Commissioner of Taxation v Clyne [1958] HCA 10

COMMISSIONER OF TAXATION OF THE

TPRENR Pag per:

HIGH COURT (1957-1

[HIGH COURT OF AUSTRALIA.)

COMMONWEALTH OF AUSTRALIA \

AND

CLYNE. - 3 : 2 5 7 ; Derenpanr.

H.C. or A. Income Tax (Cth.)—Provisional tax and contribution—Whether within power

1957-1958. Ww 1957,

Sypyry,

Nov. 12, 13, 14, 15;

1958, Apr. 2. Dixon C.J.,

McTiernan, Williams,

'Taylor JJ.

make laws with respect to taxation—Not separate tax but liability ancillary income tax and social services contribution—Constitutional validity—Ma other than taxation—Whether combined in statute imposing taxation—Ct of provisional tax not acquisition of property on unjust terms—Prescribed Zone allowances—Discrimination between States or parts of States—Validity 9 section introducing discriminatory provision—Invalid ab initio—Never part of Principal Act—Preference to one State or part thereof over another or part thereof—The Constitution (63 & 64 Vict., c. 12). ss. 51 (1i.) (wei. 55 99—Income Tax and Social Services Contributions (Individuals) Act 1956 8. 12—Income Tax and Social Services Contribution Assessment Act 1936-1956 $8. 79a, 22lya.

The system of provisional tax and contribution as prescribed by Div. Pt. VI of the Income Tax and Social Services Contribution Assessment A 1936-1956 is within the power conferred on the Parliament of the wealth by s. 51 (ii.) of the Constitution.

So held by the whole Court.

Per Dixon C.J., McTiernan, Williams, Kitto and Taylor JJ.: The liabi pay provisional tax and contribution is not a liability to a separate and d tax but is ancillary to the liability to income tax and social services bution required by s. 17 of the Assessment Act to be levied and paid upon th taxable income derived during the year of income by any person. The p of the provisional tax and contribution provisions is not simply to enst payment of tax but to bring the discharge of the burden of tax into close temporal relation with the accrual of the income upon which the tax is levie The execution of such a policy is fairly within the power in s. 51 (ii Constitution even if it be described as incidental. The main purpose of th power is expressed by the words " with respect to taxation ". It gives a leg lative authority which includes prima facie whatever is reasonably at properly incidental to the effectuation of the purpose. 'There is no reason. the means described in Div. 3 of Pt. VI for giving effect to the principle not be regarded as proper for the effectuation of the power to make laws it respect to taxation.

00 C.L.R.] OF AUSTRALIA.

In imposing provisional tax s. 12 of the Income Tax and Social Services H.C. oF A.

Contribution (Individuals) Act 1956 deals with a liability incidental to the liability to the principal tax and is therefore a provision in a law dealing " only with the imposition of taxation" within the meaning of the first paragraph of s. 55 of the Constitution.

The words "imposition of taxation" are not to be construed narrowly in the sense that there must be a distinction between provisions directed to the collection of taxation and the actual grant or imposition of the tax—per Dizon C.5., McTiernan, Williams, Kitto and Taylor IJ.

Observations of Isaacs J. in Federal Commissioner of Taxation v. Munro (1926) 38 C.L.R. 153, at pp. 185-193 commented upon.

Division 3, Pt. VI, of the Income Tax and Social Services Contribution Assess- ment Act 1936-1956 is outside s. 55.

So held by the whole Court.

Difficulties, in applying s. 99 of the Constitution, in appreciating the supposed distinction between the selection by an enactment of an area in fact forming part of a State for the bestowal of a preference upon the area and the selection of the same area for the same purpose "' as part of the State", discussed by Dizon C.3.

Upon the assumption that s. 794 of the Assessment Act introduced therein by Act No. 4 of 1945, s. 11, is inconsistent with the requirements expressed in ss. 51 (ii.) and 99 of the Constitution, such section was invalid ab initio and never became a valid part of such Act.

Section 4 of the Income Tax and Social Services Contribution (Individuals) Act 1956, in providing that the Assessment Act is incorporated in and read as 'one with that Act, means that only so much of the Assessment Act is so incor- porated as has been validly enacted by the legislature in a lawful exercise of its power. Therefore, upon the assumption made, s. 794 does not become incorporated therein and accordingly the validity of the Income Tax and Social Services Contribution Act is not affected.

The legislative requirement of the payment of provisional tax and contri- bution does not offend against s. 51 (xxxi.) of the Constitution as representing an acquisition of property on terms not just.

So held by the whole Court.

Per Webb J.: (1) Section 794 of the Income Tax and Social Services Contri- tution Assessment Act 1936-1956 is not invalid as discriminating between States or part of States contrary to s. 51 (ii.) or as constituting a preference contrary to s. 99 of the Constitution.

(2) If, after incorporation in the Income Tax and Social Services Contribu- tion (Individuals) Act, s. 794 enacting the concessions, or the provisional tax independently of those concessions, were found to be invalid, then, assuming that an invalid section could effectively be so incorporated there is no reason why the remaining sections should not be sustained as valid. There is no such interdependence between the one group of sections and the other that the excision of the one would destroy any scheme of income tax embodied in this legislation,

Decision of the majority in Blliott v. The Commonwealth (1936) 54 C.L.R. 657 affirmed by McTiernan J.

1957-1958. we Commmts- SIONER OF Taxation 0. Cyxn.

248 HIGH COURT (1957-19

H.C. or A. Demurrer. 1957-1958. 'The Commissioner of Taxation of the Commonwealth of Aus ae. issued a writ of summons out of the High Court of Austra stoner or 4th September 1957 against one Peter Leopold Clyne seel ae. recover from the defendant the sum of £752. By his state: Cuvxe. claim delivered on the following day the commissioner alleged —— __ his claim was for £752 being money due and payable by the defend to the plaintiff under the Income Tax and Social Services Contrib (Individuals) Act 1956 and the Income Tax and Social Serv Contribution Assessment Act 1936-1956 for provisional tax and cor tribution within the meaning of the said Act lawfully ascertai respect of the income of the defendant for the year of income 30th June 1957. j On Ist October 1957 the commissioner at the request of th defendant but without admitting the necessity therefor supplied tl defendant with the following particulars and by agreement bety the parties such particulars were treated as part of the statement o claim :—(1.) The amount of £752, being provisional tax, was assessed but was ascertained on or about 9th April 1957 and w

notified on the notice of assessment of the income tax payable the defendant in respect of the income of the year ended 30th Jun 1956. (2.) The said amount was ascertained under the Income and Social Services Contribution Assessment Act, and, in particul

under Div. 3 Pt. VI of the Act. (3.) The tax claimed is " provisi tax " within the meaning of the said Act and as defined ins. 221YA

On 14th October 1957 the defendant demurred to the whol the statement of claim upon the grounds (inter alia) :—(1.) Income Tax and Social Services Contribution (Individuals) Act 19 is beyond the powers of the Parliament of the Commonwealth void for the reason—(a) the Income Tax and Social Services Conti tion (Individuals) Act 1956 incorporates and imposes inter provisional tax and contributions in accordance with the provis of the Income Tax and Social Services Contribution Assessment 1936-1956. (b) The Income Tax and Social Services Coni Assessment Act 1936-1956 discriminates between those parts 0 certain States of the Commonwealth which are described in Pts. I II of the second schedule to the said Act and those parts of the sd and other States of the Commonwealth which are not so desct as aforesaid. (c) The Income Tax and Social Services Contributi (Individuals) Act 1956 is therefore not a law made for the peace and good government of the Commonwealth with respect to ta: but so as not to discriminate between States or parts of within the meaning of s. 51 (ii) of the Commonwealth of A

0 CLR.) OF AUSTRALIA.

"Social Services Contribution (Individuals) Act 1956 and the Income Tax and Social Services Contribution Assessment Act 1936-1956 are and each of them is beyond the powers of the Parliament of the Commonwealth and void for the reason that (a) the Income Tax and Social Services Contribution (Individuals) Act 1956 incorporates and imposes inter alia provisional tax and contributions in accordance with the provisions of the Income Tax and Social Services Contribution Assessment Act 1936-1956. (b) The Income Tax and Social Services Contribution Assessment Act 1936-1956 gives preference to those "parts of certain States of the Commonwealth which are described in Pts. I and II of the second schedule to the said Act over those of the said and other States of the Commonwealth which are

not so described as aforesaid. (c) The Income Tax and Social Services Contribution (Individuals) Act 1956 and the Income Tax and Social "Services Contributions Assessment Act 1936-1956 are and each of them -jsa law of revenue within the meaning of s. 99 of the Commonwealth - of Australia Constitution Act 1900 (as amended). (d) The Income Tax and Social Services Contribution (Individuals) Act 1956 and the Income Tax and Social Services Contribution Assessment Act 1936- 1956 therefore are and each of them is a law of revenue giving pre- "ference to one State or a part thereof over another State or part - thereof contrary to the provisions of s. 99 of the Commonwealth of Australia Constitution Act 1900 (as amended). (3.) Section 12 of the Income Tax and Social Services Contribution (Individuals) Act 1956 is beyond the powers of the Parliament of the Commonwealth and is void for the reason that it is not a law for the peace order and good government of the Commonwealth with respect to taxation within the meaning of s. 51 (ii.) of the Commonwealth of. Australia Constitution Act 1900 (as amended). (4.) Section 12 of the Income Tax and Social Services Contribution (Individuals) Act 1956 is beyond the powers of the Parliament of the Commonwealth and void and of no effect for the reason that (a) the provisions of the Income Tax and Social Services Contribution (Individuals) Act 1956 (other than s. 12 thereof) constitute a law imposing taxation within the meaning of 8. 55 of the Commonwealth of Australia Constitution Act 1900 (as amended). (b) The provisions of s. 12 of the said Act deal with a matter other than taxation contrary to the provisions of s. 55 of the Commonwealth of Australia Constitution Act 1900 (as amended). (5.) The Income Tax and Social Services Contribution (I 'ndividuals) Act 1956 is beyond the powers of the Parliament of the Common- wealth and is void for the reason that (a) the Income Tax and Social

Yonstitution Act 1900 (as amended). (2.) Lhe Income Tax and H. C. oF A.

1957-1958.

Commis- SIONER OF Taxation v CLYNE.

250 HIGH COURT {

H.C. or A. Services Contribution (Individuals) Act 1956 is a law imposing t 1957-1958. tion not being a law imposing duties of customs or of excise y ee the meaning of s. 55 of the Commonwealth of Australia Constit stonzr or Act 1900 (as amended). (b) The said Act deals with more th TaxaTI0N subject of taxation contrary to the provisions of s. 55 of the Co Cuvne. wealth of Australia Constitution Act 1900 (as amended). (6) T ~~ Income Tax and Social Services Contribution (Individuals) Act and particular s. 12 of the said Act and such provisions of the Ine

Tax and Social Services Assessment Act 1936-1956 as provide fe

wealth and are void for the reason that they constitute laws respect to the acquisition of property from a person for purposes in respect of which the said Parliament has power to mal laws and failed to provide for such acquisition on just te provided by s. 51 (xxxi.) of the Commonwealth of Australia Cons tion Act 1900 (as amended).

The demurrer came on for argument before the Full Court o High Court.

The defendant in person in support of the demurrer. The Incon Lax and Social Services Contribution (Individuals) Act 1956 (# Taxing Act) imposes a discriminatory tax in that it taxes in some areas of the Commonwealth more highly than persons other areas and therefore contravenes ss. 51 and 99 of the Constiti tion. [He referred to ss. 3-6 of the Taxing Act.] To see wh they are discriminatory the Taxing Act and the Income Tax an Social Services Contribution Assessment Act (the Assessment / must be taken as one piece of legislation. The necessity for looki at both Acts together is seen from W. R. Moran Pty. Ltd. y. Depu Federal Commissioner of Taxation (N.S.W.) (1), and R. v. Barger ( On the authorities there is discrimination if the legislature its discriminates as distinct from a situation where disci a results from inequality of circumstances or from the scheme legislative context in which that legislation occurs. The thing which the Constitution prohibits is a tax which brings uniformity and which offsets the inequalities of cireumstane saying that residence in a certain area may involve the payme less tax. If the taxing statute is discriminatory in what it order to bring about uniformity of result, then it is unconstituti There is discrimination within s. 51 (ii.) where one finds discriminati¢

(1) (1940) A.C. 838, at pp. 849, 853, (2) (1908) 6 C.L.R. 41, at p. 65.

54; (1940) 63 O.L.R. 338, at a pp. 341, 345, 346; (1939) 61 CLR. 735, at p. 783.

) CLR]

(1) (1906) A.C. 360, at p. 367.

2) tiie) 6 C.L.R., at pp. 66, 67, 69,

(8) (1940) A.C., at p. 856 ; (1940) 63 C.LR., at pp. 347, 348.

(4) (1908) 6 C.L.R. 41.

(5) (1908) 6 C.L.R., at pp. 49, 78, 80.

(6) ae 6C. , at pp. 106, 107,

(7) (1908) 6 C.LR., at pp. 131-133.

(8) (1923) 32 C.L.R. 68.

(9) (1923) 32 C.L.R., at pp. 71, 72.

(10) (1923) 32 C.L.R., at pp. 76, 77.

:"

OF AUSTRALIA.

(11) (1923) 32 C.L.R., at p. 78.

(12) (1923) 32 C.L.R., at p. 79.

(13) (1908) 6 C.L.R., at p. 110.

(14) (1908) 6 C.L.R., at pp. 106, 107.

(15) (1928) 41 C.L.R. 442, at pp. 455, 464.

(16) (1936) 54 O.L.R. 657.

(17) (1936) 54 C.L.R., at pp. 666, 667, 668, 672-674.

(18) (1936) 54 C.L.R., at p. 685 et seq.

(19) (1940) A.C., at pp. 856, 857; (1940) 63 C.L.R., at p. 348.

(20) (1908) 6 C.L.R., at pp. 78, 80.

If there is

{He referred to

The majority

different localities even if it cannot be said that the discrimi- H. ©. oF A. ition occurs because those localities are situated in different States. / referred to Colonial Sugar Refining Co. Ltd. v. Irving (1); R. v. Barger (2), and W. R. Moran Pty. Ltd. v. Deputy Federal Commissioner of Taxation (N.S.W.) (3).] In the light of these _ passages, s. 79A of the Assessment Act has introduced an element of discrimination within the prohibition of s. 51 (ii). discrimination between localities and such localities are situated in 'different States then s. 51 (ii.) is contravened. _R. v. Barger (4); per Griffiths C.J., Barton and O'Connor JJ. (5); _per Isaacs J. (6); per Higgins J. (7).] The majority view expressed "in the joint judgment is the one to be accepted. [He referred to Cameron v. Deputy Federal Commissioner of Taxation (8), per Knox C.J. (9); per Isaacs J. (10); per Higgins J. (11); per Rich J. (12); per Starke J. (12).] In that case the view of Isaacs J. in Barger's Case(13), not what he had earlier said in the same case (14), was adopted. [He referred to James v. The Commonwealth (15) ; Elliott vy. The Commonwealth (16); per Latham C.J. (17); per Evatt J. (18).] The view of Evatt J. in Elliott's Case (18) although a dissenting judgment states my argument and is respectfully adopted. The view of Latham C.J. in the passages cited should be departed from because it is founded on portion of the judgment of Isaacs J. in Barger's Case (14) which has never been generally adopted in this Court. [He referred to Moran's Case (19).] The passage cited supplies no support for the proposition that a statute is discrimina- tory only if the localities between which it discriminates are so treated because they are parts of different States. view in Barger's Case (20) should be adhered to. The prohibition against discrimination in s. 51 (ii.) must because of s. 51 (iii.) mean something different from a requirement of uniformity. If under 8. 51 (ii.) there is lack of uniformity the discrimen must not depend on locality or residence in different parts of the Commonwealth. Section 79A offends in this regard and is consequently invalid. It is immaterial whether the discrimination is in the form of an

1957-1958. (Si

Commis- SIONER OF 'TAXATION

v.

CiYNE.

HO. or A. 1957-1958. =

Commas- SIONER OF 'Taxation

v. CLYNE.

HIGH COURT (1957-1

exemption or deduction or difference in tax which is imp 0 Section 79A being invalid severability is not here possible, be after excision there would not be left an Act which subs' represents the intention of Parliament and the whole Act is stitutional either in being outside s. 51 (ii.) or in contravening Ifs. 79A has had no legal basis since 1945 then each year sine time Parliament has imposed a Taxing Act under a misapprehi as to the amount of tax which it was going to collect, and thea it was going to collect was related to the amount which it n collect. One cannot assume that had Parliament known that deduction granted was not legally permissible it would have impo the rate in fact imposed. The Court will not save parts of the t legislation if that has the effect of introducing a tax burden dif ent from that intended by Parliament. [He referred to Barger (1).] The present argument goes beyond the validity 8. 11 of Act No. 4 of 1945 considered alone. One cannot say 8. 1] is invalid as being discriminatory because s. 11 standing ak is not discriminatory. What is discriminatory is the As: Act looked at as a whole after the introduction of s. 11. Itisal stage that the problem of severability arises. [He refe Deputy Federal Commissioner of Taxation (N.S.W.) v. W. R. Pty. Ltd. (2).] In re-enacting the Taxing Act each year Parl cannot be said to intend that its taxing scheme shall be iny only on so many parts of the Assessment Act as are valid, according to the text of the Taxing Act as it stands. [He th referred on the question of provisional tax to the Taxing Act 19 ss. 4, 5, 12, and to the relevant sections of Pt. VI Div. 3 of t Assessment Act.| Provisional tax is either a tax or not a tax. submitted that whilst it bears some it does not bear all the hallma ofatax. A tax has to be something in the nature of a finale and not merely a loan or a temporary payout. [He refe The Commonwealth v. Colonial Combing, Spinning and We Co. Lid. (3), and Parton v. Milk Board (Vict.) (4).] The reqi of a lodgment of money to ensure that when tax is imposed it paid is not a tax. Similarly the provisions relating to ascertainment in place of assessment and the absence of a object to or appeal against it show that this cannot be int be a tax. If provisional tax is not a tax then it is o incidental or marginal power of taxation created either by impl tion from s. 51 (ii.) or by reference to s, 51 (xxix.). Notwithstan

(1) (1908) 6C.L.R., at pp. 78, 80, (3) (1922) 31 C.L.R. 421, at p. 4

81, lll. (4) (1949) 80 C.L.R. 229, (2) (1939) 61 C.L.R. 735, at pp. 780, ee

807, 808.

C.L.B.] OF AUSTRALIA.

properly incidental to taxation merely because it renders easier he collection of tax when imposed. Moore's Case (1) is distin- guishable because the liability to pay tax there imposed arose only ™ as the money was flowing in. There is a liability to pay provisional mi tax even if no money has come in between Ist July and March in any year. [He referred to Moore's Case (2).] The taxpayer can be "srequired to pay more by way of provisional tax than he will ulti- mately have to pay for income tax. At the root of Moore's Case (1) is the view that whatever is done to facilitate the collection of tax when it has been imposed is within the incidental power but the majority opinion of this Court in State of Victoria v. The Common- = wealth (3) illustrates a departure from that view. If provisional tax is not a tax, even if it be properly within what is incidental to taxation, then it is not sufficiently incidental to the imposition of 'income tax to escape the prohibition of the first part of s. 55 of the Constitution. A law within s. 55 must deal only with the imposition ., of taxation but matters incidental thereto are not thereby excluded. ) There is however a crucial difference between what is incidental to taxation so as to fall within s. 51 (ii.) and what is incidental to the imposition of taxation so as to save it from the first part of s. 55. (He referred to Federal Commissioner of Taxation v. Munro (4), _ per Isaacs J. (5).] Provisional taxation is not within the passages cited as linked in any sufficient way with the imposition of taxation. The Taxing Act 1956 deals in s. 12 with a matter other than the imposition of taxation and therefore s. 12 is by virtue of s. 55 of no effect. The only meaning which can be given to the concept of imposing taxation is to create a liability to pay tax and it is not incidental to the creation of a liability to provide for its discharge. __ [Taytor J. So far as your quotation from the judgment of - Isaacs J. in Munro's Case (5) is concerned the proposition there enunciated was not concurred in by any other member of the Court.] No, but I adopt what was there said as my argument. Upon the assumption that provisional tax is a tax, the Tawing Act 1956 imposes tax on two subject matters and contravenes therefore the Second part of s. 55. The two subject matters are income so far as . 5 of such Act is concerned and future or estimated income so far a8 s. 12 is concerned. [He referred to Osborne v. The Common- wealth (6); Morgan v. Deputy Federal Commissioner of Land Tax (V.S.W.) (7); Waterhouse v. Deputy Federal Commissioner of Land

(1) (1951) 82 C.L.R. 547. (5) (1926) 380.L.R., at pp. 186, 187, (2) (1951) 82 C.L.R., at pp. 563, 581. 188, 191. (3) (1957) 99 C.L.R.'575. (6) (1911) 12 C.L.R. 321.

(4) (1926) 38 C.L.R. 153. (7) (1912) 15 C.L.R. 661.

y. The Commonwealth (1) it is not true to say that something 4. C. oF A.

1957-1958. Ww

Conmris- SIONER OF TaxaTIoN

v.

Cuxne.

H.C. oF A.

1957-1958. eae

Commis- SIONER OF Taxation

v.

CLyNE.

HIGH COURT

Taa (S.A.) (1); Attorney-General for Queensland v. Attorney-Ge for the Commonwealth (2); National Trustees, Executors and Age Co. of Australasia Ltd. v. Federal Commissioner of Taxation | Harding v. Federal Commissioner of Taxation (4) ; Cornell v. D 7 Federal Commissioner of Taxation (S.A.) (5); British Imperial Co. Ltd. v. Federal Commissioner of Taxation (6) ; Munro's Case Colonial Gas Association Ltd. v. Federal Commissioner of Tasat (8); Jolly v. Federal Commissioner of Taxation (9), and Federal Commissioner of Taxation (10).] Taking without qualifi

the doctrine to be extracted from the cases cited that a broad int pretation of the word " income " is to be given when one says th the subject matter of the Income Tax Acts is income, nevertheles s. 12 imposes a tax, it cannot be said that it imposes a tax on incor because there is at the time of the imposition no income on which tax can be so paid. Something coming into existence in the f cannot be said to be within the subject matter of income. even if the legislation is within power and consistent with s. involves an acquisition of property on unjust terms contra s. 51 (xxxi.) of the Constitution. The mere fact that legislatio falls within s. 51 (ii.) or some other paragraph of that section d not prevent it from contravening s. 5] (xxxi.). '"" Money " is prope

become due and no interest is paid in respect thereof and tl remainder are collected and after some portion thereof is found n to be due at all it is refunded again without any allowance by w of interest. In addition the statute provides for the perman retention of some of the taxpayer's money in that additional can be imposed as a sanction to ensure the payment of provisio tax. For those reasons the demurrer should be upheld.

W. J. V. Windeyer Q.C. (with him J. R. Gibson), for the plainti The defendant's contention based on discrimination in contra' of ss. 51 (ii.) and 99 of the Constitution would, if sound, im not only provisional tax but also the whole income tax, unless 8. 7! be severable. The defendant not being himself a resident of Zoné or Zone B is only indirectly interested in contending that s. 794 invalid. It only avails him if he can bring down the whole incon

(1) (1914) 17 C.L.R. 665. (6) (1925) 35 C.L.R. 422, at p. 434. (2) (1915) 20 C.L.R. 148. (7) (1926) 38 C.L.R. 153. : (3) (1916) 22 C.L.R. 367, at pp. 371, (8) (1934) 51 C.L.R. 172.

372, 378. (9) (1935) 53 C.L.R. 206, at p. 210. (4) (1917) 23 C.L.R. 119. (10) (1942) 66 C.L.R. 198, at pp. 22

(5) (1920) 29 C.L.R. 39. 225.

OF AUSTRALIA.

' tax scheme and get what temporary advantage he can from that. "The Tax Act and the Assessment Act are to be read together in the sense of Williams J.'s judgment in Cadbury, Fry & Pascall Pty. Lid. y. Federal Commissioner of Taxation (1). So read it emerges that 'the tax is a tax on income; it is a tax on whatever sum is the "taxable income and the taxable income is not taxed at different " sates in different places. The differentiation arises not in the tax but in the manner of calculating the taxable income. In arriving "at what is the taxable income a great variety of concessions and "deductions are allowable. They are a miscellany and it is not easy * perhaps to see any unity of principle running through them. Section ®79A allows a deduction because to live and work in the prescribed "zones involves disadvantages and hardships and the Court must assume that the legislature desired to encourage persons to live and work there as beneficial to the nation. The effect of the limitation inss, 51 (ii.) and 99 is summed up by Latham ©.J. in Elliott's Case (2). The origin of the limitations on power in both sections is in the historical fact of federation. They were apparently designed to "prevent any State being at the mercy of the new federal body—see "Quick & Garran: The Annotated Constitution of the Australian = Commonwealth, (1901) p. 550 ; Moran's Case (3). One must look to = see whether the challenged legislation be aimed at a State as a State * or at part of a State because it is part of a State, bearing in mind 'that the purpose of the constitutional limitation is the protection of + the constituent partners in a federation. That is the purpose of the » constitutional limitations, not to provide for equality throughout » Australia. Contrast the United States Constitution. All the judg- = ments in Elliott's Case (4) other than the dissenting judgment of » Evatt J. are consistent with this view. Dixon J. (as he then was)

dissented but we submit very largely because he took the view that

selection of the port was equivalent to selection of the State. Under » the United States Constitution duties imports and excises must be s uniform, for reasons stated by Story; and no doubt there were as a s matter of policy very sound reasons for it, but uniformity is not what , our Constitution requires in s. 51 (ii.)—cp. s. 51 (iii.): see Story: / Commentaries on the Constitution—Abridgement (1833) p. 352. There . is nothing in the United States Constitution exactly comparable to _ 8.51 (ii.) because of the requirement of uniformity of duties etc.

Nor is there anything comparable to s. 99 because the corresponding

section in the United States Constitution forbids a preference to the

_ (1) (1944) 70 C.L.R. 362, at p. 388. (3) (1940) A.C., at pp. 855, 856; (1940) _ (2) (1936) 54 C.L.R., at p. 675. 63 C.L.R., at pp. 347, 348. (4) (1936) 54 C.L.R. 657.

H. C. or A.

1957-1958. <7 Commis- SIONER OF TAXATION v. CiyNe.

H.C. or A. 1957-1958.

Ww

Commis- SIONER OF 'TaXaTION

v

Cryne.

HIGH COURT

ports of any State. In the early draft of our Constitution ' not " parts" did appear. See Willoughby on The Constit United States, 2nd ed. (1929) vol. 2, p. 700, par. 403. Whether t be a discrimination on the basis of States has been taken decisive matter in all judgments of the High Court except in tha the majority in Barger's Case (1) and of Evatt J. in Elliott's Ca In Barger's Case (1) the primary ground on which the m held the law invalid was that it was an invasion of the State s This was expressed in a way which cannot be said to be appropri since the decision in Amalgamated Society of Engineers v. Steamship Co. Ltd. (3), but it coloured the question of diseri tion, the second ground on which the majority relied. The majo view (4) is the very part of the judgment which has not rece approval in later cases. [He referred at length to Ca Deputy Federal Commissioner of Taxation (5); James v. The monwealth (6), and Elliott's Case (2).] On the severability of s.7 if it be severable, then it is not necessary to decide the ques of the validity of s. 79A, e.g., see Allpike v. The Commonwealth | Insurance Commissioner v. Associated Dominions Assurance Soc Pty. Ltd. (8), and Steele v. Defence Forces Retirement Benefits Board Section 79A was introduced into an existing Act. It is an ment. It is de facto on the statute book and was intended by I liament to operate in relation to the pre-existing body of law— every Act unless it be purely and truly declaratory is in alter the pre-existing law. When Parliament inserts a nm vision into an existing law it assumes that the law will be vali altered although it does not necessarily assume it was valid be alteration, because the purpose of the alteration may be to cu invalidity. But here it is the new provision which create invalidity alleged. If the whole Assessment Act with s. 79A it had been enacted at one and the same time then on ordinary p ciples of interpretation and by s. 15A of the Acts Interpretatic 1901-1957, s. 79A would be severable. [He referred to A National Airways Pty. Ltd. v. The Commonwealth (10), and N.S.W. v. The Commonwealth (11).]

[Drxon C.J. It does not seem to me that we are concerned' severing out something and saying whether it is inter-tangled. purely a question of whether when the Act of 1945 was passed it} a preference. If so the discrimination would go out ; and th

(1) (1908) 6 C.L.R. 41. (7) (1948) 77 C.L.R. 62. (2) (1936) 54 . 657. (8) (1953) 89 8, at p. (3) (1920) 28 C.L.R. 129. (9) (1955) 92 71.

(4) (1908) 6 C.L.R., at p. 78. (10) (1945) 71 C.L.R. 29, at pp. (5) (1923) 32 C.L.R. 68. (11) (1948) 76 C.L.R. 1, at pp. (6) (1928) 41 C.L.R. 442. 371.

OF AUSTRALIA.

to the previous enactment. ]

I come to that approach. If the previous enactment of s. 794 completely beyond power it never came into operation as a . tive instrument at all, and therefore it is not a question of " severing it but of disregarding it. It never formed a lawful part of "the Assessment Act. The question then is whether the 1956 Act "when speaking of the Assessment Act is referring to supposed or -actuallaw. If it be construed as actual law, then the invalid matter is severable. On the basis that it refers to supposed law it is "nugatory.

* [Drxon ©.J. referred to the British Imperial Oil Co. Ltd. v.

'ederal Commissioner of Taxation (1).]

There is a difficulty if s. 15 of the Acts Interpretation Act has to be read as "every Act which validly amends another Act shall be construed with such other Act if it be valid". It makes problems "© of interpretation of federal statutes somewhat difficult. As to the defendant's argument on s. 51 (xxxi), see Burton v. Honan (2). On the question of the validity of the provisional tax provisions either © s, 12 of the Tax Act 1956 imposes a tax or it is an ancillary provision 'for the collection of income tax or there are not two provisions = imposing different obligations but two provisions which together

ine the obligation created under a continuing system of ition. Whichever view be taken the legislation is within the ing power aided if need be by s. 51 (xxxix). [He referred to Federal Commissioner of Taxation v. Official Liquidator of E. O. ss Farley Ltd. (In Liquidation) (3); Lower Mainland Dairy Products » Sales Adjustment Committee v. Crystal Dairy Ltd. (4); Parton v. » Milk Board (Vict.) (5); Moore v. The Commonwealth (6); Resch v. Federal Commissioner of Taxation (7); Cadbury-Fry-Pascall's (8); Federal Commissioner of Taxation v. Munro (9), and m v. The Commonwealth (10).] Hither the zone allowances valid, or it may not be necessary, as the defendant does not get the benefit of them, to come to a conclusion that they are invalid. In any event s. 79A does not by its presence infect the rest of the w legislation. It is either removable by surgical operation or is to be

ieee as a foreign body and disregarded. , The defendant in reply. Oe cae i(1) (1925) 35 C.L.R. 422. (6) (1951) 82 C.L.R., at pp. 568, 569, _ (2) (1952) 86 C.L.R. 169, at pp. 180, 577. 6 isl. (7) (1942) 66 C.L.R., at p. 223. (3) (1940) 63 C.L.R. 278, at p. 315. (8) (1944) 70 C.L.R. 362. i (1933) A.C. 168. (9) (1926) 38 C.L.R. 153. (5) (1949) 80 C.L.R. 229. (10) (1947) 74 C.L.R. 421.

VOL. C—17

ing question is how do you construe the Act of 1956 when it H- ©: or A.

1957-1958. ed Commus- SIONER OF Taxation v. Cuxne.

H.C. or A.

1957-1958. we

Commis- SIONER OF Taxation

oe

Ciyne.

April 2, 1958,

HIGH COURT

The following written judgments were delivered :— ;

Dixon C.J. This suit is brought by the Commissioner of T; against a taxpayer to recover a sum of £752 as provisional tax contribution due under the provisions of the Income Tax and Services Contribution (Individuals) Act 1956 (No. 102 of 1956) Act operates upon the Income Tax and Social Si rvices Co Assessment Act 1936-1956.

The suit is brought under the authority of ss. 208 and 209 of latter Act as applied to provisional tax and contribution by sub: of s. 221YA. Sub-section (3) of that section provides that ascertainment of the amount of any provisional tax (an exp including contribution) shall not be deemed to be an within the meaning of any of the provisions of the Assessmer but s. 221YD provides in effect that the amount may be noti on the notice of assessment of the income of the year next prece the year of income and shall become due and payable on the specified in the notice or on 31st March next if that be the later d Section 221YH makes the notice of assessment prima facie evide that the amount of provisional tax and all particulars relating then are correct.

The commissioner's statement of claim alleges that the claimed is for provisional tax and contribution, within the me of the Acts mentioned, lawfully ascertained in respect of the ineo of the defendant for the year of income ending 30th June By particulars treated by agreement as part of the pleading stated that the amount of £752 was ascertained on 9th April If and notified on a notice of assessment of the income tax paj by the defendant in respect of the income of the year ended June 1956. It is also stated that the amount was ascertained u Div. 3 of Pt. VI of the Assessment Act and that the tax clai provisional tax within the meaning of the Act and as define¢ 8. 221YA.

To this statement of claim the defendant demurs on stated at length in his demurrer, impugning the validity legislation under which a liability for provisional tax is imp The legislation is said to be invalid on grounds forming two tive lines of reasoning which are quite independent one of the

According to one line of reasoning the provisions dealin; provisional tax are either outside altogether the power con by s. 51 (ii.) of the Constitution to make laws with respect to ta and are simply invalid for want of power or, if within the se 8. 51 (ii.), offend against one or other paragraph of s.55. A fu if somewhat desperate-looking, argument was adduced el

)O.L.R.] OF AUSTRALIA.

ental to s. 51 (ii.), s. 51 (xxxi.) applied and required that should be just terms, because on such a footing provisional ax must be treated as an acquisition of property for a purpose in of which the Parliament has power to make laws.

The other line of reasoning on which the validity of the imposition provisional tax was attacked goes to the validity of the whole ne Tax and Social Services Contribution (Individuals) Act 1956 Yo. 102) and for that matter the Income Tax and Social Services Contribution (Companies) Act 1956 (No. 28 of 1956). Indeed the argument affects the validity of the whole system since 1945. It is on the assertion that there is a failure to observe both the

or regulation of revenue give preference to one State or any part of over another State or any part thereof. The discrimination ference which the defendant claims to have discovered has nothing to do with the circumstances of his particular case but, of - course, he can as a person sued for tax rely upon it if it be true that wings down the whole edifice of income tax. It lies in s. 79A of the Assessment Act, a section which few persons in the more populous arts of Australia have occasion to read or notice. Section 79A (1) tes that for the purpose of granting residents of the prescribed a an income tax concession in recognition of the disadvantages to which they are subject because of the uncongenial conditions and cost of living in a zone called A and to a lesser extent in a zone called B in comparison with parts of Australia not included in the ibed area, an amount ascertained in accordance with the section d be an allowable deduction. It is unnecessary at this point to into the details of the provision. It is enough to say that within ery extensive areas to which it refers, covering parts of five 8, one or other of two deductions from his assessable income is ed to the taxpayer. It is this which is said to produce a bidden discrimination or preference. Section 79A was inserted the Assessment Act by Act No. 4 of 1945 which commenced on h June 1945 and, though it has since been amended, there can be doubt, if the argument be right and justify the conclusion, that it is at that time that the total invalidity claimed for the imposition f income tax must have set in. convenient to consider first the ground of attack based upon character of provisional tax and the alleged want of power to ose it or, if otherwise its imposition be within power, the

l

tive, namely that if some footing was found for the provision H- ©: oF A.

1957-1958. Ww

Commis- SIONER OF 'Taxation

v.

CLyNe.

Dixon C.J.

H.C. or A.

1957-1958. ae

Commas- SIONER OF TaxaTION

v

CLYNE.

Dixon C.J.

HIGH COURT

s. 51 (xxxi.) of the Constitution. The first question which necessarily was raised by the argumer in support of this ground is the question whether s. 51 (ii.) covers ti provisional tax as established by Div. 3 of Pt. VI of the Assessm Act and imposed by s. 12 of the Taw Act 1956, and if s. 51 (ii) so cover it, why ? By why, is meant whether s. 51 (ii.) co because provisional tax is itself a tax or, on the other hand, beea the imposition of a liability to pay provisional tax falls within th conception of what is incidental to the legislative power to mal laws with respect to taxation. ' Beginning thus the argument in relation to the ensuing st not unnaturally, was presented with an elaboration of the res consequences which would flow from each of the alternative solution to which this primary or initial question concerning the power impose a provisional tax was said to be open. It is unneci however to follow the course of recapitulating the content to the consequences which flow from the various solutions prop to the question. It is sufficient to deal with the question itself having determined it, to proceed from that point without cor 1p cating the matter with an account of alternative possibilities whit on that footing become hypothetical only. q To my mind the system of provisional tax and contribution prescribed by Div. 3 of Pt. VI is clearly within the power confé bys. 51 (ii.) of the Constitution to make laws with respect to taxa 01 It is not a separate tax but a liability ancillary to the income t and social service contribution which s. 17 of the Assessment 4 provides shall be levied and paid, at the rates declared by th Parliament, for each financial year, upon the taxable in derived during the year of income by any person. That is the that is imposed. The liability to pay provisional tax is ancillary that ; it is not a liability to another and distinct tax. There objection to saying that provisional tax is an incident of the imp tion of the income tax but that does not take it outside the p conferred by s. 51 (ii.) to make laws with respect to taxation. distinguish the ancillary liability from the principal tax purpose under s. 51 (ii.); so far as the power conferred by # paragraph is concerned it is not only without purpose, it is without meaning. It is under s. 55 that for the purpose of argument the distinction is given an importance whether supposed. For s. 55 provides that laws imposing taxation shi deal only with the imposition of taxation and any provision thel dealing with any other matter shall be of no effect. It is conte

100 0.L.R.] OF AUSTRALIA.

'

by the defendant that once it is conceded that the liability for H.C. or A. provisional tax is not imposed as a tax, or " the " tax, it follows that 1957-1958.

- it must be " another matter " within the meaning of s. 55 so that the provisions dealing with it are of no effect, at all events the provisions dealing with it in the Tax Act, if not also in the Assessment Act.

Before dealing with this contention it is necessary first to state why I think that it is within the legislative power conferred by s. 51 (ii) of the Constitution to impose a liability to provisional tax not- withstanding that I think that it is not a distinct and separate tax.

Tf you turn to the provisions of Div. 3 of Pt. VI of the Assessment Act 1936-1956 the material characteristics of the liability will be seen. Its purpose is described as that of enabling the income tax

and social service contribution which will be payable by taxpayers to whom the system applies to be collected during the financial year for which the income tax and social service contribution is levied :

sees. 221YB (1). Itis payable in respect of the year of income which of course means, in relation to an individual, the financial year for which income tax is levied or the accounting period, if any, adopted in lieu of that financial year: see ss. 6 (1) and 221YB (2). Pro- visional tax is not payable unless the taxing Act for the year of income provides that it shall be payable: s. 221YB (3). The amount of the provisional tax is prima facie an amount equal to the income tax assessed in respect of the taxable income of the previous year, subject to an increase or decrease according to any variation in the rates of income tax that may have been declared for the current financial year : ss. 221YC (1) and (2). But a taxpayer receiving a notice of assessment on which is notified the amount of the provi- sional tax is entitled before the due date for payment or the 31st March, whichever may be the later, to make an estimate for himself showing, to put it briefly, the amount of provisional tax payable. Ifthe commissioner has reason to believe that his taxable income for the year will be or is already greater than what he has estimated, the commissioner may serve him with an estimate of his own ; but failing that the taxpayer's estimate stands : see s. 221YDA. In any case there is a deterrent to taxpayers who might be minded to make

an under estimate. If a taxpayer's estimate proves lower by four-fifths than his last year's taxable income and the taxable income of the year in question, he becomes liable by way of penalty to additional tax : see s. 221YDB.

When provisional tax has been paid the commissioner is to credit the amount paid first against such income tax, if any, as is payable by the taxpayer in respect of the income, next against any provisional tax in respect of the income of the ensuing year, and thirdly against

Se Commus- SIONER OF TAXATION v Cuyne.

Dixon ©.5.

H.C. or A.

1957-1958. we

Commas- SIONER OF 'Taxation

» Chyne.

Dixon 0.5.

HIGH COURT

any other income tax payable by the taxpayer. If after t successive credits there still be a balance, it is to be refunded te taxpayer: s. 221YE. It will be seen that there is no a provided against the notification by the commissioner of his The taxpayer however may make his own estimate and that commissioner must accept unless he has reason to believe that: taxable income will be greater. From that liability the cannot relieve himself by any legal process until he is ass income tax. He may of course then appeal against the and reduce its amount. If in the event the commissio1 proved mistaken in his refusal to accept the taxpayer's own estim: the commissioner must refund the excess after making the credi already described. The taxpayer is therefore not without ultimate remedy and the fact that the machinery is such that he under an interim liability cannot be enough to invalidate provisions.

For the year in respect of which the suit is brought s. 12 of Income Tax and Social Services Contribution (Individuals) Act (No. 102 of 1956) provides that provisional tax and contribution imposed and is payable in accordance with the provisions of Assessment Act in respect of the income of the year of income ¥ commenced on Ist July 1956. It is plain that these pro assume the existence of an income tax and provide means for anticipatory payment. The payment is compulsory but the liab to make it is not imposed as a separate tax. It is provisional as name implies. Payment made in pursuance of the liability provisional tax is applicable in discharge of the ultimate lial to income tax and is otherwise repayable. The purpose is simply to ensure payment of tax. The purpose is to bri discharge of the burden of tax into a closer temporal relation the accrual of the income upon which the tax is levied. The ex tion of such a policy appears to me to be fairly within the po expressed in s. 51 (ii.) of the Constitution even if it be deseribet incidental. The main purpose of that power is expressed by words " with respect to taxation". It gives a legislative autho which includes prima facie whatever is reasonably and incidental to the effectuation of the purpose. There is no why the means described in Div. 3 of Pt. VI for giving effect to principle should not be regarded as proper for the effectuation power to make laws in respect to taxation. I therefore think' the provisions are covered by the power conferred by s. 51 (i

No doubt the Income Tax and Social Services Contribul (Individuals) Act 1956 (No. 102 of 1956) is an Act imposing tax

OF AUSTRALIA.

'imposition of taxation and any provision dealing with any other is of no effect. Let it be assumed that s. 12 in imposing onal tax and contribution deals with an incidental liability. y should it follow that it deals with a matter other than the ition of taxation ? When s. 55 uses the expression " imposition if taxation " it employs a term of somewhat indefinite connotation. Federal Commissioner of Taxation v. Munro (1) Isaacs J. discusses he meaning of the first paragraph of s. 55 and gives his reasons for Jopting what may be called a narrow interpretation of the words eons taxation". A much wider meaning appears to have adopted by ther members of the Court. Isaacs J. however i ed sharply between the provisions of the Assessment Act to the collection of the tax and the actual grant or imposition of the tax. His Honour, however, did not have in view any process requiring provisional payment of the proportion of income as of a scheme of taxation in which the burden or incidence the tax, the source from which the burden should be borne, and ultimate ascertainment of the tax finally payable formed a ly associated congeries of liability. It does not seem probable 'that: his Honour would have regarded this as no part of the nposition of taxation within s. 55. No other judge who has dealt h this subject has adopted quite so strict an interpretation of the "imposition of taxation" in s. 55 and it does not seem that: y of the judges of the past would have doubted that s. 12 of No. 102 of 1956 came within the words " imposition of taxation " | did not form another matter. For these reasons I am of the nion that neither s. 12 of Act No. 102 of 1956 nor Div. 3 of Pt. VI

i

is paid provisionally 'and returned without st in the event of no tax accruing due. That is said to be an ition of property on terms not just. Once it is held that i ional tax is authorised by s. 51 (ii.) it seems absurd to say that,

tax eeeibate property 'acquired for a purpose in respect Parliament has power to make laws. The purpose of the er itself which is conferred by s. 51 (ii.) is to acquire money for purposes and that is no less so if the money is raised provision- and in advance of the actual accrual of the tax as debitum i solvendum in praesenti.

(1) (1926) 38 C.L.R., at pp. 185-193.

the meaning of s. 55. It follows that it may deal only with H- ©. or A.

1957-1958. we Conntrs- sIONER OF Taxation v. Coyne.

Dixon C.J.

H.C. or A.

1957-1958. Ww

Commis- SIONER OF 'TAXATION

2.

Cuyne.

Dixon ©.J.

HIGH COURT (1957-1

From the foregoing it follows that the provisions referred : not invalid under the first of the two independent grounds the defendant in support of his demurrer.

Section 11 of Act No. 4 of 1945 introduced into the Assessm Act s.79A upon which is based the contention that there has be disregard both of the prohibition against discrimination betw States and parts of States and of the prohibition contained in s, of giving preference by a regulation of revenue to one State or: part thereof over another State or any part thereof. The i ductory words of sub-s. (1) of s. 794 have been set out early i judgment. The enacting part of the sub-section provides that i

accordance with the section should be an allowable dedi Sub-section (2) then declares what amounts may be deducted. have been amendments of s. 79A increasing the fixed amount the deduction. See Act No. 11 of 1947, s. 14, and Act No. 1956, s. 12. It is enough now to give the amounts in the e they stand at present. The prescribed area, which is defined schedule added to the Assessment Act by s. 19 of Act No. 4 of 19 is divided into Zones Aand B. A resident of Zone A of the pre area is to receive a deduction of £180, a resident of Zone B ad tion of £30, if he has not resided or actually been in Zone A any part of the year of income. There is an elaborate definiti "resident" in sub-s. (4). A man is a resident who resides i area for more than half the year of income or has actually the area whether continuously or not during more than half of

year of income or who, provided he does not come within t foregoing, has died during the year of income and at the date of death resided in the area. There is necessarily a third category deduction covering persons who cannot be considered resident Zone A within the definition or a resident of Zone B who resided or actually been in Zone A during any part of the income. Such persons are to receive a deduction of such an amou being not less than £30 and not more than £180 as in the opinion the commissioner is reasonable in the circumstances. 'The pre areas in the zones are set out in a schedule. As the schedule st in 1945 Zone A comprised the whole of that part of Australia wh lies north of an imaginary line drawn in an irregular fashion the continent from west to east. The line began at Exmout! went down in an irregular way to the limit of the tropic of Cap followed the meridian marking the tropic easterly to som beyond the border of Queensland and then took an irregular

—

100 C.L.B.] OF AUSTRALIA.

jn a north-easterly direction to Cape Tribulation, the latitude of H.C. or A.

which may be stated with sufficient approximation as about 16 deg. south. Zone B was a zone south of Zone A bounded in an irregular fashion by aline beginning on the west coast near Geraldton and going 'south-east to Point Hood and then along the coast through Hopetoun and Esperance and the coastline of the Australian Bight towards Ceduna. Before Ceduna the line left the coast to go inland in such away as to exclude the Eyre Peninsula, pass through Port Augusta, exclude Quorn and Peterborough, and then pass easterly into New South Wales and then northerly considerably east of the Darling into Queensland and again, after a westerly turn, northerly through the centre of Queensland, turning to the coast so as to meet it at approximately Broadsound which is somewhat north of Townshend Island. Zone B also included the south-western portion of Tasmania. Tt will be seen that the State of Victoria is wholly excluded from the prescribed area. It will further be noticed that while the deductions operate to prefer a large geographical area of Australia to that portion of Australia which is excluded from the areas, there is also a preference between the areas enclosed in the respective zones, that is to say a preference in favour of the residents of Zone A over the residents of Zone B. The limits inter se of the two zones have been altered by s. 23 of Act No. 101 of 1956 so that the southern boundary of Zone A has been brought down to the twenty-sixth degree of south latitude, along which it runs to the border of Queensland, whence the line turns to the north as a projection of the westerly border of New South Wales until it meets the old line again. It may be added that the various Territories outside Australia are included. The legislative plan by which all this is done is attacked as involving the violation both of ss. 51 (ii.) and 99. Section 51 (ii.) confers power to make laws with respect to taxation ; but so as not to discriminate between States or parts of States. The full text of 's. 99 is as follows :—"' The Commonwealth shall not, by any law or regulation of trade, commerce, or revenue, give preference to one State or any part thereof over another State or any part thereof." We are not of course concerned with a law or regulation of trade or commerce but only with one of revenue. It happens however that the decision of this Court upon s. 99 most discussed during the argument is concerned with a law or regulation of trade or commerce. It is Elliott v. The Commonwealth (1). In that case the majority of the Court gave to the words " one State or any part thereof over

(1) (1936) 54 C.L.R. 657.

1957-1958. we

Commts- SIONER OF 'TAXATION

v.

CLyNe.

Dixon C.J.

H.C. oF A. 1957-1958.

Ww

Commis-

SIONER OF

'Taxation a CLYNE.

Dixon O.5.,

HIGH COURT

another State or any part thereof " a restricted meaning. If leg tion is attacked as violating that portion of s. 99 it would that according to that interpretation the legislation will be , unless in some way the parts of the State are selected in vi their character as parts of a State. This view seems to accord that expressed by Isaacs J. in relation to s. 51 (ii.) in Barger (1), a view, however, contrary to that taken by the majoriti the Court in that case. See further W. R. Moran Pty. Ltd. v. De Federal Commissioner of Taxation (N.S.W.) (2). tis a view that w attacked by Evatt J. in his dissenting judgment in Moran's Ca For myself I have the greatest difficulty in grasping what is the requirement that the selection of an area shall be as j of the State. No doubt it may be expressed in various ways, "in virtue of its character as part of the State " or " State" or " because it is part of a State " or "as such". Ho it may be expressed I find myself unable to appreciate the disti between the selection by an enactment of an area in fact forn part of a State for the bestowal of a preference upon the area and selection of the same area for the same purpose "as part of State". But I shall not discuss this question further becai the view I take of the case I do not think it is necessary to de whether s. 79A involves or carries with it a forbidden prefe discrimination. For the purposes of my decision I am prep: accept the view that s. 79A assumes to give a preference to ta who are residing in Zone A over taxpayers residing in Zone B an give to the residents of either zone a preference over taxpayer reside outside the prescribed area. I am further pre proceed upon the assumption that in giving this preference as a law or regulation of revenue, gives a preference to p five States of the Commonwealth over the State of Victoria and in the case of each one of those five States gives a preference to of it over parts of the other four of them. In the same way F prepared to assume that s. 79A would if valid work a discrimin between Victoria and parts of the other five States as well discrimination between a part of each of those five States and p of the other four of them. It follows that I assume that tl visions of s. 79A are not consistent with the requirements e: in ss. 51 (ii.) and 99. Section 79a prior to its amendn enacted in a statute directed to the amendment of the J Assessment Act 1936-1944 which is described as the Principal J

(1) (1908) 6 C.L.R. 41. (3) (1939) 61 C.L.R., at p. 783¢t

(2) (1940) A.C,, at pp. 849, 853, 854, 855, 856 ; (1940) 63 C.L.R., at pp. 341, 345, 347.

R.J OF AUSTRALIA.

e Principal Act the following section is inserted. Thereupon 9A was set out in full. By s. 19 of Act No. 4 of 1945 it was wided that the Principal Act is amended by adding at the end f the following schedule. Section 19 then set out the schedule taining the description of the zones as they then were defined. it was by these two sections of the Income Tax Assessment 1945 (No. 4 of 1945) that it was sought to make the provisions of s. 79A and the schedule part of the Income Tax Assessment Act. Act No. 4 of 1945 was assented to on 18th May of that year and its ite of commencement was the 15th June 1945. The Income Tax 1945 (No. 5 of 1945) imposing tax was also assented to on 18th ay and also came into force on 15th June 1945. That Act like

should be incorporated and read as one with this Act. A like ision is contained in s. 4 of the Income Tax and Social Services "Contribution (Individuals) Act 1956 (No. 102 of 1956). The argu- nt for the defendant is that this Taxing Act is invalid because it ites on an Assessment Act and indeed incorporates the Assess- 'ment Act containing s. 79A so that the Taxing Act embodies an ittempt to give by a law of revenue a preference to parts of States

er another State or parts of other States and an attempt by a

aw with respect to taxation to discriminate between a State and of other States and between parts of each of those other es and parts of the remaining States. I repeat that I assume 8. 79A with the schedule does attempt to give such a pre- and so to discriminate. But this can affect the validity the Taxing Acts only if s. 79A ever became part of the Assess- Act upon which the Taxing Acts operated. In my opinion ; hypothesis or condition never was fulfilled. My opinion is hat s. 79A was invalid ab initio and never became a valid portion the Assessment Act. Let it be assumed to the full that the ions of s. 79A would involve a preference forbidden by 9 once the Taxing Act operated upon them. It appears to me because s. 79A would if valid necessarily involve such a erence once the Taxing Act operated upon it, the consequence be that it never was within the competence of the Parliament enact s. 794. It must therefore be treated as void. It is, I equally true that without s. 99 s. 79A on the hypothesis would be outside the competence of Parliament because it conflict with the condition expressed in s. 51 (ii.) that a law

vith respect to taxation must not discriminate between States or

rs. 11 of Act No. 4 of 1945 it was simply enacted that after s, 79 H: 0. or A.

1957-1958. we

Commis- SIONER OF Taxation

Ciynz.

Dixon 0.5.

'H.C. or A.

1957-1958. "Ww

Commis- SIONER OF TAXATION

v.

CLYNE.

Dixon C.J.

HIGH COURT

Act 1945 (No. 4 of 1945) are plainly severable from the Test 0

enactment. The problem is of another description. It is the Taxing Act when it incorporates the Assessment Act is to be as incorporating the Assessment Act as it is written or as it y exists. Not without some hesitation I have formed the vi s the proper construction of the Taxing Acts is that they incorpor

laws of the Commonwealth. Now I do not think that s. 11 0 Income Tax Assessment Act 1945 (No. 4 of 1945) ever could beco

speak be true. That Act must be dealt with as a separate stati an observation which is by no means unfavourable to the defe contention. But as a separate statute it nevertheless is a law revenue within s. 99. The Act is a law of revenue because it exercise of the legislative power to tax exercise of the power conferred by s. 51 ( tion which ex hypothesi is forbidden by the condition of the po Sections 11 and 19 therefore could not begin to exist as v enactments. Section 20 of Act No. 4 of 1945 provided that th two provisions should apply to all assessments for the fi

year beginning on Ist July 1945 and all subsequent years.

It is true that a Taxing Act which sought to apply them would i give apreference. It is for that reason that the critical consideral in this case enna to me to be, and I speak again on thei 8

Assessment Acts. As in my opinion the latter is the correct v follows that the defendant's second contention must fail as his first. The demurrer should be overruled and judgment for the plaintiff for the amount claimed.

McTiernan J. In my opinion there is no substance in any grounds of the demurrer. It is quite unnecessary to add anythil what the Chief Justice has written. But I would affirm the dee of the majority in Elliott's Case (1): see Moran's Case (2).

Wiui1ams J. I have had the advantage of reading the for judgment of the Chief Justice. I respectfully agree wi reasons and the order he proposes.

(1) (1936) 54 C.L.R. 657. (2) (1940) A.C., at pp. (1940) 63 C.L.R., at pp.

C.L.B.] OF AUSTRALIA.

| jurisdiction of this Court brought by the plaintiff commis- sioner to recover £752 provisional tax and contribution under the Income Tax and Social Services Contribution (Individuals) Act 1956, hereinafter referred to as the Rating Act, in respect of the income 'of the year ended 30th June, 1956. The Rating Act incorporates the Income Tax and Social Services Contribution Assessment Act 1936-1956, hereinafter referred to as the Assessment Act, which latter Act in s. 79A provides for the granting of income tax conces- sions to residents in Zone A and on a smaller scale to residents in = Zone B, each of which zones includes parts of some States but not the whole of any State. No part of Victoria is included in either 'zone. Zone A also includes the Northern Territory and the Territory "of Papua-New Guinea and certain islands. These concessions are 'expressed by s. 79A to be in recognition of the disadvantages to 'which those residents are subject because of the " uncongenial 'climatic conditions, isolation and high cost of living " in those areas in comparison with other parts of Australia, and such disadvantages sean, I think, be judicially noticed as existing in those areas. There are six grounds of demurrer each based on one or more of 8s. 51 (ii.) and (xxxi.), 55 and 99 of the Commonwealth Constitution. grounds may be summarised: that provisional tax is quite sroutside s. 51 (ii.) ; that the concessions given by s. 79A as incorpor- ited in the Rating Act create discrimination contrary to s. 51 (ii.), or preference contrary to s. 99; that provisional tax and income tax are different subjects of taxation and are included in the same law, contrary to s. 55; that compelling payments in advance without providing for interest amounts to taking property on terms that are not just, contrary to s. 51 (xxxi.); and that, notwithstanding s. 15A. of the Acts Interpretation Act 1901-1950, severance is not permissible y because it is the Rating Act that creates the discrimination, which did ~hot exist in the Assessment Act taken by itself, nor until it was incorporated in and by the Rating Act, so that s. 79A of the Assess- 'ment Act cannot be excised as invalid leaving the rest of the legis- slation standing as valid; and that, in any event, the Parliament wereated a scheme of taxation and did not intend that scheme to operate if the concessions were invalid, or to authorise a greater »tax liability than the Parliament intended when enacting the invalid provisions. fo Dealing first with severance and the effect of s. 15A: If, after * incorporation in the Rating Act, s. 79A enacting the concessions, or the provisional tax independently of those concessions, were found

stale invalid, then, assuming that an invalid section could effectively d

'Wess J. This is a defendant's demurrer in an action in the H.C. or A.

1957-1958. a

Commas- SIONER OF TaxaTION

v Ciyne.

'H.C. oF A. 1957-1958.

we

Comntis- SIONER OF TAXATION v. Cine.

Webb J.

HIGH COURT

be so incorporated, I see no reason why the remaining should not be sustained as valid. I am unable to see such

embodied in this legislation; or any reason why the inyali of a concession should result in no tax being payable by the payers intended to be benefited. That would be an absurd

not lightly to be attributed to the Parliament in the face of s No re-writing of the legislation would be involved ; plastic s would not be required ; mere excision would suffice. Howe is generally accepted, so I understand, that the Parl s. 15A does not direct that the challenged legislation shall be u to the extent that it could be made valid even at the ex

destroying essential features of any scheme disclosed, hot elaborate, or even by the judges acting as draftsmen and re- the enactment. I take it that neither the power of the Parliam

sarily questioned ; but that the general view is that if the ¢ is presented of attributing to the language of an en: sensible meaning or an absurd one, naturally the former is pref

Because of the view I take on the other questions it is unnecessary for me to deal with severance. I have done sob of the very full argument on this and indeed on all questions r

Then turning to other grounds of the demurrer: I will ta what I may call the minor grounds based on ss. 51 (xxxi.) a as both can readily be disposed of with the assistance of the in Federal Commissioner of Taaation v. Munro (1), other of Isaacs J., and in Moore v. The Commonwealth (2). In subst there is, I think, no difference between the payments in from wool proceeds held valid in that case and pro' which, like those payments in advance, is ascertained in the e of the power to tax under s. 51 (ii) and is really income tax early stage ; " ascertained " but not assessed. It is not a dif subject of taxation. This also disposes of the ground that tax is outside s. 51 (ii.). Nor is it an acquisition of propel s. 51 (xxxi.). In Moore's Case (2) it was submitted unsuce for the taxpayer that the compulsory payments in advance ¥ providing for interest were an acquisition of property on ter! were not just, contrary to s.51 (xxxi.). Then neither s. 51 (: s. 55 applies to invalidate provisional tax.

(1) (1926) 38 C.L.R. 153. (2) (1951) 82 C.L.R. 547.

OF AUSTRALIA.

tion and preference contrary to ss. 51 (ii.) and 99: Itis understand, submitted by the defendant that for the purposes case there is any substantial difference between ss. 51 (ii.) ind 99, between discrimination and preference. Dizon J. as he hen was, said in Elliott v. The Commonwealth (1) : " If s. 99 had been d to forbid the Commonwealth by a law or regulation of commerce, or revenue to discriminate against a State or part tate, I do not think its effect would have been substantially " (2). I respectfully agree. Then confining attention to 51 (ii.), the defendant relies on the reasoning of the majority in R. v. Barger (3) where Griffiths C.J. and Barton and O'Connor JJ. in a it judgment, referring to the words " so as not to discriminate en States or parts of States" in s. 51 (ii.), said that those "recognise the fact that nature has already discriminated, prescribe that no attempt shall be made to alter the effect of natural discrimination " (4). Their Honours added that '"' The conditions of climate . . . and of locality . . . make an al discrimination for many purposes between several portions 'the Commonwealth. Lest, however, the Parliament should desire ) bring about equality in the incidence of the burden of taxation, what has been called an equality of sacrifice, by discriminating en such different portions they were expressly prohibited n so doing." (4) Their Honours then proceeded to say that tates or parts of States" was synonomous with " parts of the jonwealth " or "different localities within the Common- ", and that "it would be a strange thing if Parliament could

ating in its measure of taxation between States and ts of States because they were particular States or parts of es" (7); and that the discrimination or preference in s. 51 (ii.) 99 that is forbidden is " in relation to the localities considered s of States, and not as mere Australian localities or parts of Commonwealth considered as a single country" (7). His re added that "it does not include a differentiation based on

(5) (1908) 6 C.L.R., at p. 78. (6) (1908) 6 C.L.R., at p. 106. (7) (1908) 6 C.L.R., at p. 107.

s to the remaining ground of the demurrer, i.e. that based on H-C. or A.

1957-1958. Ww

Commtrs- SIONER OF TAXATION v Ciyne.

Webb J.

272 HIGH COURT (1957-1

H.C. or A. other considerations, which are dependent on natural or by

pater circumstances, and may operate with more or less force in di Comms. localities" (1). If his Honour's view is sound it supports

sioxzn oF validity of s. 79a. Texan Now the view of Isaacs J. as stated above was adhered to | cuyxe. Knox 0.J., Isaacs, Higgins and Rich JJ. in Cameron v. Dep

weops. Federal Commissioner of Taxation (2), and in James v. The Comn wealth (3) by Knox C.J. and Powers J. It was also adopted by t majority in Hlliott's Case (4). This is strong support for that v although the contrary view has been expressed forcibly by otl members of this Court, more particularly in Hiliott's Case (4). conclusive of the matter is the fact that subsequently the Council in Moran Pty. Ltd. v. Deputy Commissioner of Tasati (N.S.W.) (5) expressly approved of the view of Isaacs J. and 0 would be useless to carry the discussion further. In my opinion s. 79A is not invalid as discriminating betwe States or parts of States, contrary to s. 51 (ii.); or as consti

preference, contrary to s. 99. I would overrule the demurrer.

Kirro J. In my opinion the order proposed by the Chief Jus ; should be made. I agree entirely in his Honour's reasons fi judgment.

Taytor J. I entertain no doubt that the demurrer in this: should be overruled and judgment entered for the plaintiff. Lag entirely with the reasons of the Chief Justice and do not wish to: anything.

Demurrer overruled. Judgment for the plain £752 with costs.

Solicitor for the plaintiff, H. B. Renfree, Crown Solicitor fo Commonwealth. r

Solicitor for the defendant, R. J. Pettiford. R.

(1) (1908) 6 C.L.R., at p. 108. (4) (1936) 54 C.L.R. 657. (2) (1923) 32 C.L.R. 68. (5) (1940) A.C., at pp. 856, (3) (1928) 41 C.L.R., at pp. 455, 456. (1940) 63 C.L.R., at p. 348.