3. In matter number 2011/1841, the Tribunal sets aside the objection decision in respect of the superannuation contributions surcharge assessment for the year ended 30 June 2004 insofar as it included a surcharge on the notional contributions attributed to the applicant during the period commencing on 1 July 2003 and while the applicant continued in the position of Executive Director, Cabinet Office, in the Department of the Premier and Cabinet, but otherwise affirms the objection decision in relation to that year.

4. In respect of the reduced assessments referred to in paragraphs 2 and 3 above, the amount of statutory interest payable on the amended surcharge assessment is to be reduced to apply to the amended surcharge assessment.

5. The Tribunal remits the matters referred to in paragraphs 2 and 3 above to the respondent to amend the superannuation surcharge assessments in accordance with the decision in those matters.

TAXATION - Superannuation contributions surcharge assessments - executive officer of South Australian public service - implied constitutional limitation on Commonwealth legislative power - held that Commonwealth legislation validly applied to applicant except in relation to period when applicant was the Executive Director of the Cabinet Office - objection decisions affirmed except in relation to such period.

PRACTICE AND PROCEDURE - Jurisdiction of tribunal to determine issues of constitutional validity - consideration of power to refer question of law to Federal Court.

Administrative Appeals Tribunal Act 1975 (Cth), s 45

Commonwealth of Australia Constitution 1900 (Imp) 63 and 64 Vic, c 12

Statutes Amendments (Commutation for Superannuation Surcharge) Act 1999, s 6

Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (Cth)

Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 (Cth)

Re McKie and Minister for Immigration, Local Government and Ethnic Affairs (1988) 8 AAR 90

Re Adams and The Tax Agents' Board (1976) 1 ALD 251

R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170

Re Boulton; Ex parte Construction, Forestry, Mining and Engineering Union (1998) 73 ALJR 129

Re Lavery and Registrar of the Supreme Court of Queensland (No. 2) (1996) 43 ALD 13

Re Lower and Comcare [2003] AATA 540; (2003) 74 ALD 547

Re RM and Commissioner for Superannuation (1984) 6 ALD 272

Re Sarina and Secretary, Department of Social Security (1988) 14 ALD 437

Re Jonsson and Marine Council (No. 2) [1990] AATA 192; (1990) 12 AAR 323

Re Australian Education Union; Ex parte the State of Victoria [1995] HCA 71; (1995) 184 CLR 188

Austin v Commonwealth (2003) 215 CLR 185

Clarke v Commissioner of Taxation [2009] HCA 33; (2009) 240 CLR 272

Benjamin v Repatriation Commission [2001] FCA 1879; (2001) 70 ALD 622

Federal Commissioner of Taxation v Munro [1926] HCA 58; (1926) 38 CLR 153

Huddart, Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330

Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286

R v Quinn; Ex parte Consolidated Foods Corporation [1977] HCA 62; (1977) 138 CLR 1

Sunol v Collier [2012] NSWCA 14

Melbourne Corporation v The Commonwealth [1947] HCA 26; (1947) 74 CLR 31

Amalgamated Society of Engineers v Adelaide Steamship Co Ltd [1920] HCA 54; (1920) 28 CLR 129

Australian Capital Television Pty Ltd v Commonwealth [1992] HCA 45; (1992) 177 CLR 106

State Chamber of Commerce and Industry & Ors v The Commonwealth (The Second Fringe Benefits Tax Case) [1987] HCA 38; (1987) 163 CLR 329

Victoria v The Commonwealth (the Payroll Tax Case) [1971] HCA 16; (1971) 122 CLR 353

Parliamentary Trustee of the Parliamentary Contributory Superannuation Fund v Commissioner of Taxation [2012] FCA 740.

Hall, Allan N, Judicial Power, the Duality of Functions and the Administrative Appeals Tribunal (1994) 22 Federal LR 13

Hanks P, Gordon F and Hill G, Constitutional Law in Australia, 3rd Ed (2012) LexisNexis Butterworths

Kerr, D, State Tribunals and Chapter III of the Australian Constitution - Four Cases Considered (2007) AIAL Forum No. 55

1. These matters were one of three groups of applications heard together. All three applicants held senior positions in the South Australian public service, and were members of the South Australian Superannuation Fund established pursuant to the Superannuation Act 1988 (SA). They have applied to this tribunal for review of decisions made by the Commissioner of Taxation to disallow, either in full or in part, objections which they had lodged to superannuation contribution surcharge assessments for various years between the year ended 30 June 1997 and 30 June 2005. In each case the objections were based on the decision of the High Court of Australia in Clarke v Commissioner of Taxation[1], to which I will refer below.
2. The laws which imposed the superannuation contributions surcharge were the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (Cth) and the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 (Cth) (the Surcharge Acts). The Surcharge Acts were part of a legislative scheme enacted in 1997 which provided for the imposition of a superannuation surcharge on contributions made by or on behalf of taxpayers in receipt of taxable income above certain thresholds. The legislation that applied generally throughout Australia imposed liability for the surcharge on the trustees of superannuation funds, who were entitled to discharge their liability from the assets of the funds, but separate legislation was enacted in the form of the Surcharge Acts, to apply to "constitutionally protected superannuation funds", which were funds established by State legislation specified in regulations, and included the South Australian Superannuation Fund. This separate legislation imposed liability upon individual members of State superannuation schemes, and not the trustees of the funds, apparently so as to avoid the operation of s 114 of the Australian Constitution, which prohibits the imposition of Commonwealth taxes on State property[2].
3. The Surcharge Acts provided for liability to pay the surcharge to be deferred until the superannuation benefit became payable to the member of the fund, and for interest to accrue on the deferred amount. In 1999, the South Australian Parliament enacted legislation to permit members of certain State superannuation funds to commute so much of their pensions as were required to provide a lump sum equivalent to the amount of the surcharge imposed on them by the Surcharge Acts. The commutation factors to be applied to the commutation of a pension were to be determined by the Treasurer on the recommendation of an actuary[3].
4. In Clarke (supra) the High Court held that the provisions of the legislation that imposed the superannuation contributions surcharge were invalid insofar as they purported to create a liability on the part of Mr Clarke, who was a member of the House of Assembly of the Parliament of South Australia, in respect of his membership of certain constitutionally protected superannuation funds established under Acts of the South Australian Parliament.
5. In the present matters, the applicant Jeffrey Albert Walsh lodged objections against the notices of superannuation contribution surcharge assessments for the years ended 30 June 1997 to 30 June 2005 inclusive. The Commissioner allowed his objection in respect of the assessment for the year ended 30 June 2005 (when Mr Walsh was the Commissioner for Public Employment) and in respect of notional contributions attributed to him in respect of the year ended 30 June 2003 (when he was the Chief Executive Officer of the Department of Education and Children's Services), but disallowed, either in full or in part, his objections for the remaining years. In support of his applications for review of the Commissioner's decisions, Mr Walsh contended that he occupied various positions at the higher levels of the South Australian government, and that consistently with the decision in Clarke (supra), the legislation imposing the superannuation contribution surcharge could not validly apply to him.

1. Early in the interlocutory stages of all three groups of applications the Commissioner submitted that this tribunal had no jurisdiction to determine a question involving the constitutional validity of the Surcharge Acts, because this required the exercise of the judicial power of the Commonwealth, which had not been vested in the tribunal. The Commissioner further contended that the tribunal should refer the issue of constitutional validity to the Federal Court pursuant to s 45 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act), thus enabling that Court to be seized of the constitutional issue which was said to be beyond the tribunal's jurisdiction to determine. On the morning of the hearing, the Commissioner accepted that the tribunal had jurisdiction. However, the Commissioner maintained his position that the question of whether the Surcharge Acts validly applied to the applicants should be referred to the Federal Court. None of the three applicants supported this course.
2. The Commissioner raised the above preliminary issues in all three groups of applications. It is convenient first to address those common preliminary issues, and to provide an overview of recent authorities as to the extent of the implied constitutional limitation relied upon by the applicants. I will then set out the facts relevant to Mr Walsh's situation, and my decision in relation to the applications he has lodged.

Jurisdiction to consider contention re constitutional validity

1. The consent of the parties cannot confer jurisdiction on the tribunal, but I am satisfied that I have jurisdiction to determine the applications before me for the following reasons.
2. In written submissions in support of his original contention that this tribunal has no jurisdiction, the Commissioner contended that the determination of questions involving constitutional issues required the exercise of judicial power, and this was not a power vested in the tribunal. The Commissioner referred to Re Adams and The Tax Agents' Board[4] in support of this contention_._ In that matter the Tax Agents' Board had cancelled the registration of the applicant as a tax agent, and he challenged the constitutional validity of the section under which the Board had acted on the grounds that the section was not a law relating to taxation as required by s 51 of the Constitution. President Brennan J (as he then was) said that a definitive answer to a question of constitutional validity of federal legislation required the exercise of the judicial power of the Commonwealth by a court in which the judicial power of the Commonwealth had been vested[5]. However, his Honour went on to say that the lack of power of the tribunal or the Board to definitively answer the question did not mean that it was not competent to consider and reach an opinion on the question. He added that an administrative body was competent to consider and form an opinion upon the constitutional validity of a statute in order that the body might act in accordance with law, but this competence "should not be treated as a jurisdiction invested in the administrative body to reach a conclusion having legal effect. It is merely a means which the administrative body may adopt in moulding its conduct to accord with the law."[6] Counsel for the Commissioner, Dr Melissa Perry QC, referred to this aspect of Brennan J's decision in conceding that the tribunal had jurisdiction to determine the present matters.
3. Section 71 of the Commonwealth of Australia Constitution Act 1900 (Imp)[7] provides relevantly as follows:

71. The judicial power of the Commonwealth shall be vested in a Federal Supreme Court, to be called the High Court of Australia, and in such other federal courts as the Parliament creates, and in such other courts as it invests with federal jurisdiction ... .

1. The meaning of "judicial power" in s 71 was explained by Griffith CJ in an early High Court case as follows:

...(I) am of opinion that the words "judicial power" as used in sec. 71 of the Constitution mean the power which every sovereign authority must of necessity have to decide controversies between its subjects, or between itself and its subjects, whether the rights relate to life, liberty or property. The exercise of this power does not begin until some tribunal which has power to give a binding and authoritative decision (whether subject to appeal or not) is called upon to take action.[8]

1. In later cases, the High Court decided that certain functions, including the review of administrative decisions made by the Commonwealth or its agencies, were capable of being conferred on a court exercising judicial power, or on a tribunal exercising administrative power, and it was for Parliament to provide whether such functions should be committed to a court or an administrative officer or tribunal[9]. This was recognised in Federal Commissioner of Taxation v Munro[10], where it was held that the powers of review conferred upon the Taxation Board of Review (whose jurisdiction was later subsumed by this tribunal) were not part of the judicial power of the Commonwealth. Functions of this kind, which can be performed either by courts or administrative bodies, have been referred to as "chameleon-like" functions[11]. Whether such functions should be characterised as judicial or administrative will often depend on how the functions are performed, and whether the function has traditionally been exercised by courts or administrative bodies[12].
2. When this tribunal reviews decisions made by the Commonwealth or its agencies, the proceedings generally determine the rights or obligations of the parties. However, decisions of the tribunal constitute the final step in a process of merits review of the exercise by the Commonwealth or its agencies of their administrative powers and discretions. The objection decisions under review in the present proceedings were made by the Commissioner, and involved determining the application of the implied constitutional limitation referred to in Clarke and earlier High Court cases. It was not suggested that the Commissioner was not empowered to make that determination in his capacity as an administrative decision-maker. The tribunal is expressly empowered to exercise all the powers and discretions that are conferred on the decision-maker whose decision is under review for the purpose of reviewing that decision[13], and it is well established that in reviewing administrative decisions, the tribunal exercises administrative, not judicial, power[14].
3. It is basic to the determination of review applications made to this tribunal for the tribunal to consider the application of particular legislative provisions to the proceedings before it. This routinely involves the tribunal making findings as to disputed issues of fact, and then interpreting and applying the relevant legislation to the facts as found, in order to arrive at the correct, or where there is a discretion, the preferable decision. The determination of the present matters will similarly entail finding the facts relevant to the position of each applicant, and then determining whether such Acts can validly apply to each applicant, having regard to the constitutional restraints on the Commonwealth's legislative power. This process is incidental to the administrative functions that have been conferred on the tribunal, in the same way as occurs more commonly when the tribunal interprets and applies relevant legislation. I consider that the determination of the present matters involves the exercise of administrative powers; the consequence that this will of necessity entail the tribunal forming an opinion on the constitutional validity of the legislation in its application to each applicant does not alter the character of the function that the tribunal is performing. The determination of this issue is a necessary incident of reviewing the reviewable decisions.
4. The distinction between the question of the constitutionality of legislation, and the question of whether legislation can validly apply in particular circumstances or to particular persons, was referred to in Re RM and Commissioner for Superannuation[15]. In that case, the tribunal (Deputy President AN Hall and Members Dr AH Marsh and I Prowse) said:

89. Where, however, the constitutional question that is sought to be argued before the Tribunal does not go to the basic constitutionality of the legislation from which the powers of review arise ... but rather is directed to confirming (sic) within proper constitutional limits a statutory power of apparently broad application, we are satisfied that it is within the Tribunal's jurisdiction to consider the question. How the Tribunal deals with such a question will require careful consideration in each case.

1. In an earlier case, Re Sarina and Secretary, Department of Social Security[16] Deputy President RK Todd made the following statement, to the same effect:

The AAT may consider the constitutional applicability of legislation to particular facts proved before it, but its powers do not extend to the finding of constitutional invalidity.

1. The conclusion I have reached with respect to the tribunal's jurisdiction is consistent with views expressed by the Full Court of the Supreme Court of New South Wales in Sunol v Collier[17] in relation to a State tribunal, namely the Appeal Panel of the Administrative Decisions Tribunal. The Full Court decided that notwithstanding that the Commonwealth had not invested federal jurisdiction on the tribunal (because it was not a State court within the meaning of s 39 of the Judiciary Act 1901 (Cth), which invests federal jurisdiction on State courts) it was nevertheless competent for the tribunal to form an opinion about the validity of the State law under consideration, and to act on the basis of that opinion[18]. The Court said, at [8], that if the State law in question:

... (i)s invalid, it is not invalid because a court has declared it to be such: it is invalid because a "pretended law made in excess of power is not and never has been a law at all": South Australia v The Commonwealth [1942] HCA 14; 65 CLR 373 at 408 (Latham CJ). As his Honour continued, "[a]nybody in the country is entitled to disregard it.

1. This tribunal took a similar view of its jurisdiction in Re Jonsson and Marine Council (No. 2)[19], where it was contended that a regulation that affected the reviewable decision was invalid. The tribunal reviewed a number of earlier cases, including decisions of the tribunal where constitutional issues had been raised, and decided that in the particular circumstances of that case it was appropriate for the tribunal to determine the validity of the regulation in issue.
2. I will approach the present proceedings in accordance with the following propositions, which I think emerge from authorities relevant to the question of the tribunal's jurisdiction to review the constitutional validity of legislation:
   • (a) the tribunal should approach matters on the assumption that the relevant legislation is constitutionally valid[20];
   • (b) the tribunal is empowered to consider the constitutional validity of legislation in order to determine whether or not it has jurisdiction to review the reviewable decision, and if it considers that the legislation is unconstitutional, it should decline to exercise the jurisdiction purportedly conferred on it by that legislation[21];
   • (c) the tribunal can form an opinion on whether legislation can apply within constitutional limits to particular persons or in particular circumstances, and can act on that opinion in determining applications for review of administrative decisions[22];
   • (d) however, the tribunal does not have jurisdiction to reach a conclusion having legal effect that legislation is unconstitutional, and such a decision can only be made by a court exercising judicial power[23]; and
   • (e) the tribunal should nevertheless proceed with caution where such issues arise, and
   • (f) the tribunal should give consideration to referring a question of law to the Federal Court[24].
3. As mentioned above, the Commissioner himself determined the objections by reference to whether the Surcharge Acts could validly apply to the applicants, and it would be administratively inefficient if decisions on issues of this sort had to be delayed until the parties had obtained a decision from a court exercising judicial power on the constitutional question that has arisen. For all of the above reasons, I consider that this tribunal has jurisdiction to determine the within proceedings by forming an opinion in the present matter as to whether the Surcharge Acts can validly apply to the applicants.

Should the tribunal refer a question of law to Federal Court of Australia

1. As mentioned above, the Commissioner has requested the tribunal to refer a question of law in this matter to the Federal Court pursuant s 45 of the AAT Act. That section empowers the tribunal, of its own motion or at the request of a party, to refer a question of law arising in a proceeding before the tribunal to the Federal Court of Australia for decision. This may only be done with the concurrence of the President of this tribunal, and in a proceeding before the Small Taxation Claims Tribunal, the interests of the applicant seeking review of the relevant taxation decision must be taken into account. A number of considerations have led me to conclude that it is not appropriate to refer a question of law to the Federal Court in the three groups of applications before me.
2. First, there are a significant number of applications pending in this tribunal where assessments of the surcharge levy were raised against persons who occupied various senior positions in the public service of South Australia and Western Australia. As appears later in these reasons, in order to determine whether the Surcharge Acts can validly apply to a particular applicant it will be necessary to make factual findings as to the circumstances of each applicant, including such matters as the particular position he or she occupied and his or her role and function, and the extent to which the Surcharge Acts interfered with the capacity of the States to recruit persons to senior government positions. In some of the pending cases, the applicants held a number of different positions over the period covered by the surcharge assessments, and it will be necessary for the tribunal to investigate and find the relevant facts in the case of each position. In this respect, the pending matters differ from the position in Clarke (supra) and Austin v Commonwealth[25], where the taxpayers were respectively a member of Parliament and a judge of a State Supreme court, who exercised constitutional functions which were readily understood, and whose functions could be expected to be identical to those of many other persons in corresponding positions in other States of Australia, so that the ultimate decision in those two cases would be determinative of the liability for the superannuation contribution surcharge tax of many other taxpayers in the same position.
3. Secondly, recent judgments of the High Court of Australia, including Clarke[26] and Austin[27], have explained the principles by which the issues that have arisen in the various pending matters must be determined, and those cases entailed an analysis of the effect of the Surcharge Acts being the same legislation that has given rise to the three groups of applications before me.
4. Thirdly, a referral to the Federal Court would mean that the applicants, some of whose cases are within the jurisdiction of the Small Taxation Claims Tribunal, would not receive the benefit of their applications being dealt with in accordance with the informal and inexpensive processes employed by this tribunal. I note in this regard that requests had previously been made (which were supported by the former president of this tribunal, President Garry Downes J) for test case funding to assist in the resolution of particular cases which had been selected as test cases, but this request was declined. The applicants are self-represented, and have therefore been able to receive the benefit of processes developed by the tribunal to assist self-represented parties.
5. Fourthly, if any party is dissatisfied with the tribunal's decision, there can be an appeal to the Federal Court on the correctness or otherwise of the tribunal's opinion as to the constitutional issue; this would constitute a question of law within the meaning of s 44 of the AAT Act, and the Federal Court could determine the appeal on the basis of the factual findings made by the tribunal[28].
6. Finally, the disposition of the present applications has been delayed because of the unsuccessful requests for test case funding. After the refusal of that request, Mr Walsh expressed concern at the delay in resolving his application. Referring a question of law to the Federal Court would involve further delay, because it would be necessary for the parties to prepare and then agree a statement of agreed facts[29]. Any such further delays would be inconsistent with the statutory objectives of the tribunal to provide a mechanism of review that is "fair, just, informal and quick"[30].

Overview of recent authorities re the extent of the implied constitutional limitation on the Commonwealth's legislative power

1. In Austin the High Court concluded that the Acts were a proper exercise of the Commonwealth's legislative power with respect to taxation, and did not discriminate between States.
2. However, the High Court has held that the Commonwealth's legislative power is subject to an implied limitation derived from the federal nature of the Constitution. In Clarke French CJ formulated this limitation as follows:

The constitutional implication considered in Austin and its precursors means that the Commonwealth cannot, by the exercise of its legislative power, significantly impair, curtail or weaken the capacity of the States to exercise their constitutional powers and functions (be they legislative, executive or judicial) or significantly impair, curtail or weaken the actual exercise of those powers or functions. The Constitution assumes the existence of the States as 'independent entities'. This implies recognition of the importance of their status as components of the federation.[31]

1. In Clarke, the High Court held that the Surcharge Acts could not validly apply to the appellant, who was a member of the South Australian House of Assembly, on the grounds that they involved a significant impairment of the exercise by that State of its constitutional powers and functions in fixing the terms of remuneration of its legislators.
2. A similar conclusion was reached in Austin, where the plaintiffs were a judge of the Supreme Court of New South Wales and a Master of the Supreme Court of Victoria. In that case, Gaudron, Gummow and Hayne JJ held that the Surcharge Acts involved a significant impairment on the exercise by the States of their freedom to select the manner and method for the discharge of their constitutional functions regarding the appointment and remuneration of the judges of the courts of the State, in that secure judicial remuneration at significant levels assisted to attract persons to judicial office, and might have encouraged State judges to retire before reaching the statutory retiring age.
3. The implied limitation was also applied by the High Court in Re Australian Education Union; Ex parte the State of Victoria[32] where the Court recognised that the arbitration power in the Constitution did not authorise the Industrial Relations Commission to make awards concerning the terms and conditions of employment of high level office holders and senior public servants. The Court said:

In our view, also critical to a State's capacity to function as a government is its ability, not only to determine the number and identity of those whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged. Hence, Ministers, ministerial assistants and advisers, heads of departments and high level statutory office holders, parliamentary officers and judges would clearly fall within this group. The implied limitation would protect the States from the exercise by the Commission of power to fix minimum wages and working conditions in respect of such persons and possibly others as well ... .[33]

1. In rejecting the applicants' assessment objections, the Commissioner relied on the above passage from Re Australian Education Union and concluded that he was not a person engaged at the higher level of government. The Court's comments in that case are of course instructive, but leave open the question of what is meant by persons engaged at the "higher levels of government"; the examples of such persons referred to by the Court only included those who would "clearly fall" within the relevant category, and the Court said that the implied limitation would apply "possibly" to others also. The present matters involve determining how the principle should apply to persons engaged in the executive branch of the government of South Australia.

1. Each of the applicants contended that he was a person engaged at the "higher levels of government". Various suggestions were made as to what criteria should be used to determine whether officers would fall within this category[34]. Each applicant referred to his position in the structure of the public service, the function of the unit in which he was employed, and his own role and functions. I will consider these matters below.
2. Mr Walsh was appointed to be the Commissioner for Public Employment in December 2003, and was very familiar with the structure of the executive level of the public service in South Australia. Mr Walsh tendered a Guideline for the South Australian Public Service issued by the Commissioner for Public Employment in March 2001[35]. This referred to the definition of "an executive", an expression defined by the Public Sector Management Act 1995 (SA) to mean "an employee occupying a position determined by the Commissioner under Part 6 to be an executive position"[36]. The Guideline continues:

The Commissioner's determination of executive positions will reflect the concept of an executive team based on management responsibility rather than remuneration.

The quality and performance of executives is a significant factor for the success of the government's programs provided by agencies.

The Guideline goes on to refer to the importance of the executives in the public service as a "major government resource". The Guideline states:

The executive resources is effectively managed as a major government resource

To ensure that executives in the public service can actively support the achievement of the government's priorities, executives should be effectively managed as a major government resource. (emphasis added)

1. Mr Walsh contended that this Guideline was an indication by the State of South Australia of the persons whom the State regarded as essential to the functioning of the State. He said that as at 30 June 2009 there were only 1263 executives under executive contracts in South Australia, compared with a total workforce of 66,396[37]. He accordingly submitted that all persons who had been appointed to an executive position pursuant to the Public Sector Management Act 1995 should be regarded as persons engaged at the "higher levels of government" for the purposes of determining the application of the implied constitutional limitation on the Commonwealth's legislative powers.
2. The documents provided by Mr Walsh to the Commissioner in support of his objections included a copy of the Executive Remuneration Structure as of 1 July 2006[38]. This document lists a range of six levels of remuneration, and a statement of the responsibilities attached to each remuneration level.
3. The applicant Peter Wilson submitted that the immunity should apply in his case because of his position as a senior lawyer employed at an executive level in the Crown Solicitor's Office, and also because he routinely provided legal advice to Ministers and heads of government departments, and so came within the immunity for "ministerial assistants and advisers" referred to in Re Australian Education Union. The applicant Peter Bridge submitted, by reference to a passage in Austin, that all of the persons subjected to the superannuation contribution surcharge who were employed by the State government should be regarded as employees in offices "at the higher levels of government" because the applicable threshold fixed by the Surcharge Acts meant that the surcharge only applied to high-income members of constitutionally protected superannuation funds, and so they should all receive the benefit of the implied limitation.
4. Dr Perry accepted that the executive officers who were the chief executives of government departments would qualify for the implied limitation, but pointed out that in the circumstances where their objections had been disallowed, the applicants were at a level at least one step below that of the chief executive in the department in which they were employed. She submitted that having regard to the factors identified by the High Court in Clarke, Austin and Re Australian Education Union which underpinned the basis of the implied limitation, the applicants could not be said to be at the "higher levels" of the government for the purposes of receiving the benefit of the limitation.

1. In developing her argument, Dr Perry helpfully reviewed the system of responsible government under the Westminster system as it applies in South Australia pursuant to the Constitution Act 1934 (SA). She provided the following helpful summary:

The doctrine of responsible government can be described as providing for a single consolidated chain of command from the people (the electorate) to the Crown. Specifically, the electorate controls Parliament through the election process; Parliament controls the Ministry in that the Ministry needs the confidence of Parliament in order to continue in government; and the Ministry controls the Crown in its capacity as the Executive Government comprised of the Ministers, Government Departments and Department employees.

1. This summary is consistent with the analysis provided by Mason CJ in Australian Capital Television Pty Ltd v Commonwealth[39]. In that case, McHugh J similarly observed:

Representative government involves the conception of a legislative chamber whose members are elected by the people. ... Furthermore, responsible government involves the conception of a legislative chamber where the Ministers of State are answerable ultimately to the electorate for their policies. As Sir Samuel Griffith pointed out in his Notes on Australian Federation_, the effect of responsible government 'is that the actual government of the State is conducted by officers who enjoy the confidence of the people'"._[40]

1. A further aspect of the doctrine of responsible government to which Dr Perry referred is that the invariable practice is that Ministers have responsibility for a department of the public service, and are responsible to Parliament for the administration of their departments; they must be prepared to answer questions in the Parliament concerning their responsibilities, and to resign if censured by the House[41]. She accordingly submitted that Ministers exercise functions that are critical to the capacity of the State to function as a government under applicable constitutional principles and conventions.
2. As to the head of a government department, Dr Perry submitted that he or she can be seen to exercise functions that are critical to the capacity of the State to function as a government in that:
   • (a) Ministers exercise control over departments within their portfolios by direction to the head of the department, and control over departmental expenditure;
   • (b) the head of the department reports directly to the Minister to whom he or she is responsible; and
   • (c) the head of the department is responsible immediately below the Minister for the administration of the department and for carrying out the lawful directions of the Minister.

Dr Perry submitted that as a result, the discharge by the Minister of his or her constitutional role is dependent in an immediate and direct sense upon the discharge by the head of the department of his or her role in administering that department. I agree with this analysis.

1. The above precepts are consistent with the structure contemplated by the Public Sector Management Act 1995 (SA), which makes provision for the public service of South Australia and its management. This Act has since been repealed, but was in force at the relevant time. It provided in s 7 that the public service consisted of administrative units established under the Act, and the Governor was empowered by proclamation to establish an administrative unit and assign a title to it. Under s 8, subject to certain exceptions, all persons employed by or on behalf of the Crown were required to be employed in the public service under the Act. Sections 9 and 10 provided for there to be a Chief Executive of each administrative unit appointed by the Governor, on terms and conditions to be the subject of a contract made between the Premier and the Chief Executive in consultation with the Minister responsible for the unit, and under s 12, the Chief Executive could be dismissed only by the Governor on the grounds of misconduct or other specified grounds. Section 14 provided for the Chief Executive to be responsible to the Minister responsible for the unit, and during part of the relevant period, also to the Premier. Under s 15 the Chief Executive was subject to the direction by the Minister responsible for the unit, and for part of the relevant period, also to the Premier with respect to "whole of government objectives", save that no Ministerial direction could be given to a Chief Executive relating to the appointment, transfer, remuneration discipline or termination of a particular person. Under ss 30 and 31, the Chief Executive could fix and vary the remuneration, duties, titles and remuneration levels of positions in the unit, and appoint persons as executives of a unit, and the conditions of employment of those in an executive position were subject to a contract between the executive and the Chief Executive. Provision was made in s 36 for the Chief Executive of the unit, with the approval of the Commissioner for Public Employment, to terminate an executive's employment, and under s 37, an executive was responsible to the Chief Executive of the administrative unit in which he or she was employed.

1. There was no issue as to the relevant facts in this matter, and I make the following findings partly from the evidence of Mr Walsh, and partly from documentary material before me.

1. The Commissioner allowed certain objections made by Mr Walsh to surcharge assessments, but those that were disallowed, and are the subject of the proceedings in this tribunal, related to the following periods and positions.

1. During the interlocutory stages of the present proceedings, the Commissioner conceded that the Surcharge Acts did not validly apply to Mr Walsh in respect of notional surcharge contributions attributed to him between 24 February and August (or September) 2003, when he was Executive Director, Cabinet Office in the Department of the Premier and Cabinet[42]. In that position, Mr Walsh had responsibilities for the effective management of the Cabinet Office, a matter clearly central to the constitutional functioning of the State. I regard the Commissioner's concession as appropriate, and my decision in these proceedings gives effect to his concession.
2. First position in dispute - Director, Corporate and Customer Services, Transport SA: Mr Walsh described his roles and responsibilities in this position as "Staff of between 400 and 1200 (See Motor Registration Division); HR; Information Technology; Administrative Services; Property Services; Finance; Motor Registration Division (1997 to 2001)". He said that his place in the organisation structure was "(i)mmediately below CEO - Level E", and that he reported direct to the CEO, Transport SA[43].
3. Second position in dispute - Director, Operational Support, Transport SA: Mr Walsh said that in this position he was responsible for around 1200 staff, including weekly paid staff, and described his role and responsibilities as:

Provision of professional and technical services relating to:

Investigation and testing of road materials and foundations;

Maintenance of road and road-related assets, including minor construction capability

He said that his place in the organisation structure was "Level below CEO", and that he reported direct to the CEO, Department of Transport and Urban Planning[44] .

1. Third position in dispute - Co-ordinator, Urban Regeneration: Mr Walsh described his roles and responsibilities in this position by reference to a Minute dated 24 August 2000[45], proposing that he be seconded to this position. The Minute included the following background information:

A high level Urban Regeneration Program is auspiced by the Senior Management Council through a sub-Committee chaired by the Chief Executive of the Department for Transport, Urban Planning and the Arts (DTUPA). A position titled Program Coordinator, Urban Regeneration (EXB) has been established to ensure a whole of Government approach to the revitalisation of urban Adelaide through urban regeneration.

The Program is a significant strategic high level initiative which aims to develop and implement a work plan to manage the coordination of urban regeneration priorities across several State Government portfolio areas, the three tiers of Government and across public/private boundaries.

The role and responsibilities of the Program Coordinator requires leadership capabilities of the highest calibre. Successful across agency coordination at all tiers of Government and with community groups will be crucial to the success of the Program. The Program Coordinator will be required to form strategic links with senior level Government advisory groups and maintain direct contact with the Minister.

The Program is a priority for the State and it is imperative that a suitably qualified executive be seconded to the position of Program Coordinator as a matter of priority.[46]

1. Mr Walsh was appointed to this position by the CEO of the Department of Transport, Urban Planning and the Arts pursuant to s 44(1) of the Public Sector Management Act 1988 (SA). It entailed reporting to the CEO, who in turn reported to the Minister for Transport and Urban Planning (as well as to the Minister for the Arts and the Minister for the Status of Women)[47]. Mr Walsh gave evidence that he tended to meet with the Minister about once a month on a regular basis, but when there were particular initiatives that were being undertaken (the primary one being the development and settlement of the urban growth boundary in South Australia) the contact would have been about once a fortnight. Mr Walsh explained that they were progressing the initiative with the Minister in a policy sense, and then also through Cabinet and then through Parliament. He said that he would typically take along one or two of his staff to meetings, but the CEO of the Department of Transport and Urban Planning would not go to the regular meetings.
2. Mr Walsh was appointed to his position as Coordinator, Urban Regeneration on the terms of an agreement dated 24 August 2000 between the Chief Executive of the Department for Transport, Urban Planning and the Arts on behalf of the State of South Australia and himself[48]. Clause 3.3 of the agreement provided for Mr Walsh to be responsible to the Chief Executive for a number of matters, including the efficient and effective management of the resources under his control and the attainment of the performance standards set from time to time by the Chief Executive. By clause 3.4 he was required to obey and comply with all lawful orders and directions given to him from time to time by the Chief Executive or his or her delegate. Under clause 5.2 the review of his performance criteria and of his performance was to be conducted by the Chief Executive at his or her instigation. He was required by clause 8 to make disclosure to the Chief Executive of pecuniary interests and any conflict of interest, and under clause 9.3 the Chief Executive could terminate his appointment on three months' notice with the approval of the Commissioner for Public Employment.
3. Fourth position in dispute - Executive Director, Planning SA: Mr Walsh's appointment to this position was effected by a variation agreement dated 4 November 2003, which varied the terms of the agreement dated 24 August 2000 to refer to such matters as his new position, the term of his new appointment and his increased salary level, but was otherwise continued pursuant to the terms of that agreement[49]. In his submissions to the Commissioner in support of his objection, he referred to the roles and responsibilities of Planning SA as follows:

Planning SA has a total professional, technical and administrative staff complement of 220

The role of Planning SA is to facilitate State development and enhance the State's competitive advantage through providing an integrated system of strategic planning, development policy and development assessment, supported by strategic information systems.[50]

In a letter to the ATO of 22 June 2011, Mr Walsh said that during his term in this position he was:

(t)o finalise the SA Planning Strategy and bring forward major changes to the Planning and Development legislation. Both those pieces of work were for the express intention of equipping the Minister to take them to Cabinet for approval.[51]

1. Mr Walsh said that his position in the organisational structure was immediately below the CEO of the Department of Transport and Urban Planning, and he reported direct to that person and to the Minister for Urban Development and Planning[52]. It appears the CEO had reporting responsibilities to multiple Ministers who held a total of six portfolios between them, and were themselves the Ministers responsible for the department[53]. Mr Walsh gave evidence that at that time the State Government "featured a fair bit of what was called 'matrix management', which (was) a way of obscuring accountability ..."[54]. He said that he reported direct to his Minister in regular weekly meetings, and the Minister at the time was fairly active in terms of policies, and that tended to drive what he would be talking to the Minister about. He said that the Chief Executive would give direction on some things, but not so much, and he would usually take one or two members of staff to the meetings with the Minister, depending on what was current at the time. He added that his position as Executive Director, Planning SA, was a more responsible and accountable position than his earlier position as Coordinator, Urban Regeneration, because Planning SA had previously been a separate department in its own right for quite a few years, and then was brought within the larger department, and "to some extent, ... the executive director of it still played a role somewhat akin to a chief executive"[55].

Salary levels and assessment of surchargeable contributions

1. The table in paragraph 46 above refers to the remuneration classifications for the various offices held by Mr Walsh. He provided a summary of this classification structure as of 1 July 2006, and I understand from his evidence that similar classification structures applied during the years covered by the disputed surcharge assessments. The summary as of 1 July 2006 indicates that there are six classifications, with classification F the highest and A the lowest. The summary provides as follows (omitting in each case a range of figures which was not explained, but appears to be an element of the total remuneration package value applicable to each executive level).

Chief Executive of very large multifaceted agency accompanied by very large service delivery (responsibilities); or

Strategic central agency with a whole of government focus.

Chief Executive of a large agency with a focus on state-wide resource management impacting on public and private sectors and making a significant contribution to the economic/social development of state; or

Statutory offices providing highest level independent advice to Government and Parliament across a wide range of issues.

Chief Executive of a medium agency with a focus on service delivery and development of government programs; or

Statutory offices/Executive Director with a focus on a major aspect of government administration and regulatory affairs; or

Director role encompassing a broad range of accountabilities in a major multifaceted agency covering policy development, major projects of state-wide significance or large service delivery responsibilities.

Chief Executive of a small agency/independent division with a focus on a specific function, discipline or service including policy development, program enhancement and quality service provided; or

Directors managing significant resources delivering professional/technical/corporate services through a major state-wide distribution network; or

Directors providing strategic policy advice on matters affecting a number of portfolios or major government initiatives/projects with state-wide significance affecting public and private sectors.

Principal Manager of a specialist function for the state which is multifaceted and covers a number of professional, technical and operational disciplines; or

Director of a major administration or service performed under general direction from higher level executives; or

Principal Advisors and program developers of major new initiatives with state significance and with implications for how government business is conducted.

Principal Project Manager leading the investigation of complex matters involving the assessment of economy, efficiency and effectiveness in how government/agencies conduct business and develop new services; or

Director of a specialised function covering a small range of disciplines or integrating a number of facets comprising a major aspect of the agency's operations; or

Key advisors to Government/public and/or private sectors, on a specific function/ discipline, profession or statutory/regulatory matter.[56]

1. The Fund reported surchargeable contributions for Mr Walsh for the years in which he held the above positions. In accordance with a direction that I made following the conclusion of the hearing, the Commissioner provided further information, from SuperSA, as to the assessment of the surcharge. It appears from this information that a Notional Surcharge Contribution (NSC) amount was determined using a Notional Surcharge Contribution Factor (NSCF) determined by actuaries. The NSC amount was calculated by multiplying the annual salary by the NSCF, and a commutation factor was calculated as at Mr Walsh's retirement date. Mr Walsh's surcharge liability at that date, including accrued interest, was $34,178.55. He advised that from his inquiries, he would have had to have commuted 2.4 % of his pension entitlement to discharge this liability, so that his fortnightly pension payments would have been reduced by this percentage[57]. On my calculations, based on the figures provided subsequently by SuperSA, he would have had to have commuted 1.51% of his pension entitlement in order to meet his surcharge liability. On either calculation, the effect on his pension was not significant. In fact, Mr Walsh met the liability out of his accrued long service leave entitlement at retirement, and the liability was later adjusted after the Commissioner allowed his objections in respect of two of the positions he had occupied before he retired.

1. I referred in paragraph 28 to the formulation of the implied constitutional limitation enunciated by French CJ in Clarke (supra). His Honour's formulation included reference to the extent of the limitation and the rationale for it.

1. In the same case Gummow, Heydon, Kiefel and Bell JJ identified a number of "points" which they regarded as relevant to determine whether there had been a significant curtailment or interference with the exercise of State constitutional power in that case. I will refer to these points in turn.
2. The first point was that the Commonwealth enactments imposing the surcharge were not "laws of 'general application' which the States must take as they find them as part of the system governing the whole community"[58], such as laws imposing pay-roll tax and fringe benefits tax, which had been imposed on the States and taxpayers generally. In making this comment, their Honours were referring to the fact that separate provision was made for constitutionally protected superannuation funds, which imposed liability on the members of the funds, and not the funds themselves.
3. The second point was that members of a State legislature were within the class of persons at the higher levels of government "in respect of whom it is critical to the State's capacity to function as a government that it retain the ability to fix the terms and conditions under which they serve" upon their election to Parliament[59] (emphasis added). The taxpayers in Clarke and Austin, being respectively a member of Parliament and a judge of a State Supreme Court, clearly met this criteria for the application of the implied limitation, having regard to the essential constitutional functions they performed.
4. The third point was in effect that the disabling effect on State authority and interference with capacity to function as a government was the basis for the implied limitation, and not the significance of the size of any financial burden. That is relevant in the present matter, because it appears unlikely that the Surcharge Acts would have imposed a significant financial burden on the State of South Australia.
5. The fourth point was to explain that the issues that had arisen did not relate to s 109 of the Constitution, which provides for inconsistencies between State and Commonwealth laws.
6. The fifth point was to reiterate views that had been expressed by the majority of the Court in Austin to the effect that the notion of a federal law discriminating against the State was merely an illustration of the essential question of whether the relevant Commonwealth law relevantly interfered with or impaired State functions, and discrimination was not a separate ground for the implied constitutional limitation.
7. The sixth point was to describe the nature of the inquiry that had to be made to determine the appeal in Clarke. Their Honours adopted the following formulation from Austin (omitting citations)[60]:

... The question presented by the doctrine in any given case requires assessment of the impact of particular laws by such criteria as 'special burden' and 'curtailment' of 'capacity' of the States "to function as governments". These criteria are to be applied by consideration not only of the form but also "the substance and actual operation" of the federal law. ... Further, this inquiry inevitably turns upon matters of evaluation and degree and of "constitutional facts" which are not readily established by objective methods in curial proceedings.

1. French CJ in Clarke identified a number of similar factors which were to be taken into account. His Honour said:

In my opinion, the application of the implied limitation requires a multifactorial assessment. Factors relevant to its application include:

1. Whether the law in question singles out one or more of the States and imposes a special burden or disability on them which is not imposed on persons generally.
2. Whether the operation of a law of general application imposes a particular burden or disability on the States.
3. The effect of the law upon the capacity of the States to exercise their constitutional powers.
4. The effect of the law upon the exercise of their functions by the States.
5. The nature of the capacity or functions affected.
6. The subject matter of the law affecting the State or States and in particular the extent to which the constitutional head of power under which the law is made authorises its discriminatory application.

None of these factors, considered separately, will necessarily be determinative of the application of the limitation. The decisions of this Court indicate that the fact that a law singles out the States or a State will be of considerable significance, to be weighed together with the effects of such a law on their capacities and functions. The fact that a law is of general application may make it more difficult to demonstrate, absent operational discrimination on its impact upon the States, that it transgresses the limitation. [61]

His Honour then applied these factors to members of the South Australian Parliament, and concluded that when the factors were taken together, the Surcharge Acts significantly interfered with the remuneration arrangements made between the State and its legislatures and, to that extent, significantly burdened the exercise by the State of its powers and functions in fixing their remuneration.

1. The Court's conclusions in Clarke as to a number of the "points" or factors that are relevant to determining whether the Surcharge Acts could validly apply to the taxpayer concerned in that case are directly applicable to the present proceedings, and support the applicants' contention that the Surcharge Acts were invalid in their application to them.
2. For example, (and notwithstanding that the Court made it clear that there was not a separate test of discrimination that would attract the implied constitutional limitation), the Court observed that the Surcharge Acts were not laws of "general application" in that tax was imposed on the members of constitutionally protected superannuation funds, rather than on the trustees of the superannuation funds[62]. In the present proceedings, the Commissioner did not adduce evidence as to the practical impact of the surcharge legislation that might have been relevant to the degree of this discriminatory aspect of the Surcharge Acts (and there was no such evidence before the High Court in Clarke or Austin). It occurs to me that in the case of accumulation funds (as opposed to defined benefits funds) it is likely that, in order to meet their fiduciary obligations to all members, the trustees of such funds would have deducted the amount of the assessments of the surcharge contributions tax from member balances; and in that event, the members would have borne the impact of the surcharge, as occurred in the case of constitutionally protected superannuation funds[63]. However, there is no such evidence before me, and I therefore approach the present proceedings on the basis that the Surcharge Acts were discriminatory in their application.
3. It also appears from Clarke and Austin that a Commonwealth law which interferes with the retirement benefits, being part of the remuneration package provided by the State to senior office holders, can constitute a special burden on the capacity of the States to carry out their constitutional functions, or on the exercise of those functions, in that it interferes with the freedom of the States to remunerate such persons in the manner the States might choose[64]. It was also decided that it is relevant to consider the effect on the State, and not the effects on the particular officers concerned. The Court pointed out that the passing of the amending legislation, to which I referred in paragraph 3 above, was evidence that the Surcharge Acts had affected the arrangements made by the State with its senior office holders, and that that effect needed to be ameliorated. Further, the Court decided that the absence of a significant adverse financial impact on the State was not a significant consideration.

Factors and authorities supporting the respondent's objection decision

1. However, the judgments in Clarke and Austin did not relate to persons occupying positions in the executive arm of government, and do not provide an answer to the question of whether each applicant occupied a position within the State government in respect of whom it was critical to the State's capacity to function as a government for it to retain the ability to fix the terms and conditions under which he was employed. On my analysis of the authorities, this involves two further important remaining questions, namely first considering the position which each applicant occupied in each of the various offices that he held and its significance in the constitutional functioning of the State, and secondly the "practical question"; and in my view important question, of evaluating the degree to which the exercise of, or the capacity for the exercise of, the constitutional powers and functions of the State would be impaired, curtailed or weakened by the application to him of the Surcharge Acts[65].
2. It is readily apparent that persons occupying the position of members of Parliament or judges of the Supreme Court of a State perform functions that are essential to the constitutional functioning of the State. As mentioned above, in Clarke, Gummow, Heydon, Kiefel and Bell JJ described members of a State legislature as "within that class of persons 'at the higher levels of government' in respect of whom it is critical to the State's capacity to function as a government that it retain the ability to fix" their terms and conditions of remuneration.[66] It is clear that Mr Walsh's responsibilities in the four offices in dispute were very senior positions within the executive government of South Australia, and that he had important responsibilities. However, in my view it is an oversimplification to examine the question of whether the taxpayer concerned was engaged at the "higher levels of government" to focus on the hierarchy of the public service, and then either to include or exclude particular officers as persons to whom the implied constitutional limitation would apply according to their position in that hierarchy. This inquiry is relevant, but should not be applied as if it were a separate test of invalidity, just as the issue of whether the Commonwealth law is discriminatory should not be used as a separate test of invalidity. Rather, the inquiry as to the taxpayer's position in the constitutional structure of the State Government must be determined, and this entails considering the person's role and responsibilities and his or her relationship with the Minister responsible for the government department concerned. It is then necessary to evaluate the actual operation of the Commonwealth legislation under consideration, and to decide whether the Commonwealth, by that legislation, has significantly impaired, curtailed or weakened the exercise by the States of their constitutional functions, or their capacity to exercise those functions[67].
3. The need for this evaluation arises from the basis of the implied constitutional limitation, which must be understood in the context of the approach to the interpretation of the Constitution formulated by the High Court in the Engineers' case[68]. In Melbourne Corporation v The Commonwealth Dixon J summarised the primary position as follows:

The prima-facie rule is that a power to legislate with respect to a given subject enables the Parliament to make laws, which, upon that subject, affect the operations of the States and their agencies.[69]

1. As appears from later cases, it will only be legislation that significantly impairs, curtails or weakens the constitutional functioning of the States, or their capacity for such functioning, that will attract the implied immunity. For example, in Melbourne Corporation it was held that a provision in Commonwealth legislation that controlled or restricted the executive government of the States in the use of banks for the conduct of their banking business had placed the States under a particular disability, and was void. The legislation entailed an interference with the ability of the States to manage their own funds, and was a matter which was clearly very significant to the constitutional functioning of the States.
2. In decisions since Melbourne Corporation successive High Courts appear to have taken a strict approach in determining the circumstances in which the implied constitutional limitation will apply. For example, in the Second Fringe Benefits Tax Case[70], the Court upheld the validity of the legislation that imposed a tax on the provision to employees of fringe benefits, and decided that the legislation by the Commonwealth did not discriminate against the States or single them out for special treatment, or interfere with, impair or curtail the exercise of their functions of government. Although Brennan J (as he then was) took a different view in the case of officers of the "essential organs of government", he concluded that the legislation was invalid only to the extent that the legislation imposed a tax on fringe benefits provided in respect of the employment of members of State parliaments, State ministers and judges[71]. It was apparent that these were the persons whom he regarded as the "essential organs of government". I referred in paragraph 31 above to the High Court's proposition in Re Australian Education Union providing examples of persons engaged at the "higher levels of government", and again, the persons identified comprised a restricted and specific group of officer holders or employees whom the Court regarded as "critical" to the States' capacity to function as a government. It was not necessary for the Court in either Austin or Clarke to consider to what extent this very specific group of persons might need to be expanded to accommodate the Court's allusion in Re Australian Education Union to "possibly others as well", but it is significant that in Clarke, when referring to the concept of persons "at the higher levels of government", Gummow, Heydon, Kiefel and Bell JJ referred to that class of persons as those "in respect of whom it is critical to the State's capacity to function as a government" (emphasis added) for the State to retain the ability to fix the terms and conditions of remuneration[72]. This description also indicates that the Court considered that the implied immunity would apply only to a limited class of senior personnel.
3. It is implicit in the passage from the High Court's judgment in Re Australian Education Union that the Court regarded the implied constitutional limitation as preventing the Commonwealth from determining the terms and conditions of engagement of the group of persons to whom the High Court referred, being those at the "higher levels of government". The Court did not appear to suggest that in the case of that group of persons it would be necessary to examine the extent to which an award by the Federal Industrial Relations Commission would affect such matters as the recruitment of persons to the relevant offices[73].
4. Similarly, in Austin, in the course of considering the relevance of the immunity to the particular case before it, Gaudron, Gummow and Hayne JJ appear first to have accepted the proposition that the ability of a State to make provision to fix judicial remuneration was of constitutional significance to the States, and that the significance of that matter was considerable. And after referring to the issue of whether the legislation in question was beyond the legislative power of the Commonwealth, they said at [165]:

That issue may be narrowed by asking whether that result comes about by a sufficiently significant impairment of the exercise by the State of its freedom to select the manner and method for discharge of its constitutional functions respecting the remuneration of the judges of the courts of the State. That requires consideration of the significance for the government of the State of its legislative choice for the making of provision for judicial remuneration. Having regard to what is said earlier in these reasons, particularly with reference to decisions of the Supreme Court of the United States and the Supreme Court of Canada, jurisdictions which share a common constitutional traditional with this country, that significance is to be taken as considerable.[74] (emphasis added)

1. However, after referring to the judgment of Brennan J in the Second Fringe Benefits Tax case, and the way in which judicial pensions were provided, their Honours then posed a further question, which they referred to as the "practical question", and examined the effect of the laws in question on the plaintiffs. Their Honours said (omitting citations):

There is then posed the 'practical question' identified by Starke J in Melbourne Corporation ... This, in the end, is whether, looking to the substance and operation of the federal laws, there has been, in a significant manner, a curtailment or interference with the exercise of State constitutional power.[75]

1. Their Honours had earlier cited a passage from the judgment of Gibbs J in Victoria v the Commonwealth (the Payroll Tax Case)[76] which contemplates that in the case of a tax of general application, it was relevant that the tax did not constitute an impediment to the States employing civil servants. His Honour said:

Although in some cases it may be possible to show that the nature of a tax on a particular activity, such as the employment of servants, renders the continuance of that activity practically impossible, it has not been shown that the tax in the present case prevents the States from employing civil servants or operates as a substantial impediment to their employment. The tax has now been imposed upon and paid by the States for nearly thirty years, and it has not been shown to have prevented the States from discharging their functions or to have impeded them in so doing. They may have less money available for public purposes because they have to pay the tax, but that could be said in every case in which a tax is imposed on the States, and in itself it cannot amount to an impediment against State activity sufficient to invalidate the tax.

1. Gaudron, Gummow and Hayne JJ then proceeded to examine in some detail the practical effect of the Surcharge Acts on the plaintiff's remuneration, and considered whether there had in fact been, in a significant manner, a curtailment or weakening of the State's constitutional power. They pointed out that that the plaintiff's surchargeable contributions had been fixed at more than 60 per cent of his annual remuneration, and also referred to actuarial evidence to the effect that if the Judge concerned had worked until his retirement age of 72, his surcharge liability would have been of the order of $550,000, or more than double his anticipated pre-tax pension entitlement on retirement. These considerations led them to say that if the plaintiff had met the imposts as they were imposed year by year during the term of his office, the interest of the State in providing an adequate level of remuneration would have been denied[77]. The fact that the practical effect of the legislation would interfere with the ability of the State to attract and retain competent persons to serve as judges was clearly relevant to their conclusion that the legislation could not validly apply to the plaintiff. In his dissenting judgment, Kirby J also considered the practical effect of the legislation, but he decided that the evidence before the Court did not establish that the length of judicial service would alter significantly due to the surcharge, and he also thought that States would continue to be able to attract suitable persons to serve as judges.[78] His Honour also did not agree with the opinion of the majority that the imposition of the surcharge would have a significant and detrimental effect on the power of a State to determine the terms and conditions of judicial remuneration, pointing out that the High Court had repeatedly upheld the broad power of the Federal Parliament to make laws with respect to taxation, notwithstanding that such laws of general application extended to persons holding office at high level in state governments, such as judges[79].
2. I also note that in Clarke the Court concluded that the effect of the Surcharge Acts on the remuneration of members of Parliament would make it more difficult for the State to attract and retain competent persons to serve in that office. Further, French CJ referred in his Honour's factors numbered 2, 3, and 4 to the requirement to assess the operation and effect of the law on the States and their capacity to exercise, and the exercise of, their constitutional powers and functions[80].

1. The restrictive application and formulations of the immunity by successive High Courts, to which I have referred above, reflect the basis on which the immunity is implied, namely that the Commonwealth cannot significantly impair, control or weaken the capacity of the States to exercise their constitutional power and functions, or their exercise of such power and functions. In paragraphs 40 to 44 above, I referred to the structure of the executive government of South Australia. The key functionaries in that structure, apart from Ministers, are the chief executives of the administrative units of the government. An analysis of the extensive powers conferred on those persons by the Public Sector Management Act 1995 (SA) makes it clear that they (as well as the Ministers to whom they report) are the persons in whom the functions that are essential to the constitutional functioning of the executive arm of government have been vested. No doubt many persons employed in particular positions in the public service, including (relevantly in these proceedings) people who are employed in very senior technical or management positions, play a very important role in ensuring the efficient functioning of government. However, in my view, the fact that particular executive officers within an administrative unit for which a chief executive is responsible have been assigned specific responsibilities or projects that might entail meeting with or advising a Minister does not mean that they hold positions that are critical to the constitutional functioning of the State.
2. To the extent that it is necessary to consider Mr Walsh's position in the public service hierarchy, it appears from paragraphs 48 to 52 above that he was not a Chief Executive of an administrative unit for which a Minister was responsible when he occupied the three positions there referred to, namely Director, Corporate and Customer Services and Director, Operational Support with Transport SA, and Coordinator, Urban Regeneration with the Department of Transport, Urban Planning and the Arts. His remuneration classification was also below the level that applied to a Chief Executive. I do not think that the implied constitutional limitation would apply to him in any of those three positions. The positions were not such that he was within the immune class of persons referred to in Re Australian Education Union.
3. The effect of the implied limitation on the last position in dispute, namely Executive Director, Planning SA, is less clear. In that position, Mr Wright had regular meetings with the Minister and provided advice direct to him. This position entailed a more significant and direct relationship with the Minister responsible for planning, because of the way in which the State government had at that time restructured the Executive. The creation of the hybrid structure, where one Chief Executive Officer, namely the Chief Executive Officer of the Department for Transport, Urban Planning and the Arts, was responsible to multiple Ministers having a total of six port folios, must inevitably have made it necessary for the Minister for Planning to rely more heavily on the Director of Planning, as the person in charge of the various divisions or administrative units within the Department of Transport, Urban Planning and the Arts. I think that this conclusion is supported by Mr Walsh's description of his role in his position as Executive Director, Planning SA and his relationship with the Minister. I also note that his level of remuneration was raised to a category which included "Chief Executive of a small agency/independent division with a focus on a specific function, discipline or service including policy development, program enhancement and quality service provided"[81].
4. However, I do not think that in this position Mr Walsh fell within the category of "ministerial assistants and advisers" referred to in Re Australian Education Union, since I think the Court's description was intended in its context to refer to senior members of the Minister's personal staff. Further, he was not a chief executive officer of an administrative unit, and so did not possess the constitutionally significant powers conferred on chief officers by the Public Employment Act 1995 (SA), and was not therefore included in the protected class of persons referred to in that case.
5. I referred above to what I called the second remaining important question to determine the application of the implied constitutional imitation[82] that is, the "practical question" of whether there has been a significant curtailment, weakening or burdening of the actual exercise of, or the capacity for the exercise of, the State's constitutional functioning. I consider the determination of this question to be most important, because the implied constitutional limitation only arises if the Commonwealth law has the requisite significant effect on the constitutional functioning, or capacity for such functioning, of the States. I have concluded that the impact on Mr Walsh of the Surcharge Acts, to which I referred in paragraph 56 above, was comparatively insignificant. I take into account that "constitutional facts" are not readily established by objective methods in curial (or tribunal) proceedings[83], but I would not have expected recruitment or promotion, to the extent that that occurred from within the ranks of the public service, to have been impeded by the Surcharge Acts, even in the case of chief executive officers. In the present matter, not only is there no evidence that the Surcharge Acts would have made it more difficult for the State to attract or retain persons in senior positions in the public service, but on the contrary, Mr Walsh frankly admitted that from his experience in his subsequent office as the Commissioner for Public Employment, the surcharge had an effect on persons like him who were already under contract in the public service, and he could not say that the introduction of the Surcharge Acts had been a major impediment in recruiting outside persons to senior positions in the State government[84]. Whilst it is more difficult to evaluate the effect of the Surcharge Acts on the relevant capacity of the States (taking into account the importance of their ability to retain freedom of choice in determining the remuneration of the relevant key personnel) I am not disposed to infer that the relevant capacity of the State of South Australia has been significantly affected, in view of the evidence to which I have referred above.
6. For the sake of completeness, I add that the submissions made by Mr Wilson are not relevant to the positions occupied by Mr Walsh, and I have rejected the submission made by Mr Bridge to the effect that the implied immunity extended to all persons to whom the Surcharge Acts applied[85].
7. After carefully weighing the various factors and considerations to which I have referred above, I have concluded that the effect of the Surcharge Acts on Mr Walsh in any of the four positions in issue did not significantly burden, curtail or weaken either the capacity of the State of South Australia to carry out its proper constitutional functions, or its exercise of those functions, and that accordingly, those Acts were not invalid in their application to him.
8. After I had prepared these reasons, a decision of the Federal Court which was handed down two days ago, namely Parliamentary Trustee of the Parliamentary Contributory Superannuation Fund v Commissioner of Taxation[86], came to my attention. That case contains, with respect, a most helpful summary and analysis by Jessup J of a number of earlier High Court cases relevant to the application of the implied constitutional limitation. The case involved an appeal by the Trustee of the Parliamentary Contributory Superannuation Fund against a decision by the Commissioner to disallow an objection made by the Trustee of the Fund to assessments of superannuation contributions surcharge. The Court dismissed an appeal against the Commissioner's objection decision. The legislation under consideration in that case imposed liability to pay the surcharge on the Fund, whereas in the present case, the liability arising under the Surcharge Acts was imposed on the members of the constitutionally protected funds. The case accordingly involved issues that are not directly relevant to the matters before me, and has not altered the conclusions I have reached.

1. In matter numbers 2011/1834-1839, the tribunal affirms the objection decision in relation to the years ended 30 June 1997 to 30 June 2002.
2. In matter number 2011/1840, the tribunal sets aside the objection decision in respect of the superannuation contributions surcharge assessment for the year ended 30 June 2003 insofar as it included a surcharge on the notional contributions attributed to the applicant during the period from 24 February 2003 to 30 June 2003 (when the applicant was the Executive Director, Cabinet Office, in the Department of the Premier and Cabinet).
3. In matter number 2011/1841, the tribunal sets aside the objection decision in respect of the superannuation contributions surcharge assessment for the year ended 30 June 2004 insofar as it included a surcharge on the notional contributions attributed to the applicant during the period commencing on 1 July 2003 and while the applicant continued in the position of Executive Director, Cabinet Office, in the Department of the Premier and Cabinet, but otherwise affirms the objection decision in relation to that year.
4. In respect of the reduced assessments referred to in paragraphs 89 and 90 above, the amount of statutory interest payable on the amended surcharge assessment is to be reduced to apply to the amended surcharge assessment.
5. The tribunal remits the matters referred to in paragraphs 89 and 90 above to the respondent to amend the superannuation surcharge assessments in accordance with the decision in those matters.

I certify that the preceding ninety two (92) paragraphs are a true copy of the reasons for the decision herein of Deputy President D G Jarvis

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[1] [2009] HCA 33; (2009) 240 CLR 272.

[2] See Austin v Commonwealth (2003) 215 CLR 185 at [66].

[3] Statutes Amendment (Commutation for Superannuation Surcharge) Act 1999 (SA), s 6, which inserted s 40A into the Superannuation Act 1988 (SA).

[4] (1976) 1 ALD 251.

[5] (1976) 1 ALD 251 at 253.

[6] (1976) 1 ALD 251 at 257.

[8] Huddart, Parker & Co Pty Ltd v Moorehead [1909] HCA 36; (1909) 8 CLR 330 at 357.

[9] See Hall, Allan N: Judicial Power, the Duality of functions and the Administrative Appeals Tribunal (1994) 22 Federal LR 13 at 21-28, for a summary of the development of what he referred to as the "duality principle".

[10] [1926] HCA 58; (1926) 38 CLR 153. The High Court's decision was confirmed on appeal to the Privy Council: (1930) 44 CLR 530.

[11] R v Quinn; Ex parte Consolidated Foods Corporation [1977] HCA 62; (1977) 138 CLR 1 at 18, per Aickin J.

[12] See Hanks P, Gordon F, and Hill G: Constitutional Law in Australia, 3rd Ed (2012) LexisNexis Butterworths at [9.19].

[13] s 43(1) of AAT Act.

[14] Benjamin v Repatriation Commission [2001] FCA 1879; (2001) 70 ALD 622 at [47]; Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286 at [140].

[15] (1984) 6 ALD 272 at [89]. In the same case, the tribunal quoted with approval the following proposition from an American text on administrative law: "A fundamental distinction must be recognized between constitutional applicability of legislation to particular facts and constitutionality of the legislation. When a tribunal passes upon constitutional applicability, it is carrying out the legislative intent, either express or implied or presumed. When a tribunal passes upon constitutionality of the legislation, the question is whether it shall take action which runs counter to the legislative intent. We commit to administrative agencies the power to determine constitutional applicability, but we do not commit to administrative agencies the power to determine constitutionality of legislation. Only the courts have authority to take action which runs counter to the expressed will of the legislative body."

[16] (1988) 14 ALD 437 at 439.

[17] [2012] NSWCA 14.

[18] See also the analysis by the President Duncan Kerr J, writing prior to his appointment as President of this tribunal, of the position of non-court State tribunals and their capacity, in common with other administrative bodies, to exercise admixed State executive, judicial and quasi-legislative powers, in State Tribunals and Chapter III of the Australian Constitution - Four Cases Considered, (2007) AIAL Forum No. 55, page 10.

[19] [1990] AATA 192; (1990) 12 AAR 323.

[20] Re McKie and Minister for Immigration, Local Government and Ethnic Affairs (1988) 8 AAR 90 at 95-96; Re Adams and The Tax Agents' Board (1976) 1 ALD 251 at 257.

[21] Re Lavery and Registrar of the Supreme Court of Queensland (No.2) (1996) 43 ALD 13 at [34] and [37]; R v Toohey; Ex parte Northern Land Council [1981] HCA 74; (1981) 151 CLR 170 at 193, where the issue before the Commissioner related to the validity of planning regulations; Re Boulton; Ex parte Construction, Forestry, Mining and Engineering Union (1998) 73 ALJR 129 at [21].

[22] Re Adams (supra) (1976) 1 ALD 251 at 257.

[23] Re RM (supra) (1994) 6 ALD 272 at [88]. Re Adams (supra) (1976) 1 ALD 251 at 257; Sunol (supra) [2012] NSWCA 14 at [20]. Although review decisions by tribunals do not create binding precedents, such decisions often have application in future similar cases. Further, it would seem appropriate for decisions of this tribunal to be given some weight as useful precedents, bearing in mind that the tribunal can be constituted by presidential members who are serving or retired judges, and the tribunal's position as the Commonwealth's "premier" tribunal: see the recently published report to the Minister for Finance Deregulation, Strategic Review of Small and Medium Agencies in the Attorney General's Portfolio, January 2012, by Stephen Skehill, para 7.43. Further, it is helpful for agencies to make a public statement (as occurs in the case of the ATO by means of decision impact statements) as to their position in relation to decisions that have future relevance: see generally Administrative Review Council Report 39 to the Minister for Justice, Better Decisions, Review of Commonwealth Merits Review Tribunals, published in 1995, at [6.39], available at http://www.arc.gov.au/Publications/Reports/Pages/ Reportfiles/ReportNo39.aspx.

[24] Re Lower and Comcare [2003] AATA 540; (2003) 74 ALD 547 at [30].

[25] (2003) 215 CLR 185.

[26] [2009] HCA 33; (2009) 240 CLR 272.

[27] (2003) 215 CLR 185.

[28] Under s 44(3) of the AAT Act, one tier of appeal could be eliminated, since the Court hearing the appeal could be constituted as a Full Court, and must be so constituted if the tribunal was constituted by a member who was, or by members at least one of whom was, a Presidential member, and if the Chief Justice of the Federal Court thinks it appropriate.

[29] I note that in Clarke and a second related matter involving a State magistrate, the process of resolving the Statement of Agreed Facts and the questions of law to be referred to the Federal Court took more than 10 months.

[31] [2009] HCA 33; (2009) 240 CLR 272 at [32].

[32] [1995] HCA 71; (1995) 184 CLR 188.

[33] [1995] HCA 71; (1995) 184 CLR 188 at 233, per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ.

[34] In exhibit A4 at page 3, Mr Walsh suggested four criteria, namely an identifiable and individual contract of employment with a fixed time element; the ability to terminate and the terms and conditions individually negotiated and agreed; the expertise, judgement and accountability required at the "higher level"; and proximity to the execution of constitutional powers and functions of the State government, including reporting relationship with Ministers.

[39] [1992] HCA 45; (1992) 177 CLR 106 at 137-128.

[40] [1992] HCA 45; (1992) 177 CLR 106 at 230.

[41] See generally Selway, B, The Constitution of South Australia (Federation Press, 1997) at [6.4.6] and [4.10.4].

[42] Exhibit R1, T14, pages 125 and 126, and pages 135-137. The dates during which Mr Walsh occupied this position are not clear from the papers before me; he may have continued in this position until he was appointed to his next position, as Executive Director, Planning SA with effect from 8 November 2003 (see Exhibit R1, T12, pages 128-130).

[47] Exhibit R1, T12, pages 91 and 119, and Exhibit A1, Attachment 5.

[53] Exhibit A1, Attachment 6. The portfolios were Minister for Transport, Minister for the Status of Women, Minister for the Southern Suburbs, Minister for the Arts, Minister for Urban Development and Planning, and Minister for Local Government.

[54] Transcript, 13.06.12, page 27, lines 8 and 9.

[55] Transcript, 13.06.12, page 27, lines 36 - 37.