State Enterprises (Commonwealth Tax Equivalents) Act 1996

Mechanically, the State Enterprises (Commonwealth Tax Equivalents) Act 1996 creates a statutory obligation, in Western Australia, for specified State enterprises to pay a tax-equivalent amount to the Treasurer in respect of financial years when those enterprises are exempt from particular Commonwealth taxes. The obligation is set out in s 5: a State enterprise to which the section applies “is to pay to the Treasurer a tax equivalent sum in respect of each financial year” (s 5(1)), and that sum “is to equal the amount of any income tax or sales tax for which the enterprise would have been liable … if the enterprise were not exempt from that tax under the relevant Commonwealth Act” (s 5(2)). The Act therefore converts a hypothetical Commonwealth tax liability into a real State payable for prescribed entities.

The Act confines application of that obligation in two principal ways. First, whether a specific State enterprise is subject to s 5 depends on prescription by regulation (s 6(1)(a)). Second, the obligation applies only for financial years during which the enterprise is exempt from the relevant Commonwealth law (s 6(1)(b)). The Treasurer is vested with administrative power to determine assessment principles, who will make the assessments and payment timings (s 7(1)(a)-(c)), and to give directions and rulings to give effect to s 5 (s 7(2)). State enterprises must comply with determinations, directions and rulings that apply to them (s 7(3)). The Governor may make regulations to prescribe matters required or convenient for giving effect to the Act (s 8).

The long title states the Act’s objective as authorising imposition on State enterprises of liability to pay amounts equivalent to Commonwealth income and sales tax from which they are exempt, and to repeal the Public Authorities (Contributions) Act 1974 (long title; s 9(1)). The Act implements a regime in which the State fixes (by regulation and Treasurer determination) which State enterprises pay, the rules for assessing the amount payable equal to the notional Commonwealth tax, and the mechanics of collection. The Act contains transitional and specific transfer provisions relating to two water boards (s 9(2)(a)-(c)) and includes commencement by proclamation (s 2) and transitional treatment for the 1996/97 financial year (s 3).

Definitions and scope

• “State enterprise” is a defined term in s 4. It means either a company or a body established by a written law that is, for the time being, a State/Territory body (and not an excluded STB) under the Commonwealth statutory schemes mentioned: Division 1AB of Part III of the Income Tax Assessment Act 1936 (ITAA 1936) or s 3D of the Sales Tax (Exemptions and Classifications) Act 1992 (s 4). The Act therefore adopts the Commonwealth’s classification mechanism rather than creating a distinct State category.
• “Income tax” and “sales tax” carry the narrow statutory references given in s 4: income tax is the tax levied under s 17 ITAA 1936; sales tax is the tax payable under the Sales Tax Assessment Act 1992 (s 4).

Principal obligation

• The central operative rule is in s 5: a tax-equivalent sum equal to the income or sales tax the enterprise would have paid if not Commonwealth-exempt (s 5(2)). Payments are made to the Treasurer (s 5(1)).

Prescription and temporal limitation

• The obligation in s 5 applies only to enterprises “prescribed by the regulations for the purposes of that section” (s 6(1)(a)). The obligation applies only during financial years when the enterprise is Commonwealth-exempt (s 6(1)(b)). Regulations may make transitional provisions connected to prescription or revocation (s 6(2)).

Administrative architecture

• The Treasurer determines the assessment principles and rules, who makes the assessments, and payment timing (s 7(1)(a)-(c)). The Treasurer may issue directions and rulings to implement s 5 (s 7(2)). A State enterprise must comply with any applicable determination, direction or ruling (s 7(3)). Section 7 operates subject to any regulations under s 6(2) (s 7(4)).

Regulatory power and commencement

• The Governor may make regulations for any matter required or permitted by the Act or necessary or convenient to give effect to it (s 8). The Act commences by proclamation (s 2), with express transitional application to the 1996/97 financial year (s 3).

Transitional and repeal

• The Act repeals the Public Authorities (Contributions) Act 1974 (s 9(1)), and contains specific transitional transfer obligations for the Bunbury and Busselton Water Boards with specified timing and percentages of revenue (s 9(2)(a)-(b)) and continued application of certain provisions of the repealed Act for those purposes (s 9(2)(c)). The compilation table and notes show later reprints and that s 10 has been omitted (notes).

Entities potentially affected

• State enterprises as defined in s 4: those that are either a company or a body established by written law and that are recognised under the Commonwealth’s State/Territory body classification in Division 1AB of Part III of the ITAA 1936 or s 3D of the Sales Tax (Exemptions and Classifications) Act 1992. The Act therefore targets entities that are already treated as State/Territory bodies for Commonwealth tax-exemption purposes; only those entities can be subject to the Act’s obligation.

Who decides whether an entity is covered

• Two separate mechanisms determine practical coverage. The Commonwealth statutes determine the State/Territory body status used in the Act’s definition of “State enterprise” (s 4). Separately, the Act requires regulations to prescribe which State enterprises are to be subject to s 5 (s 6(1)(a)). As a result, an entity must meet the Commonwealth statutory classification and must be prescribed in regulations to be obliged to pay the tax-equivalent sum.

State decision-makers

• The Treasurer controls the detailed assessment framework and enforcement mechanics: determining principles, who assesses, and payment timing (s 7(1)). The Governor makes regulations (s 8) that may prescribe which enterprises are liable, transitional arrangements, and any other matters necessary or convenient to give effect to the Act.

Financial stakeholders

• The Treasurer/Consolidated Account is the recipient of tax-equivalent sums (s 5(1)). The Act therefore reallocates cash flows that otherwise would not be payable to the State if the enterprises remained Commonwealth-exempt.

Entities not directly affected

• The Act only applies to entities that are both Commonwealth-recognised State/Territory bodies and prescribed by State regulations. Entities that are not companies or bodies established by written law, or that are not STBs under the Commonwealth Acts, are outside the statutory definition (s 4) and therefore not covered. The Act also applies only during financial years when the entity is Commonwealth-exempt for income or sales tax (s 6(1)(b)), so entities losing the Commonwealth exemption in a year would not be subject for that year under this statutory scheme.

Transitionally affected entities

• The Bunbury Water Board and the Busselton Water Board are specifically addressed by s 9(2)(a)-(b): they must transfer specified percentages of revenue to the Consolidated Account by stated deadlines. For those two entities, the provisions of the repealed Public Authorities (Contributions) Act 1974 specified in s 9(2)(c) continue to apply for the purposes of those transfers.

Primary duty to pay

• Duty to pay tax-equivalent sums: s 5 requires each State enterprise to which the section applies to “pay to the Treasurer a tax equivalent sum in respect of each financial year” (s 5(1)). The amount is defined as the income tax or sales tax the enterprise would have been liable for if it were not Commonwealth-exempt (s 5(2)).

Triggering events for duty

• Two triggers limit the duty. First, the enterprise must be prescribed in regulations for s 5 to apply to it (s 6(1)(a)). Second, the duty applies only for financial years during which the enterprise is exempt from the relevant Commonwealth law (s 6(1)(b)). Regulations may modify operation in respect of a particular enterprise (s 3(2)) or make transitional provisions when an enterprise is prescribed or revocation occurs (s 6(2)).

Obligations to comply with administrative instruments

• The Treasurer is empowered to set assessment “principles and rules”, designate who will make assessments, and set payment times (s 7(1)(a)-(c)). The Treasurer may give directions and rulings to effect s 5 (s 7(2)). A State enterprise must comply with any determination, direction or ruling that applies to it (s 7(3)). That creates a statutory duty to follow the Treasurer’s administrative instruments once they apply.

Regulatory compliance

• The Governor may make regulations for any matter required or convenient to give effect to the Act (s 8). The regulations will determine which enterprises are prescribed and can therefore narrow or extend who owes amounts under s 5 (s 6(1)(a)). Regulations may contain transitional and procedural detail for assessment and payment (s 6(2), s 8).

Defined entitlements and boundaries

• The Act does not expressly create entitlements to refunds or offsets in respect of overpayment, nor does it set out dispute-resolution procedures. The Act confers power on the Treasurer to set the principles and rules for assessment (s 7(1)(a)), which is the mechanism by which details of measurement, offsetting, or rebates could be specified. Any rights to challenge assessments, obtain credits or secure timing relief would therefore depend on the content of Treasurer determinations and regulations made under s 8 and s 6(2).

Transitional obligations

• Section 3 addresses the 1996/97 financial year by providing that, if the obligation in s 5 applied when the Act commenced for the year beginning 1 July 1996, application extends to the period from 30 June 1996 to the commencement of the Act (s 3(1)). Regulations under s 6(2) may vary this operation for a particular State enterprise (s 3(2)). Section 9(2) imposes a one-off obligation on two water boards to transfer specified percentages of revenue to the Consolidated Account by specified dates (s 9(2)(a)-(b)), and preserves certain provisions of the repealed Act for those purposes (s 9(2)(c)).

Statutory text and omissions

• The Act requires compliance with Treasurer determinations, directions and rulings (s 7(3)), and the Governor may make regulations necessary to give effect to the Act (s 8). However, the printed text of the Act does not itself specify any penalties, sanctions, interest charges, or enforcement mechanisms for non-payment or non-compliance with s 5. The Act also does not elaborate administrative enforcement tools such as liens, garnishee orders, or enforcement proceedings. The only statutory enforcement mandate in the text is the compliance obligation in s 7(3).

Delegated enforcement possibilities

• Because s 8 allows regulations “prescribing all matters that are required or permitted by this Act to be prescribed, or are necessary or convenient to be prescribed for giving effect to this Act”, the Act contemplates that regulations may specify enforcement measures. Similarly, s 7(1) permits the Treasurer to determine who assesses liabilities and when payments are due, which implicitly gives the Treasurer the capacity to structure administrative collection frameworks, including appointing assessors and setting payment timetables. Neither s 7 nor s 8, however, creates explicit enforcement penalties in the Act text.

Probable enforcement pathways available under the Act’s architecture

• The Act centralises assessment and collection direction in the Treasurer and the Governor’s regulations. Enforcement therefore would occur, if at all, through:
  • Treasurer determinations that set payment dates and assessment processes (s 7(1)(a)-(c)), enabling administrative follow-up actions by the agencies designated to assess or collect.
  • Regulations under s 8 which may prescribe offences, penalties, interest, recovery procedures and transitional enforcement measures (s 6(2) explicitly contemplates transitional provisions linked to prescription or revocation). Because the Act defers these details to subordinate instruments, enforcement as a matter of statute depends on those instruments being made.

Legal consequences of non-compliance within the Act

• The Act requires compliance with applicable determinations, directions and rulings (s 7(3)). In the absence of penalties in the Act itself, non-compliance could be pursued by the State under general law remedies available to the Crown (contractual or equitable remedies) or under any enforcement provisions enacted under the regulation-making power. The Act’s text does not enumerate such remedies or direct particular procedural steps.

Dependence on Commonwealth tax classification

• The Act’s definition of “State enterprise” is expressly tied to Commonwealth statutory definitions: it requires that the entity be a State/Territory body “under Division 1AB of Part III of the Income Tax Assessment Act 1936 of the Commonwealth or section 3D of the Sales Tax (Exemptions and Classifications) Act 1992 of the Commonwealth” (s 4). The Act therefore imports Commonwealth classifications to determine who may be subject to State tax-equivalent obligations. The Act does not redefine STB status; it relies on Commonwealth law to identify candidate entities.

Reference to Commonwealth tax measures

• The Act defines “income tax” and “sales tax” by reference to specific Commonwealth statutes (s 4). Section 5 makes the State payable equivalent to the amount of income tax or sales tax the enterprise would have been liable for “if the enterprise were not exempt from that tax under the relevant Commonwealth Act” (s 5(2)). That links the quantum of the State obligation to hypothetical Commonwealth liabilities, thereby tying measurement to Commonwealth tax law principles and potentially to Commonwealth interpretations of taxable bases and rates.

State regulations and Treasurer determinations

• The Act leaves operational detail to State subordinate instruments. Regulations under s 8 and Treasurer determinations and rulings under s 7 will interact with Commonwealth law to the extent they set assessment principles that calculate the notional Commonwealth tax. For example, the Treasurer’s principles and rules may need to adopt or reference Commonwealth definitions of taxable income, allowable deductions, or sales tax incidence, because the Act measures the State payable by reference to the Commonwealth liability the enterprise would have had.

Repeal of prior State Act and transitional interaction

• Section 9 repeals the Public Authorities (Contributions) Act 1974 and preserves certain provisions of that Act for specific transfers by two water boards (s 9(2)(c)). That creates a transitional legal relationship between the new tax-equivalents regime and the prior contributions regime: for those two transfers, the repealed Act’s provisions continue to apply to the extent stated. The Act therefore displaces the former statutory framework, except as expressly preserved, and interacts with the law of the earlier Act for particular legacy payments.

Administrative law and review

Primary enactment and commencement

• The Act is chaptered as No. 55 of 1996 and received assent on 11 November 1996 (compilation table). Section 9 and s 10 are to be taken as having come into operation on 1 July 1996 (see s 2 and s 3(3) in the compilation table), with the balance of the Act commencing on 7 June 1997 (see s 2 and Gazette reference in the compilation table).

Later amendment and reprint

• The long title was amended by Financial Legislation Amendment and Repeal Act 2006, No. 77 of 2006 s 4 (compilation notes). The compilation table records Reprint 1 as at 6 August 2004 and notes the 2006 amendment with commencement on 1 February 2007 for that amending provision.

Omissions and reprints

• Section 10 is omitted under the Reprints Act 1984 s 7(4)(e) (text note). The compilation notes state that the present text is a compilation that includes amendments made by other written laws referred to in the table, and that the table contains reprint information.

Transitional provisions and retrospective commencement

• Section 3 provides that if the s 5 obligation applied to a State enterprise in respect of the financial year beginning 1 July 1996 when the Act commenced, the application extends to the period from 30 June 1996 to the commencement of the Act (s 3(1)). Regulations under s 6(2) may vary that operation for a particular State enterprise (s 3(2)). Section 3(3) declares that when the Act commences, the repeal and amendments made by ss 9 and 10 are to be taken to have come into operation on 1 July 1996 (s 3(3)). The compilation table reflects this for ss 9 and 10.

Repeal of predecessor and transitional carry-over

• Section 9 repealed the Public Authorities (Contributions) Act 1974 (s 9(1)). Despite the repeal, s 9(2) imposes specified legacy transfer obligations on the Bunbury and Busselton Water Boards with deadlines and percentages, and preserves s 3(2) and (3) of the repealed Act for the purposes of those transfers (s 9(2)(c)). The compilation table shows amendment by the Financial Legislation Amendment and Repeal Act 2006 s 4; the notes indicate certain amending provisions affecting other Acts have been omitted from the reprint under the Reprints Act.

What the current text reflects

• The Act as compiled includes the 2006 long-title amendment and reprint updates as noted. Practitioners should consult the current reprint and any regulations or Treasurer determinations issued subsequently, because the Act relies on those subordinate instruments for operational details and some of the transitional effects noted above depend on the regulations.

Express absence of litigation references in the source

• The printed text and compilation notes supplied do not cite or record any litigation or judicial decisions that interpret or apply this Act. No cases are named or discussed in the supplied Act text.

Potential issues likely to generate disputes, grounded in the Act’s text

• Coverage disputes: Because the Act’s definition of “State enterprise” depends on the Commonwealth’s STB classification under Division 1AB of Part III of the ITAA 1936 and s 3D of the Sales Tax Act (s 4), disputes could arise over whether a particular entity is, for Commonwealth purposes, a State/Territory body. Any disagreement over Commonwealth classification might be litigated in proceedings concerning that Commonwealth classification, and those outcomes would affect whether the entity falls within this Act’s definition. The Act itself does not create a separate State test; it adopts the Commonwealth definition (s 4).

• Prescription and regulation disputes: Section 6(1)(a) makes application of s 5 contingent on prescription by regulations. Litigation could arise about whether a regulation validly prescribes an entity, whether the regulation was validly made under s 8, or whether regulations purporting to prescribe an entity were properly enacted given the Governor’s powers. The Act reserves to regulations the specification of who is captured (s 6(1)(a)) and transitional arrangements (s 6(2)).

• Assessment and administrative law challenges: The Treasurer is empowered to determine the “principles and rules” for assessment, who will make assessments, and payment times (s 7(1)(a)-(c)), and to give directions and rulings (s 7(2)). Disputes could arise about the lawfulness of a Treasurer determination, whether it is ultra vires, whether it was made fairly, or whether it conforms to s 5’s requirement that the tax-equivalent equals the income or sales tax the enterprise “would have been liable” for. Judicial review on administrative law grounds would be the route for such challenges, but the Act itself does not specify a particular internal appeal mechanism.

• Measurement and calculation issues: Because the payable amount is defined by reference to a hypothetical Commonwealth tax liability (s 5(2)), litigation could arise over how to calculate the notional Commonwealth liability. Questions could include whether particular items are deductible for the hypothetical Commonwealth calculation, the correct apportionment between State and Commonwealth elements, and whether the Treasurer’s principles correctly adopt Commonwealth approaches.

Reliance on Commonwealth classifications

• The Act’s definition of “State enterprise” is tied to Commonwealth statutory classifications (s 4). An entity’s coverage depends on external Commonwealth determinations. Practitioners should not assume that all State-owned companies or statutory bodies are automatically “State enterprises” under this Act; the enterprise must be a State/Territory body under the Commonwealth Acts cited. The Act does not create its own independent classification.

Regulation-based coverage

• The duty to pay arises only if the enterprise is prescribed by regulation for the purposes of s 5 (s 6(1)(a)). That means an enterprise that otherwise meets the statutory definition may still escape liability until and unless the Governor makes a regulation to prescribe it. Conversely, prescription by regulation can bring an enterprise within scope regardless of expectations. Always check the current regulations under s 8.

Temporal limitation and retrospective application

• The obligation applies only for financial years during which the enterprise is Commonwealth-exempt (s 6(1)(b)). However, s 3 provides for extension into the period from 30 June 1996 to commencement if the obligation applied at commencement for the 1996/97 year (s 3(1)). Regulations may vary that operation for particular enterprises (s 3(2)). Do not assume that coverage neatly aligns with fiscal-year boundaries without checking for regulatory or Treasurer determinations that may adjust timing.

Treasurer’s broad administrative discretion

• The Treasurer sets assessment principles and rules, designates assessors, and fixes payment times (s 7(1)). The Treasurer can issue directions and rulings (s 7(2)). Once issued, enterprises must comply with those instruments (s 7(3)). That centralisation means substantial administrative detail will be in Treasurer instruments rather than the Act. If those instruments are vague, enforcement and compliance expectations may be uncertain until the Treasurer clarifies them.

No express penalties or appeal mechanisms in the Act

• The Act does not itself provide penalties, interest, or express appeal routes against assessments. Enforcement and remedies may be placed in regulations under s 8 or in Treasurer determinations. Do not assume statutory penalty provisions exist; check subordinate instruments.

Calculation tied to hypothetical Commonwealth liability

Step 1 , determine whether you are a “State enterprise”

• Check s 4: you must be either a company or a body established by written law, and you must be for the time being a State/Territory body under Division 1AB of Part III of the ITAA 1936 or s 3D of the Sales Tax Act 1992. Coverage depends on Commonwealth classification, so obtain documentary confirmation of STB status under the Commonwealth Acts. The Act imports the Commonwealth test; it does not create an independent State test (s 4).

Step 2 , check regulatory prescription

• Confirm whether your entity has been prescribed under regulations for the purposes of s 5 (s 6(1)(a)). The duty to pay arises only if the regulations have specifically prescribed the State enterprise. Locate and review regulations made under s 8 to see if prescription, transitional modifications, or revocation provisions apply to your entity (s 6(2)).

Step 3 , identify the relevant financial years

• The obligation applies in respect of financial years during which the enterprise is exempt from income tax or sales tax under the relevant Commonwealth law (s 6(1)(b)). Determine which financial years you are Commonwealth-exempt and whether the Treasurer or regulations have altered the temporal operation (see s 3 for special 1996/97 treatment and s 6(2) for transitional rules).

Step 4 , obtain Treasurer determinations and rulings

• The Treasurer is to determine assessment principles and rules, who makes assessments, and payment times (s 7(1)(a)-(c)). The Treasurer may also issue directions and rulings (s 7(2)). Obtain copies of all applicable Treasurer determinations, directions and rulings that apply to your enterprise. The Act makes compliance with these instruments mandatory (s 7(3)).

Step 5 , implement accounting and tax-equivalent calculation systems

• Because the tax-equivalent sum is the amount of income tax or sales tax the enterprise would have been liable for under Commonwealth law (s 5(2)), align internal accounting and tax reporting to be able to calculate that hypothetical Commonwealth liability in accordance with the Treasurer’s principles and rules. Ensure records reflect the items necessary for the Treasurer’s assessment rules and that they capture the bases for deductions, taxable income and sales tax measures that would apply under Commonwealth law.

Step 6 , comply with payment timing and assessment procedures