits are given by the State (although typically they are) and not all those benefits are provided by the State out of its property (although some car fringe benefits and housing fringe benefits are so provided). However, where the car is the property of the State the tax which is exacted from the State is exacted because the car is applied or made available by the State as employer to the employee or to an associate of the employee. Similarly, where the housing accommodation is the property of the State, the tax is exacted because the State has granted a lease or licence to an employee or an associate of an employee. In other words, so far as the car fringe benefits and housing fringe benefits provided by the use of property of the State are concerned, the tax is imposed on the State by reason of the particular manner in which it has used its property and by reference to that use. The measure of the tax is the value of the benefit conferred calculated in accordance with the provisions already outlined; it is the value of the benefit provided by the State, and not the value of the benefit received by the recipient. In so far as the values of the car fringe benefits and housing fringe benefits are taxed, the tax in its true nature is one in respect of the use, under certain circumstances, of the property of the State. It is a tax on property belonging to the State within s. 114. As I have said, the fact that the Acts tax other benefits as well does not save the impost so far as it is now challenged. If it matters, it should be added that the tax on the property of the State used to provide the car fringe benefits and the housing fringe benefits is not a mere incidental concomitant of another tax; what is incidental is the tax on the provision of the benefits by associates or arrangers or a tax on the use of property not owned by the State.

[91]

The point is well illustrated by the elliptical phrase "any tax on property". Property does not pay taxes; individual taxpayers do: see Bennett & White (Calgary) Ltd. v. Municipal District of Sugar City No. 5 [47] ; Re Federal Tax on Exported Natural Gas [48] ; Dennis Hotels Pty. Ltd. v. Victoria [49] ; Gosford Meats Pty. Ltd. v. New South Wales [50] . But an individual may be liable to pay tax because of some relationship between himself and property and if the relationship between the tax and the property is sufficiently direct and substantial then the tax may be said to be a tax on property. Clearly enough, a tax upon the holding or ownership of property will be a tax upon property, whether or not the tax is actually charged upon the property. Thus municipal rates, whether or not a charge upon the land, are a tax on property: Sydney Municipal Council v. The Commonwealth [51] ; Attorney-General (N.S.W.) v. Collector of Customs (N.S.W.) [52] ("the Steel Rails Case "). On the other hand, a tax upon a transaction, even if it involves the use of property, is not ordinarily a tax upon property. Thus a pay-roll tax is not a tax on property: Victoria v. The Commonwealth [53] ("the Payroll Tax Case "). In one sense every tax involves property since it involves the payment of money which is a form of property, but clearly it is not the funds used to pay the tax, or the source of those funds, which determines what kind of tax it is. Sales taxes and income taxes are taxes imposed upon transactions or activities and there is no direct relationship between them and any property held or owned by the taxpayer in the sense that he is liable to tax because he is the holder or owner of property. On the other hand, a tax which is tantamount to a tax upon the holding or ownership of property, such as a tax upon the proceeds of sale, may provide a sufficiently direct relationship between the tax and the property itself to constitute the tax a tax on property. It was reasoning of this kind which led the Privy Council in Attorney-General (Saskatchewan) v. Canadian Pacific Railway Co. [54] to hold that a "business tax", imposed by reference to the floor space used for the purposes of business, was a tax on property rather than a tax upon the activity of carrying on business. The argument was rejected that the space used was nothing more than a yardstick to ascertain the amount for which a taxpayer was liable under the tax.

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Judgment (107 paragraphs)

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