Roy Morgan Research Pty Ltd v Commissioner of Taxation

Roy Morgan Research Pty Ltd v Commissioner of Taxation - [2011] HCA 35 - HCA 2011 case summary — Zoe

[20]

The legislative power conferred by s 51(ii) is subject to the restriction in that paragraph "but so as not to discriminate between States or parts of States". Of the term "taxation" as it appears in s 51(ii), Isaacs J said in 1908 that it was "a word so plain and comprehensive that it would be difficult to divine anything to surpass it in simplicity and amplitude"[8]. Subsequently, in The Commonwealth v Colonial Combing, Spinning and Weaving Co Ltd[9], Isaacs J emphasised that the executive power does not extend to the levying of taxation and that this requires the exercise of legislative power.
There are a number of references in the Constitution to taxation, in addition to that in s 51(ii). Reference has already been made to s 55. Sections 53, 54 and 55 impose particular requirements upon the powers and procedures of the two Chambers of the Parliament with respect to laws and proposed laws imposing or dealing with the imposition of taxation. Failure to observe the requirements of s 55 brought down the legislation at issue in Air Caledonie International v The Commonwealth[10] and Australian Tape Manufacturers Association Ltd v The Commonwealth[11]. Section 114 is a prohibition directed both to the Parliaments of the Commonwealth and those of the States. Without the consent of the Parliament of the Commonwealth, a State may not impose any tax on property of any kind belonging to the Commonwealth; the Commonwealth, on its part, may not impose any tax on property of any kind belonging to a State.
Further, with respect to federal laws, s 51(xxxi) of the Constitution requires just terms for certain acquisitions of property. However, taxation stands outside the guarantee provided by s 51(xxxi)[12]. The result is that some laws which are held not to impose taxes nevertheless may be invalid by reason of s 51(xxxi). In Tape Manufacturers, the law under challenge was held not to be a law with respect to the acquisition of property but to be a law imposing taxation which nevertheless was invalid because there had been a contravention of s 55 of the Constitution.
It should be added that the discernment of a legislative objective to raise revenue is not necessarily a determinant that the exaction in question bears the character of taxation[13]. For example, the objective of the imposition of a customs tariff at a high level may be to protect domestic industry by providing a disincentive to the importation of competing products. The point was made by Kitto J in Fairfax v Federal Commissioner of Taxation[14] with reference to the statement in United States v Sanchez[15]:

[28]

Section 90 of the Constitution is directed to what otherwise might have been the concurrent powers of the Parliament of the Commonwealth and other Australian legislatures[31] to impose particular forms of taxation, namely duties of customs and excise. Duties of customs must be uniform (s 88). Section 90 renders exclusive that power of the Parliament of the Commonwealth to impose duties of customs and excise and denies that competency to other legislatures. Many of the cases in which this Court has considered the nature of a law imposing taxation have concerned not federal but State laws. The issues that arose in those matters included, inter alia, whether the challenged impost answered the description of a tax and, if so, whether it answered the further description of a duty of excise.
The State laws successfully challenged in Attorney‑General (NSW) v Homebush Flour Mills Ltd[32], Matthews v Chicory Marketing Board (Vict)[33] and Parton v Milk Board (Vict)[34] involved statutory marketing schemes. These established: in Homebush[35], a committee to fix price on flour consisting of a Minister, two officers of his Department, representatives of the flour mills and a representative of the master bakers; in Matthews[36], Marketing Boards constituted by one member, appointed by the Governor in Council and by others elected by producers of the commodity; and, in Parton[37], a Milk Board, which was a body corporate, whose members were appointed by the Governor in Council.
The levy considered in Matthews was to be applied in work directed to the improvement of the quality of the commodity[38], in Homebush to the relief of necessitous wheat farmers[39], and in Parton for the provision of what were regarded by the legislature as benefits to those engaged in the milk industry[40]. In this setting, an issue was presented whether the statutory bodies had the character of public authorities sufficient to give to them the ability to impose, collect and expend moneys which had the character of taxes.
In each case it was held that the State legislation imposed a tax (and that this was an excise). This was so notwithstanding the intermediate role of the relevant committees and boards. In that regard, in Matthews, Dixon J[41] remarked:

[42]

The source of that last requirement was located by their Honours in what was said by Dixon CJ in Deputy Federal Commissioner of Taxation v Brown[65], namely that compliance with the Constitution requires that liability for tax be not imposed, without leaving open to the taxpayer some judicial process by which the taxpayer may show that in truth the tax was exigible or not exigible in the sum assessed.
The notion of "compulsory exaction" has received some refinement in the decided cases. The nature of a particular exaction or the end to which revenues raised might be put may be such as to take the exaction outside the constitutional conception of "taxation". As s 53 of the Constitution itself recognises, a law does not impose taxation by reason only that it contains provisions for the imposition or the appropriation of fines or other pecuniary penalties, or for the demand or payment of fees for licenses, or fees for services. Further examples are provided by decisions in Moore v The Commonwealth[66], Clyne v Federal Commissioner of Taxation[67], Airservices Australia v Canadian Airlines International Ltd[68], and Luton v Lessels[69].
In Moore, the money raised from each wool producer was to be applied in satisfaction of its assessed income tax or provisional income tax and otherwise was to be refunded to the producer; the laws in question were supported by s 51(ii) of the Constitution but did not themselves impose a tax so as to have required observance of s 55 by the Parliament[70]. Likewise, it was held in Clyne that the liability to pay provisional tax was but ancillary to the liability to pay income tax[71].
The charges imposed on the airlines which were considered in Airservices Australia were examples of financial burdens placed upon "users" to fund the maintenance of public assets and the provision of public services. Finally, the scheme established by the two statutes considered in Luton v Lessels provided a new mechanism for the enforcement of existing obligations to make child maintenance payments. The legislation did so by the substitution of a new obligation to the Commonwealth to be owed by the obligor and a new right against the Commonwealth owed by the obligee, measured by reference to the obligation which was terminated[72].

[43]

The exaction represented by the Charge, contrary to the appellant's submission, is not of a nature which takes it outside the constitutional conception of "taxation". None of the examples considered above are applicable here.
The legislation considered in the recent decisions which bears the closest analogy to the Charge Act and the Administration Act is that which was the subject of Northern Suburbs General Cemetery Reserve Trust v The Commonwealth[73].
In that case, the Court upheld the validity of the Training Guarantee Act 1990 (Cth) and the Training Guarantee (Administration) Act 1990 (Cth). The legislation defined a minimum amount which the employer notionally was required to expend in the training of its workforce. A charge was imposed corresponding to the amount by which the actual expenditure on training by each employer fell short of that minimum amount; the employer was rendered liable to pay the amount of the shortfall to the Commissioner and thus into the Consolidated Revenue Fund; an equivalent amount was appropriated from the Consolidated Revenue Fund into a trust account which was expended on workforce training, in particular by payments made pursuant to agreements between the Commonwealth and the States.
The appellant in its submissions concerning Northern Suburbs emphasised that under the training guarantee scheme upheld in that case, and unlike the situation in the present case, there was no "linkage" in the sense of a requirement that funds collected under the charge be expended on training of the particular employees paying the charge.
That consideration was significant for the decision in Northern Suburbs but not in the way in which the appellant submitted. The absence of a requirement that moneys disbursed be expended upon eligible training programs by those employers who had incurred a liability to pay the charge was significant. This indicated an absence of a sufficient relationship between the liability to pay and the provision of employment related training, to warrant characterising the liability to pay the charge as a fee for services, or as something akin to a fee for services provided to that employer[74].
The Court in Northern Suburbs also emphasised a point made earlier in these reasons: that the raising of revenue is secondary to the attainment of some other legislative object is no reason for treating an impost otherwise than as a tax[75]. As Latham CJ pointed out in Radio Corporation Pty Ltd v The Commonwealth[76], this is so even if the legislation is designed for the purpose of carrying out a policy affecting matters not directly within the legislative competence of the Parliament of the Commonwealth.
The submission by the appellant that the Charge is invalid because the legislation confers upon employees a "private and direct benefit" cannot be accepted. Nor does this "linkage" indicate that the Charge is not imposed by the Parliament for "public purposes". It is settled that the imposition of a tax for the benefit of the Consolidated Revenue Fund is made for public purposes[77]. That is not to say that the receipt of funds into the Consolidated Revenue Fund conclusively establishes their character as the proceeds of a tax. But it does establish in the present case that the Charge is imposed for "public purposes" and thus, if other necessary criteria are met, as they are in this case, the Charge is a valid tax.
Moneys received into the Consolidated Revenue Fund are available to be appropriated for any purpose for which the Parliament may lawfully spend money; this is so, whatever the purpose for which those moneys were raised[78]. In the First Uniform Tax Case, Latham CJ explained[79]:

[53]

The superannuation guarantee charge is modelled on the Training Guarantee Act 1990 (Cth) and the Training Guarantee (Administration) Act 1990 (Cth). The validity of that legislation was upheld in Northern Suburbs General Cemetery Reserve Trust v The Commonwealth[91]. The legislation created a training guarantee scheme. That scheme defined a minimum amount that each employer was notionally required to expend in training its workforce. The legislation imposed a charge corresponding to the amount by which the employer's actual expenditure on training fell short of that minimum amount. The employer was liable to pay that amount to the Commissioner of Taxation, ie into the Consolidated Revenue Fund. Provision was made for monies to be taken from the Consolidated Revenue Fund to be expended, among other things, on workforce training pursuant to training guarantee agreements between the Commonwealth on the one hand and the States and Territories on the other on the advice of bodies containing representatives of government, employers and trade unions. The reasoning of this Court upholding the charge as a tax operated on the basis that industrial training is a public purpose. The provision of workplace superannuation is similarly a public purpose.
The appellant did not submit that the Northern Suburbs case should be overruled, but did submit that it was distinguishable. The point of distinction relied on was that the scheme in that case did not require the funds that were collected from employers which had not trained their workforces to be spent on training the employees of those particular employers. Instead the funds were, among other things, to be spent by State or Territory governments under training guarantee agreements. That circumstance was used by this Court as the basis for a conclusion that the charge was not a fee for service; it was not crucial in reaching the conclusion that the funds raised were applied for "public purposes"[92]. Accordingly the point of distinction relied on is not available.
In all other basic respects the two legislative schemes are materially similar. In particular, each scheme contemplated as the preferable and primary course direct payment by the employers rather than payment only through the charges. The charges are only secondary in the sense that the duty to pay them serves as a means of achieving the preferable course of ensuring direct payment by the employers. As Mason CJ, Deane, Toohey and Gaudron JJ said[93]: "the fact that the revenue-raising burden 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." The similarity in the two legislative schemes invalidates the appellant's reliance on "private and direct benefit" as pointing against the existence of a public purpose. Even if the superannuation legislation confers a "private and direct benefit", that conferral operates as part of a scheme in which the threat of having to pay the superannuation guarantee charge into the Consolidated Revenue Fund, thereby operating as an indirect source of payments from the Consolidated Revenue Fund in favour of employees' superannuation funds, is essentially a method of vindicating the primary purpose of influencing employers to make payments directly into superannuation funds. That primary purpose is a public purpose.
The question, then, is whether the superannuation guarantee charge, considered as an exaction, is a tax. To the extent that employers make payments directly into employees' superannuation funds, there will be no exaction; to the extent that they do not, there will be. The legislative scheme uses the threat of the exaction to prevent the need to pay it from arising. But each occasion when the need to pay it arises tends to encourage others later so to arrange their affairs that they do not have to pay it. In the Northern Suburbs case the spending of the exaction on training did not prevent the exaction from being a tax. So here, the spending of the exaction on payments into superannuation funds for the benefit of employees does not prevent the exaction from being a tax.
The appellant did not submit that the Northern Suburbs case should be overruled. It cannot be distinguished. It must therefore be applied. Its application leads to the conclusion that the superannuation guarantee charge is a tax.

[54]

The appellant contended that Luton v Lessels[94] was indistinguishable from the present case. The legislative scheme under consideration in Luton v Lessels was directed to persons who had defaulted in their existing obligations to make payments of child maintenance. The legislation terminated those obligations. It substituted for them a new right in the person caring for the child to claim payment from the Commonwealth, and gave powers to an official to collect the relevant amounts from the defaulter, including a power to issue garnishee notices to the defaulter's employer. This Court held that the legislation did not have to comply with s 55 of the Constitution because it did not provide for the imposition of a tax. Instead it created a new mechanism for the enforcement of an existing private obligation by substituting for the obligation of the defaulter to pay a carer for the child's upkeep an obligation of the defaulter to pay the Commonwealth coupled with the creation of new rights in the carer against the Commonwealth. Luton v Lessels is distinguishable because there the obligation created in the Commonwealth was created in substitution for a former obligation of another person which was terminated. Here no particular obligations of employers to make payments into superannuation funds for the benefit of their employees are terminated, although compliance with those obligations will reduce the charge, and to the extent that payments are made into superannuation funds from the Consolidated Revenue Fund this will eliminate or destroy the quantum of damages which the employees can claim from their employers for breach of these obligations. The duty to pay the superannuation guarantee charge does not depend on the existence of any obligation to make payments into superannuation funds. And no duty is created on employers to make contributions into those superannuation funds. In Luton v Lessels the legislation created a new legal obligation to do something in substitution for an existing one. Here the legislation merely creates an incentive to do something, whether or not there was any obligation to do it.
Finally, the appellant relied on Luton v Lessels as exemplifying a distinction between "public purposes" as a necessary element in a tax and "the public interest" which was not sufficient to satisfy the "public purposes" element in a tax. The appellant did not demonstrate that the references to "public interest" on which it relied in Luton v Lessels[95] were supportive of the proposition that the purposes of the superannuation legislation were matters only of "public interest", not "public purpose".

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