An exaction for public purposes
74 In Matthews v Chicory Marketing Board (Vic) (1938) 60 CLR 263 at 276, Latham CJ described a tax as characteristically "a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered." In Air Caledonie International v The Commonwealth (1988) 165 CLR 462 at 467 a unanimous High Court, taking a more impressionistic approach, expressed the view that, in principle, the compulsory exaction of money might be characterised as a tax even though it was exacted "for purposes which could not properly be described as public." But even if it be accepted that an exaction must be for public purposes if it is properly to be characterised as a tax, the exaction effected by s 5 and s 6 of the SGC Act is for public purposes insofar as it provides an incentive to all employers to contribute to the superannuation needs of their employees. In Austin v Commonwealth (2003) 215 CLR 185 at [57]-[58], Gaudron, Gummow and Hayne JJ referred to the SGC Act, the SGA Act, and the Superannuation Guarantee (Consequential Amendments) Act 1992 (Cth) as together implementing a policy concerned with "the making of stipulated contributions by employers". In our respectful opinion, an exaction, the purpose of which is to encourage all Australian employers to contribute to the financial needs of all Australian employees in old age or infirmity is an exaction for public purposes.
75 In Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 (Tape Manufacturers), the High Court held that legislation which imposed on vendors of blank tapes an obligation to pay a specified "royalty" to a collecting agency for distribution to copyright owners by way of recompense in respect of home copying of sound recordings was a law with respect to taxation. The circumstance that the royalty was imposed to recompense one group of persons at the expense of another did not prevent the exaction being characterised as a tax.
76 In Tape Manufacturers 176 CLR at 504-505, Mason CJ, Brennan, Deane and Gaudron JJ said:
The only possible reason … for holding that the provision in question in this case is not a law imposing taxation is that an expropriation from one group for the benefit of another as an incident of legislative regulation of interests on a subject matter within power, with a view to bringing about what is conceived to be an equitable outcome, is not an exaction for public purposes and is therefore not a tax. In one sense it may be said that the purpose is private in that it concerns the interests of the two groups only. But, in truth, the legislative solution to the problem proceeds on the footing that it is imposed in the public interest. Indeed, the purpose of directing the payment of the levy to the collecting society for ultimate distribution of the net proceeds to the relevant copyright owners as a solution to a complex problem of public importance is of necessity a public purpose.
77 In this case, as in Tape Manufacturers 176 CLR 480, the raising of revenue from one group of persons within the community for the purpose of its application for the benefit of another group of persons can be seen to be an exercise in raising revenue for the public purpose of compensating the second group of persons in circumstances where they had no prior legal right against the first group to receive the payments.
78 In Northern Suburbs 176 CLR 555, the High Court upheld the validity of the Training Guarantee Act 1990 (Cth) and the Training Guarantee (Administration) Act 1990 (Cth). It is apparent that the SGA Act and the SGA Act were modelled on that earlier legislation. The Training Guarantee Act imposed a charge corresponding to the amount by which an employer's annual expenditure on training its workforce fell short of a minimum amount which an employer was required to spend on training. The employer was liable to pay that amount to the Commissioner of Taxation, and an equivalent amount was then appropriated from the Consolidated Revenue Fund to a trust account to be expended on workforce training pursuant to training guarantee agreements between the Commonwealth and the States. The High Court held that the exaction of funds for expenditure on training of some employees was a public purpose. Mason CJ, Deane, Toohey and Gaudron JJ (with whom Brennan J relevantly agreed) said at 569-570:
…the fact that the revenue raising burden (of an Act) is merely secondary to the attainment of some other object or objects is not a reason for treating the charge otherwise than as a tax . One might as well suggest that a protective customs duty is not a tax because its primary object is the protection of a particular local manufacturing industry from overseas competition.
If a law, on its face, is one with respect to taxation, the law does not cease to have that character simply because Parliament seeks to achieve, by its enactment, a purpose not within Commonwealth legislative power. In Osborne v The Commonwealth, the Court rejected a challenge to the validity of the Land Tax Act 1910 and the Land Tax Assessment Act 1910 (Cth) which was based on the ground that their object was to prevent residents owning large areas of land or to prevent landholders from residing out of Australia or to prevent absentees from holding land in Australia. Subsequently, in Radio Corporation Pty Ltd v The Commonwealth, Latham CJ (with whom Rich, Starke and McTiernan JJ agreed) said:
"After Osborne v The Commonwealth, it is difficult to contend that an Act relating to taxation is invalid because it is designed for the purpose of carrying out a policy of the Commonwealth Parliament which affects matters which are themselves not directly within the legislative power of the Parliament."
Fairfax v Federal Commissioner of Taxation likewise demonstrated that, in the characterization of a law with respect to taxation, the legislative purpose has limited relevance. That case concerned the validity of statutory provisions which denied to trustees of superannuation trusts the general exemption from liability to income tax on the investment income of the trust, unless the investments of the trust contained a specified proportion of Commonwealth and other public securities. Kitto J said:
"The legislative policy is obvious and may be freely acknowledged: it is to provide trustees of superannuation funds with strong inducement to invest sufficiently in Commonwealth and other public securities. The raising of revenue may be of secondary concern. But the enactment does not prescribe or forbid conduct. Its character is neither fully nor fairly described by saying that it makes trustees of superannuation funds liable to pay for failing to do what the legislature wishes. To adapt the language of Higgins J in R. v Barger, the substance of the enactment is the obligation which it imposes, and the only obligation imposed is to pay income tax. In substance as in form, therefore, the section is a law with respect to taxation."
(footnotes omitted)
79 Similarly, in Northern Suburbs 176 CLR at 589, Dawson J said:
The fact that the wider object of the legislation is to encourage employers to pay for training programs themselves and so avoid the charge does not alter the true nature or character of the impost. After all, any protective tariff ultimately aims to eliminate the activity which gives rise to its incidence, yet a protective tariff is clearly a tax. There is more than a hint of Barger's Case in this aspect of the plaintiff's argument, but that case, if it survived Osborne v The Commonwealth, was laid to rest in Fairfax v Federal Commissioner of Taxation. In Fairfax the Court rejected the doctrine that "a law which purports to provide for a tax upon behaviour is in substance not a law with respect to taxation if it exhibits on its face a purpose of suppressing or discouraging the behaviour and is to be explained more convincingly as a means to that end than as a means to provide the Government with revenue". The same reasoning applies where the purpose of the law is to encourage rather than discourage behaviour. As Windeyer J put it:
"The Commonwealth Parliament may use its power to make laws with respect to taxation in order to promote some purpose that it desires to promote. The law is not thereby rendered invalid. The question is only: is it properly described as a law with respect to taxation? … A law with respect to taxation may do no more than exempt from a tax that would otherwise be exigible persons or transactions that answer certain descriptions or fulfil certain conditions."
(footnotes omitted)
80 Roy Morgan seeks to distinguish the present case from Northern Suburbs 176 CLR 555 by pointing out that, under the training guarantee scheme, there was no requirement that funds collected pursuant to the charge be expended for the benefit of the particular trainees from whom the charge had been exacted. But this circumstance was not relevant to demonstrating that the training guarantee levy did not have the positive attributes of a tax. Rather it was relevant to demonstrating that the positive attributes were not trumped by the consideration that the charge was a fee for service (and therefore not a tax). That this is so is apparent from the following passage in the reasons of Mason CJ, Deane, Toohey and Gaudron JJ at 566-568:
It is beyond question that the Act imposes a compulsory levy, exacted by the Commonwealth itself and enforceable by law. And s 34 of the Administration Act provides that the moneys so collected are to be applied for certain enumerated public purposes. In Air Caledonie International v The Commonwealth, this Court affirmed that it "suffice[s] to stamp an exaction of money with the character of a tax" if those positive attributes are present in combination with the negative attribute identified by Latham C.J. in Matthews v Chicory Marketing Board (Vict), namely, that the levy is "not a payment for services rendered". But, as the Court emphasized in Air Caledonie, this proposition is not to be applied as an exhaustive definition of a tax. In particular, the negative attribute "not a payment for services rendered" should be seen "as intended to be but an example of various special types of exaction which may not be taxes even though the positive attributes … are all present" for the reason that the presence of other characteristics may indicate that the exaction is not in its true character a tax. The plaintiff pointed to three suggested characteristics of the Act and the Administration Act which, it said, indicate that the liability to pay the charge is not a tax in the Constitutional sense.
…
Fee for services
The plaintiff submits that the statutory imposition of the liability to pay the charge is not a law with respect to taxation because the charge is a fee for services or at least akin to a fee for services. The amount of the charge an employer is liable to pay is an amount which bears a direct relation to the employer's expenditure on employment related training. And the Administration Act permits the charge paid to the Commonwealth to be expended on employment related training. But is the charge so paid a fee for the training on which it is so expended?
As stated earlier, s 34(1) of the Administration Act provides that money in the Fund (which may include money paid to the Commonwealth in discharge of an obligation to pay the charge) "may be applied for the purposes of … (b) making payments under training guarantee agreements". Section 35 provides for the making of training guarantee agreements. They are "agreements … about making payments out of the Fund to [a] State or Territory and the expenditure of those payments, or amounts attributable to those payments, in relation to eligible training programs". An agreement is of no effect unless the State or Territory agrees "to ensure that the payments [under the agreement], or amounts attributable to the payments, are expended only in relation to eligible training programs" (s 35(2)(b)(ii)). But the Administration Act imposes no requirement that the State or Territory agree to expend the money paid under an agreement on eligible training programs for those employers who have paid money to the Commonwealth in discharge of an obligation to pay the charge. True it is that the State or Territory must agree that it "supports the Training Guarantee Scheme" (s 35(2)(a)) and agree to distribute payments made to it under the agreement on the advice of a body containing representatives of the State or Territory, employers and trade unions (s 35(2)(b)(i)). But these requirements fall a long way short of requiring either that the money received be expended on the provision of eligible training programs or that the money received be expended in relation to eligible training programs for those employers who have incurred a liability to pay the charge. There is therefore no statutory warrant for concluding that the charge paid is a fee for services. The Administration Act does not by its terms establish any sufficient relationship between the liability to pay the charge and the provision of employment related training by the ultimate expenditure of the money collected to regard the liability to pay the charge as a fee for services or as something akin to a fee for services.
(Footnotes omitted).
81 In the present case, there is no suggestion that the exaction effected by the SGC Act coupled with the distribution from the Consolidated Revenue Fund effected by Part 8 of the SGA Act might somehow be regarded as providing a fee for service. Accordingly, in our view, Roy Morgan's argument draws no support from this statement in Northern Suburbs 176 CLR 555.
82 On behalf of the Attorney-General for the Commonwealth it is submitted that the exaction of funds for payment into the Consolidated Revenue Fund established by s 81 of the Constitution conclusively establishes that the exaction is for public purposes. There is support in authority for that submission. In Tape Manufacturers 176 CLR 480, Mason CJ, Brennan, Deane and Gaudron JJ said at 503:
In Australia, the fact that a levy is directed to be paid into the Consolidated Revenue Fund has been regarded as a conclusive indication that the levy is exacted for public purposes.
(Footnote omitted).
83 In Tape Manufacturers 176 CLR 480, Dawson and Toohey JJ said at 522-523:
Under s 81 of the Constitution all revenues or moneys raised or received by the Executive Government of the Commonwealth form one Consolidated Revenue Fund to be appropriated for the purposes of the Commonwealth. If an exaction is a tax, the moneys which it raises are revenue and must form part of the Consolidated Revenue Fund by reason of s 81. That is to say, if in the present case the royalty constitutes a tax, the legislative provisions which make it payable to the collecting society to be distributed by it fail for reasons more fundamental than are to be found in s 55 of the Constitution. They fail because the moneys raised must form part of the Consolidated Revenue Fund and can only, under ss 81 and 83 of the Constitution, be received by the collecting society after appropriation by law for the purpose of payment to it.
If these considerations involve practice rather than principle then the observation in Air Caledonie International v The Commonwealth that there is no reason in principle "why the compulsory exaction of money under statutory powers could not properly be seen as taxation notwithstanding that it was by a non-public authority or for purposes which could not properly be described as public" may stand. But we doubt whether s 81 of the Constitution can in this context be regarded as a machinery provision and, consequently, it now seems to us that the passage which we have cited may be too wide. Read in its widest sense that passage does suggest that any exaction enforceable by law may be a tax in the constitutional sense and that is, as we have said, to regard as dispensable that feature of a tax which is, in truth, indispensable, namely, that the moneys raised be government revenue. Indeed, if all that is required for a tax is that there be an exaction enforceable by law, s 51(ii) assumes unforeseen proportions. Any compulsory exaction of money under statutory power would need no other constitutional warrant.
(Footnotes omitted)
84 On behalf of Roy Morgan it is said that the authority of the statements in Tape Manufacturers 176 CLR 480and Northern Suburbs 176 CLR 555 to which we have referred must now be seen to be qualified by the decision of the High Court in Luton 210 CLR 333 and the observations by members of the Court in that case. In Luton 210 CLR 333, the High Court held that the Commonwealth child support scheme established by the Child Support (Assessment) Act 1989 (Cth) and the Child Support (Registration and Collection) Act 1989 (Cth) could not be supported as an exercise of the constitutional power to make laws with respect to taxation. That legislation provided for debt for child support owed to a carer to be replaced by an obligation on the debtor to pay the debt to the Commonwealth with the Commonwealth making payments to the carer equivalent to amounts recovered from the child support debtor. The statutory replacement of a private debt obligation with a debt to the Commonwealth caused the Court to hold that the exaction was not a tax despite the fact that it was paid into the Consolidated Revenue Fund. Gleeson CJ, with whom McHugh J agreed, said at [13]:
As was pointed out in Airservices Australia v Canadian Airlines International Ltd, while an objective of raising revenue for the government is not a universal determinant, the presence or absence of such an objective will often be significant in deciding whether an exaction, or the imposition of a liability, bears the character of taxation. That is the most usual form of public purpose involved; an idea reflected in what was said by Quick and Garran. Revenue raised by a government may be earmarked, formally or informally, for a specific purpose, and still be a tax. For example, Commonwealth pay-roll tax was introduced in 1941 as a means of providing revenue to finance the provision of child endowment under legislation enacted in the same year. The impost in the Australian Tape Manufacturers Association Case involved raising revenue from one group for the purpose of its application for the benefit of another group. The majority held that revenue was raised for a public purpose of compensating the second group. The group who were to be compensated had no prior legal right against the group from whom the revenue was to be raised. That is a point of distinction from the Registration and Collection Act. The fact that the proceeds of the exaction were not paid into, and out of, the Consolidated Revenue Fund was not regarded as decisive. I would also regard the converse as true.
(footnotes omitted)
85 Gleeson CJ went on to explain why the exaction in that case was not for public purposes. At [14]-[17] Gleeson CJ explained:
The Assessment Act creates a private or personal obligation, in the form of a debt payable by the liable parent to the eligible carer. The debt is recoverable by the carer. The creation of a legal obligation, enforceable by private action, in a parent, to pay for the support of a child, is not taxation. It is a scheme for the creation and adjustment of private rights and liabilities. But the existence of the obligation is of significance in considering the aspect of the legislative scheme upon which the plaintiff principally relies, which is in the Registration and Collection Act. What is alleged to be taxation is in substance no more than a mechanism for the enforcement of a pre-existing private liability.
If a child support assessment is registered under the Registration and Collection Act the debt payable by the liable parent to the eligible carer is extinguished, and replaced by a debt payable by the liable parent to the Commonwealth. The Commonwealth, as necessary, collects the amount owing, and pays it into the Consolidated Revenue Fund. An amount equal to the amount collected is transferred to the Child Support Account. Payments of child support are then made to the carer from the Child Support Account. What is involved is a collection mechanism to facilitate the recovery of child support payments that a parent becomes liable to make under the Assessment Act. It enables the discharge of a personal obligation created by the Assessment Act. A multiplicity of payments may be involved, the amounts of payments are likely to be modest, and many carers would lack the means or the will to undertake private recovery proceedings. The practical advantages of such a scheme are obvious, but they do not include any financial benefit to the Commonwealth.
The payment of moneys collected by the Commonwealth into the Consolidated Revenue Fund, is necessitated by s 81 of the Constitution, which refers to "revenues or moneys". The legislation does not have either the purpose or the effect of raising revenue for the Commonwealth. Its purpose is to create, and facilitate the enforcement of, private rights and liabilities. The Assessment Act creates a personal liability in a parent to the carer of a child; the Registration and Collection Act gives the carer the facility, in exchange for extinguishment of the liability to the carer, to have the Commonwealth recover the child support payments assessed and pay an equivalent amount to the carer.
The legislation does not bear the character of taxation.
(Footnotes omitted)
86 In Luton 210 CLR 333, Gaudron and Hayne JJ said at [55]:
The destination of money that is exacted may well be significant in deciding whether it is exacted for public purposes. A requirement that a sum which legislation requires is paid be paid into the Consolidated Revenue Fund does not conclude the issue of characterising the law as one imposing taxation.
87 Their Honours went on to say at [59]-[60]:
What marks the present exactions apart from other exactions that have been held to be taxes is that in every case the sum exacted under the Registration and Collection Act is, when the maintenance liability is first registered, the amount which otherwise would be due and payable by the payer in satisfaction of an existing obligation owed by that payer to the carer of a child as maintenance for the child.
There is, therefore, under the Registration and Collection Act, more than the mere earmarking of a compulsory exaction for a particular application. Imposing a financial burden on one group in society for the benefit of another group in society will often constitute a tax. Pointing to some identifiable relationship between the group of payers and the group of recipients or even to some relationship between a particular payer and a particular recipient will not usually require some different conclusion. Under the Registration and Collection Act, however, the obligation to make a payment to the carer of the child is replaced by the obligation to pay the same amount to the Commonwealth. That obligation is coupled with the creation of a new right in the carer to have the Commonwealth pay the carer whatever the payer thereafter gives up - whether by making a payment to the Commonwealth or by suffering a compulsory deduction from salary or wages. The combination of these features - the substitution of a new obligation to the Commonwealth equal to an existing obligation which is terminated, coupled with the substitution of new rights in the carer against the Commonwealth equal to the extent to which the payer performs his or her obligation to the Commonwealth - takes this compulsory exaction outside the description of "taxation".
88 Callinan J said of the two Acts there under consideration at [177]-[179]:
Their purpose is not to raise revenue for the Commonwealth. The scheme does not contemplate any net benefit to the Commonwealth. The scheme does not confer any direct benefit upon the general community. It does not seek to exact money from the community. It may apply to, and require deductions from a social security pension or benefit payable by the Government (s 72AA of the Collection Act), features which hardly give the scheme the appearance of one for the exaction of a tax. The beneficiaries of the scheme are of a limited class: children whose parents or parents would seek to avoid their moral and legal obligations owed to them. The Collection Act extinguishes the debt payable pursuant to the Assessment Act by a liable parent to an eligible carer: it creates a debt payable by a liable parent to the Commonwealth. And, it is important to note, s 76 of the Collection Act confers rights to payment upon an eligible carer of an equivalent amount by the Commonwealth. The result that the Collection Act is intended to achieve, and the means by which it is achieved, have some similarity to what happens when a creditor assigns a debt to another. As a result of the operation of the Acts, the Commonwealth becomes the substitute creditor, for and on behalf of the eligible carer, a situation no doubt very acceptable for the eligible carer and, accordingly of a kind to which a creditor (carer) would be likely to wish to assent.
These aspects of the scheme would be immediately sufficient to put beyond doubt any question that it is not one for the exaction of a tax but for the recent decision of this Court in Australian Tape Manufacturers Association Ltd v The Commonwealth. There, amounts of royalties were paid in the first instance by purchasers of blank recording tapes to a collecting society, to be held in a fund for the benefit of copyright owners who were members of the society. The Court was narrowly divided as to the characterisation of the legislative scheme there. It was held in that case that the royalty was imposed for a "public purpose", namely the compensation of relevant copyright holders. If a purpose of compensating copyright holders is a public purpose, it is not immediately apparent why a purpose of ensuring that child carers receive maintenance for children, should not also be so regarded. The majority there (Mason CJ, Brennan, Deane and Gaudron JJ) regarded the relevant enactment as one for the exaction of money from one group for redistribution for the benefit of another group, with a view to bringing about what was seen to be an equitable outcome. There was no necessary correspondence between a copyright holder and the purchaser of a blank tape, who might not even use the tape to copy copyright material. By contrast, the amounts payable under this scheme are paid to the Commonwealth by a particular debtor in relation to a particular child or children, and an equivalent amount is paid to the particular person entitled to that amount of child support. It is this feature which makes Australian Tape Manufacturers distinguishable and it is unnecessary to consider the Commonwealth's submission that it should be permitted to reopen that case to argue that the correct approach was the minority's (Dawson, Toohey and McHugh JJ).
Some further reference to Air Caledonie is however useful, although in this field of discourse, of high moral, social and, in modern times, legal obligations owed to children by parents, and the designing of provisions for an effective means of discharging those obligations, not all of the language used in cases concerned with the payment of money to the Commonwealth by income earners and commercial enterprises has a necessary application. Here, unlike in Air Caledonie, this scheme does not involve an exaction by a public authority for a public purpose of the kind discussed in that case. A person assessed under this scheme may have no ultimate choice but to pay the assessment to the Commonwealth, but the compulsion to pay only arises, if, and only if, the payer has not otherwise discharged the obligation that a parent owes to his or her child or children. It is parenthood that is, and continues to be the source of the obligation. There is a clear connection between what is payable and what is received in return for it. What is payable is the value of reasonable child support. What is received in return for it, is a discharge of the liability that the parent owes to the child.
(Emphasis added).
89 The observations by the members of the Court in Luton210 CLR 333 to which we have referred make it clear the exaction for payment into the Consolidated Revenue Fund was not decisive in favour of a positive answer to the question whether the exaction was for public purposes because the countervailing indication was compelling. That countervailing indication was that the exaction involved the statutory replacement of a private obligation in the debtor to make a payment to the carer of a child by an obligation on the debtor to pay the same amount to the Commonwealth together with the creation of a new right in the carer to have the Commonwealth pay the carer whatever the debtor thereafter yields up to the Commonwealth in discharge of his or her obligation.
90 On Roy Morgan's behalf it is said that it is the close correspondence between the amounts paid to the Commissioner (as the aggregate of individual superannuation shortfalls) and the amount paid out by way of the shortfall component in respect of each employer that establishes the "private" nature of the SC Charge. In this regard, it is argued, paraphrasing the highlighted passage from the reasons of Callinan J in Luton210 CLR 333 set out above:
…the amounts payable under this scheme are paid to the Commonwealth by a particular [employer] in relation to a particular [employee or employees] and an equivalent amount is paid to the particular [employee] entitled to that amount of [superannuation benefit]. It is this feature which makes Australian Tape Manufacturers distinguishable …
91 This paraphrase does not accurately state the effect of the relevant passage from the reasons of Callinan J in two respects. First, Roy Morgan substitutes "[employer]" for the word "debtor" in the reasons of Callinan J. This is important in that Callinan J proceeds explicitly on the footing that the legislation there in question fixed upon a person who was already a "debtor", ie, a person who was already under a private obligation, and then purported to provide for an exaction to acquit that obligation. Secondly, the paraphrase does not accurately state the effect of Part 8 of the SGA Act in that s 65 does not provide for a payment of the amount of superannuation benefit directly to an employee. Rather, s 65 provides for payment to a fund to be held against the invalidity or old age of the employee.
92 Nothing in the reasoning of any member of the High Court in Luton210 CLR 333 casts doubt on the decisions or the reasoning in Northern Suburbs 176 CLR 555 or Tape Manufacturers 176 CLR 480. The circumstance that the moneys exacted are paid into the Consolidated Revenue Fund in conformity with s 71 of the SGA Act establishes, in the absence of a countervailing consideration, that the exaction effected by s 5 of the SGC Act is for public purposes. The SGA Act and SGC Act do not operate to substitute a new statutory obligation for a pre-existing private obligation in an employer to make a payment to any employee. Rather, the legislation exacts a payment from an employer; and that payment is paid to the Consolidated Revenue Fund. While payments from the Consolidated Revenue Fund pursuant to s 65 of the SGA Act are made by the Commissioner for the ultimate benefit of individual employees, that benefit is only received by an individual employee in the event of infirmity or retirement.
93 In our opinion, the exaction imposed by the SGC Act and the SGA Act is for public purposes. That conclusion is supported by Tape Manufacturers 176 CLR 480 and Northern Suburbs 176 CLR 555 and is consistent with Luton 210 CLR 333.
94 Accordingly, we conclude that the SG charge is a tax within s 51(ii) of the Constitution.