Morabito, Vince --- "The Constitutional Restriction on Taxes Imposed on Crown Property" [1998] JlATax 5; (1998) 1(1) Journal of Australian Taxation 41

THE CONSTITUTIONAL RESTRICTION ON TAXES IMPOSED ON CROWN PROPERTY

by Vince Morabito

This article provides a critical evaluation of the leading pronouncements of the High Court on s 114 of the Commonwealth Con-stitution which prohibits, among other things, Commonwealth taxes on property belonging to a State and State taxes on property belonging to the Commonwealth. It is posited that the Court’s construction and application of the key terms of s 114 have been undu-ly narrow and excessively legalistic.

1. INTRODUCTION

Section 114 protects the property of one level of government from incursion by way of taxation by the other level of government. In fact, it provides that:

a State shall not without the consent of the Parliament of the Commonwealth ... impose any tax on property of any kind belonging to the Commonwealth, nor shall the Commonwealth impose any tax on property of any kind belonging to a State.^[1]

Gibbs CJ has lamented that “it cannot be said that the decisions of this Court contain a clear expo-sition of the meaning and scope of s 114”.^[2] In light of this comment and given the practical importance of s 114, it is surprising that s 114 has not been the subject of extensive review by legal commentators. It is the aim of this article to provide such a review of s 114. The three key elements of s 114 - “consent [by the Commonwealth to State taxation]”, “a State ... [and] the Commonwealth” and “tax on property” − are explored separately.

2. “WITHOUT THE CONSENT OF THE COMMONWEALTH”

The concept of Commonwealth consent to State taxation levied on Commonwealth property was first considered in Municipal Council of Sydney v Commonwealth (“the Sydney Council case”)^[3] by Griffith CJ who indicated that:

the consent intended by s 114 is a consent expressed by some positive action on the part of the Parliament, not one to be tacitly inferred from its inaction. Parliament, which is a legislative body, ordinarily expresses its will by a legislative Act, and there is nothing in the section itself to suggest that the prohibition, which is direct and explicit, can be withdrawn in any other way. While, however, the consent required to validate State taxation, as such, of Commonwealth property must be given by Statute, the same practical result, in a pecuniary sense, might, no doubt, be effected by the appropriation of money to an amount equal to the rates which would be imposed on the same property if it were liable to taxation.^[4]

The difficulty entailed in ascertaining the intention of the Commonwealth Parliament, in the absence of an express consent to State taxation, was evident in the more recent judgment of the High Court in Superannuation Fund Investment Trust v Commissioner of Stamps (SA) (“the First Superannuation Fund case”).^[5] Three of the Justices - Barwick CJ, Mason and Murphy JJ - grappled with the difficult issue of whether the Superannuation Act 1976 (Cth) (“the Commonwealth Act”), pursuant to which the Superannuation Fund Investment Trust (“the Trust”) was created, evinced an intention that the Trust was liable to pay stamp duties under State laws on instruments to which it was a party.^[6]

Mason and Murphy JJ held that ss 42(5), 160(1) and 173(3) of the Commonwealth Act provided clear evidence that State stamp duty on instruments to which the Trust was a party was imposed with the consent of the Commonwealth. Section 42(5) provided that the income of the Superannuation Fund (“the Fund”), created pursuant to the Commonwealth Act, was exempt from liability to taxation under Commonwealth, State or Territory laws. Section 173(3) provided that the Trust was not liable to pay stamp duty on a particular category of documents that did not include the documents in question. Pursuant to s 160(1), “the costs of and incidental to the management of the Fund by the Trust” were to be paid out of moneys appropriated by Parliament. According to these two Justices, the lack of a corresponding provision to s 42(5) in relation to stamp duty allowed the inference to be drawn that the Trust was liable to stamp duty. In the view of Mason and Murphy JJ this implication was strengthened by s 173(3). Furthermore, in light of these considerations:

s 160(1) is to be understood as a direction that the costs of and incidental to the management of the Fund, including stamp duties payable under State laws, are to be paid out of moneys appropriated by Parliament.^[7]

Barwick CJ, on the other hand, concluded that no intent on the part of the Commonwealth Parliament to subject the Trust to State stamp duties could be inferred from the presence of s 42(5). The Chief Justice was of the view that:

the presence of s 42(5) in the Act must, in my opinion, be attributed to an abundance of caution, rather than as an expression of intent that the Crown in right of the Commonwealth and its property should otherwise be subject to taxation by the States and by the Territories: or perhaps to some uncertainty on the part of the draftsman as to whether or not the Trust was a manifestation of the Crown. But, if so, that uncertainty would not justify the conclusion that there was a legislative intention to subject the property of the fund, if it did represent the Crown, to State taxation. To take from that section and its presence in the Act a positive indication that the Crown in right of the Commonwealth was to be in other respects subject to taxation by the States is, to my mind, an unwarranted conclusion.^[8]

Section 160(1) was reviewed in some detail by Aickin J who, unlike Mason and Murphy JJ, concluded that the payment of stamp duty could not be regarded as a cost of management but was instead an investment cost.^[9]

3. “A STATE ... [AND] THE COMMONWEALTH”

The question of what entities are to be regarded as equivalent to a State or the Commonwealth for the purpose of s 114 was considered, in some detail, by the High Court in the First Superannuation Fund case.^[10] As with the issue of what constitutes Commonwealth consent to State taxation, no consensus was reached by the Justices − Barwick CJ, Mason, Stephen and Aickin JJ − who considered this question. Stephen and Aickin JJ were of the view that the Trust was not the Crown in right of the Commonwealth while the opposite conclusion was arrived at by Mason J and the Chief Justice. This divergence of views was largely attributable to a different interpretation of the legislative scheme governing the Trust. Stephen^[11] and Aickin JJ^[12] placed emphasis on what they saw as the lack of any ministerial or other control over the members of the Trust in relation to their functions as expert investors of the moneys of the Fund, to support the conclusion that the Trust should not be equated to the Crown in right of the Commonwealth. Mason J, on the other hand, construed the effect of the legislative scheme differently and concluded that “although the Trust is a separate corporate entity the control which the Crown has over its membership and its activities shows that it is an alter ego of the Crown”.^[13]

All four Justices selected the concept of the Crown in right of the Commonwealth (or the State as the case may be) as the governing criterion for determining the entities that are entitled to the immunity from taxation provided by s 114. This development was unsatisfactory for three major reasons. First, it had the effect of drastically curtailing the number of entities that came within the scope of s 114 thereby rendering illusory the immunity conferred by s 114.^[14] Secondly, as we shall see below, this definition of what constitutes a State and the Commonwealth for the purpose of s 114 was not in line with the Court’s definition of these terms in relation to other provisions and legal doctrines. Finally, the different conclusions arrived at by the four Justices in question in relation to the dispute before them indicated the elusive, and therefore unsatisfactory, nature of the concept of the Crown in right of the Commonwealth (or the State).

Most of the problems outlined above were removed by the unanimous judgment of the High Court in the subsequent case of DFC of T v State Bank of New South Wales (“the State Bank case”).^[15] The Court made it clear that for the State Bank of NSW (“the State Bank”) to enjoy the immunity from Commonwealth taxation offered by s 114 it was not necessary to demonstrate that it was the Crown in right of the State.^[16]

The Court also rejected the Commissioner’s alternative submission that the test that needed to be applied was whether the State Bank was entitled to the privileges and immunities of the Crown. Instead, the terms States and Commonwealth referred to:

organisations or institutions of government in accordance with the conceptions of ordinary life, [consequently] it must follow that these references are wide enough to denote a corporation which is an agency or instrumentality of the Commonwealth or a State as the case may be. The activities of government are carried on not only through the departments of government but also through corporations which are agencies or instrumentalities of government.^[17]

The Justices also rejected the distinction between traditional and inalienable functions of government on the one hand and business and commercial functions carried out by the government on the other hand:

that distinction ... can have no place in the interpretation of s 114, which must take account of the historical circumstance that colonial governments in Australia carried on a wide range of governmental functions which were not traditional and inalienable.^[18]

In the two cases discussed in this subsection, the Court was required to consider the scope of the terms State and Commonwealth for the purpose of determining whether the entities in question were entitled to the immunity from taxes provided by s 114. In the Sydney Council case,^[19] on the other hand, the High Court was required to determine which State entities were prevented by s 114 from imposing taxes on property belonging to the Commonwealth. This case concerned the validity of municipal rates imposed by the Municipal Council of Sydney in respect of land located within the City of Sydney and owned by a department of the Commonwealth. The Court unanimously rejected the Council’s submission that the s 114 “prohibition is only against any action of the State itself or the Parliament of the State, in imposing taxation for the purposes of Government”.^[20] It was held, instead, that the protection conferred by s 114 was in respect of any tax imposed upon Commonwealth property by “all the agencies and instrumentalities by which a State can exercise its power of taxation”.^[21]

The inclusion of agencies or instrumentalities of government within the scope of the terms State and Commonwealth, for the purpose of s 114, is consistent with the Court’s pronouncements on the meaning of these terms in relation to s 75 of the Commonwealth Constitution^[22] and the constitutional prohibition on Commonwealth laws placing special burdens or disabilities on the States.^[23]

4. “TAX ON PROPERTY”

The scope of s 114 is essentially determined by the ambit of the crucial concept of “tax on property”. The definition of this expression currently favoured by the High Court is as follows:

the prohibition in s 114 of the Constitution against the imposition of ‘any tax on property of any kind belonging to a State’ protects the property of a State from a tax on the ownership or holding of property. But it does not protect the State from a tax on transactions which affect its property, unless the tax can be truly characterised as a tax on the ownership or holding of property ...

a tax on application to use of property is not the less a tax on the use of property because it attaches to a momentary activity rather than to use or ownership over a period. The tax attaches to use, that being the exercise of a right central to the concept of ownership, and that is enough to bring the tax within the ambit of the constitutional prohibition.^[24]

In applying this definition, the High Court has indicated that substance rather than form is to be considered.^[25] Consequently:

a tax framed as a tax on transactions may in some circumstances amount to a tax on property. Such a tax, though it may take the form of a tax on transactions, may yet be in truth and substance a tax on property. If it were otherwise, the constitutional immunity would be little more than an empty shell, easily circumvented by framing the tax as a tax on transactions, though upon analysis the tax is tantamount to a tax upon the ownership or holding of property.^[26]

The three most recent High Court judgments on s 114 will now be considered. It will be shown that the concept of tax on property noted above has on occasions been applied incorrectly as a result of the Court’s tendency to adopt a legalistic approach that places emphasis on form rather than substance. In the concluding part of this article, a more fundamental criticism will be levelled at the High Court as it will be submitted that the definition of tax on property enunciated by the Court is not supported by cogent reasoning.

4.1 Queensland v Commonwealth (“the Fringe Benefits Tax case”)^[27]

The central question that was considered by the Court was whether the State of Queensland was exempted by s 114 from the liability to pay the tax (“the FBT”) levied by the Fringe Benefits Tax Act 1986 (Cth) (“the Tax Act”) in respect of the benefits provided when motor vehicles owned by the State are used by its employees and when dwelling houses and other places owned by the State are occupied by its employees under lease or licence. The answer to this question was, in turn, dependent on a determination as to whether the FBT could be characterised, for the purpose of s 114, as a tax on property belonging to a State.

The Court held, by a majority,^[28] that the FBT on the car and housing fringe benefits did not violate the s 114 prohibition. The following comments of Mason, Brennan and Deane JJ are representative of the reasoning of all the majority Justices:

in the case of car fringe benefits the tax is imposed on the value of the private use of the car by the employee or his associate or on the value of the availability of the car. The tax is not imposed on the ownership or holding of the car by the State as employer or on its possession or use of the car. Nor is it imposed on the disposition by the State of any interest in its property. The tax is imposed because the employer provides the employee with a benefit in connection with his employment. Likewise with housing fringe benefits, though in this case the tax is imposed on the value of a benefit, a housing right, which may be an interest in property in the form of a lease. The tax is not imposed on or in respect of the disposition as such. Nor is it imposed on the proceeds of sale. It is imposed on the benefit which the employer provides to the employee in connection with his employment and it is imposed because the benefit is provided on that account.^[29]

With all due respect, it is submitted that the reasoning above is flawed as it fails to recognise that the practical effect of the Tax Act was to impose the FBT on the use by the State of its property. As was explained by Gibbs CJ:

the tax imposed by those Acts on the State, as employer, is measured by the taxable value of the fringe benefits provided to its employees. The tax is attracted by the giving of the benefits. Not all of those benefits are given by the State (although typically they are) and not all those benefits are provided by the State out of its property (although some car fringe benefits and housing fringe benefits are so provided). However, where the car is the property of the State the tax which is exacted from the State is exacted because the car is applied or made available by the State as employer to the employee or to an associate of the employee. Similarly, where the housing accommodation is the property of the State, the tax is exacted because the State has granted a lease or licence to an employee or an associate of an employee. In other words, so far as the car fringe benefits and housing fringe benefits provided by the use of property of the State are concerned, the tax is imposed on the State by reason of the particular manner in which it has used its property and by reference to that use. The measure of the tax is the value of the benefit conferred calculated in accordance with the provisions already outlined; it is the value of the benefit provided by the State, and not the value of the benefit received by the recipient. In so far as the values of the car fringe benefits and housing fringe benefits are taxed, the tax in its true nature is one in respect of the use, under certain circumstances, of the property of the State. It is a tax on property belonging to the State within s 114. (emphasis added)^[30]

In light of the clear acceptance by all of the majority Justices that a tax on the use by a State of its property constitutes a tax on property,^[31] the unpersuasive conclusion of these Justices could only have been arrived at by focusing on the legal operation of the Tax Act^[32] and ignoring the methodology that the Court has consistently claimed should be applied, namely, a determination of the substance or practical effect of the Act under challenge. The emphasis on form by the majority Justices can clearly be seen in the following comments of Wilson and Dawson JJ, respectively:

It [the Tax Act] takes as the criterion of liability the provision to an employee of a fringe benefit in respect of the employment. (emphasis added)^[33]

It is the criterion of liability which will distinguish one tax from another and a tax will only be a tax on property where it is tied to property by the circumstances which the legislation makes decisive of the liability to pay it. (emphasis added)^[34]

Criterion of liability was the name given to a judicial test that focused on the legal operation of State laws to determine whether they imposed excise duties contrary to s 90 of the Commonwealth Constitution.^[35] This test was abandoned by the High Court in favour of an approach that focused on the substance or practical effect of the State tax under challenge.^[36]

Regardless of the precise terms of the Tax Act, it seems clear that where a State allows certain individuals, including its employees, to use its property and incurs a tax liability as a result of this action, the practical effect of the Tax Act has been the imposition of a tax on the use by the State of its property. Consequently, applying the definition of tax on property enunciated by the majority Justices which, as has been noted above, includes a tax on the use by a State of its property, a breach of s 114 has taken place.^[37]

4.2 South Australia v Commonwealth (“the SA Trust case”)^[38]

The South Australian Superannuation Fund Investment Trust sought a declaration that, as a result of s 114, it was not liable to pay income tax on income derived by way of interest on money lent and on net capital gains made by the South Australian Superannuation Fund.

The Court held, by a majority,^[39] that the income tax did not constitute a tax on property for the purpose of s 114. On the other hand, there was agreement among all the Justices that the tax imposed on net capital gains violated s 114 as it fell within the description of a tax on property.

Income Tax on Interest

The Court first considered the general question of whether a tax on income constitutes a tax on property for the purpose of s 114. The reasoning of the majority Justices on this issue is neatly captured by the following passage appearing in the joint judgment of Mason CJ, Deane, Toohey and Gaudron JJ:

the fact that income is a generic term and the fact that both the assessable and the taxable income of a taxpayer are concepts, not descriptions of property which belongs to the taxpayer, support the view that income tax is not a tax on the ownership or holding of property as contemplated by s 114. Moreover, the Act focuses its attention upon the derivation of income by the taxpayer, not upon the ownership or holding of property. The notion of derivation of income is a complex one involving, as it does, considerations divorced from the ownership and holding of property.^[40]

With respect, the overly conceptual and legalistic focus of the majority Justices made them overlook three simple and yet essential propositions which were highlighted and relied upon by the minority Justices.^[41] The first proposition is that income is not derived, and hence not taxed, “unless the taxpayer has acquired property on revenue account during that year”.^[42] Secondly:

the immunity created by s 114 is from tax on any property which belongs to Commonwealth or State (as the case may be). The immunity is not restricted to taxes on property from or out of which other property of the Commonwealth or a State is derived. A tax which taxes fruit may not tax the tree, but if the fruit belongs to the Commonwealth or a State, s 114 protects ownership of the fruit as well as ownership of the tree. A tax on either the fruit or the tree is offensive to s 114.^[43]

The third line of argument cogently furnished by Brennan and McHugh JJ focused on the adverse consequences which would flow from the adoption of the narrow view enunciated by the majority Justices:

if s 114 were not to protect the revenue of a State from taxation by the Commonwealth and the revenue of the Commonwealth from taxation by a State, the taxing power of either polity could be undermined by an exercise of the taxing power of the other. The immunity would be illusory if tax revenue could be depleted by adverse taxation. And s 114 would have an illogical operation if it failed to protect the revenue of a State or the revenue of the Commonwealth from taxation by the other but protected capital held or owned by a State or by the Commonwealth.^[44]

Having rejected the notion that income tax may be characterised generally as a tax on property, Mason CJ, Deane, Toohey, Gaudron and Dawson JJ indicated that it was nevertheless possible that the relationship between a given type of income and the property that produces it may be such as to lead the Court to the conclusion that a tax on that income may constitute a tax on property for the purpose of s 114. Consequently, attention was placed by these Justices on the relationship between income tax and interest received on money lent. They held that, whilst the taxpayer pays tax because he/she derives income that may be identified with a chose in action of which he/she is the owner, the correct character of the tax is that of a tax on income rather than a tax on ownership or holding of property.^[45] Again, the reasoning of these Justices is open to criticism. As was aptly pointed out by Waters and Stone:

if it is appropriate at all to look behind the concept of ‘taxable income’ to individual receipts, as the Court did, it is hard to see why each receipt is not itself ‘property’, the ownership or holding of which is being subjected to tax. Even apart from this, the majority appear to accept that s 114 would be attracted if the imposition of tax were sufficiently linked to the ownership or holding of the chose in action being the entitlement to the interest stream. On one view, the actual receipt of interest payments is integral to the ownership of that chose and, in fact amounts to a progressive realisation of the chose, such that to divorce the ‘derivation of interest’ from the ownership of the chose is mere sophistry.^[46]

Tax on Net Capital Gains

This issue was rather straightforward as the

Court unanimously held that the right to dispose of property is a right central to the concept of ownership of property. Consequently, the imposition of a tax on the exercise by a taxpayer of this right of disposition constituted a tax on the ownership or holding of property belonging to the taxpayer.

4.3 The State Bank case^[47]

The Court was asked to determine whether s 17(1) of the Sales Tax Assessment Act (No 1) 1930 (Cth) was in breach of s 114 as a result of imposing on the State Bank the liability to pay sales tax in respect of printed matter manufactured in Australia by the State Bank and applied to its own use. This provision levied sales tax on the sale value of goods manufactured in Australia by a taxpayer and sold or treated by the taxpayer as stock for sale by retail or applied to the taxpayer’s own use.

Once the Court was satisfied that the State Bank fell within the description of a State for the purpose of s 114,^[48] the conclusion that the sales tax constituted a tax on property belonging to a State logically followed. In the words of the High Court:

once it is appreciated that liability to pay the tax is attracted either by an owner’s sale or by use of his or her property, the conclusion becomes inevitable that the tax is relevantly a tax on property.^[49]

5. TIME FOR A BROADER DEFINITION OF TAX ON PROPERTY

Right from the outset, the High Court was essentially faced with two possible interpretations of the key expression in s 114, tax on property. Pursuant to the so-called broad interpretation of tax on property, s 114 prohibits a tax on any transaction affecting the property of the Commonwealth or the States. This was the path followed by the Supreme Court of Canada in relation to the Canadian Constitution’s equivalent of s 114.^[50] The other possible interpretation of s 114 is a much narrower one pursuant to which s 114 only protects a State − or the Commonwealth as the case may be − from taxes imposed on its ownership or holding of property. As has been explained above, this has been the approach followed by the High Court. In the remainder of this article, the reasons for the Court’s preference for this narrower interpretation will be critically evaluated pursuant to the following four general categories: earlier authorities, literal considerations, contextual considerations and policy considerations.

5.1 Earlier Authorities

In adopting a narrow reading of s 114 in the three most recent High Court cases, the majority Justices have placed significant emphasis^[51] on two of the first cases on s 114, namely, D’Emden v Pedder^[52] and Attorney-General of New South Wales v Collector of Customs for New South Wales (“the Steel Rails case”).^[53] In the former case the High Court was required to determine, among other things, whether a receipt given by a federal officer for his salary was exempt from stamp duty as a result of the operation of s 114. The analysis of this question by the Court was limited to the following passage which has been quoted, and relied upon, numerous times in subsequent cases:

with regard to the contention that the receipt in question is exempt from State taxation under s 114 of the Constitution, as being property of the Commonwealth, we think that the receipt, although undoubtedly it may be described as the property of the Commonwealth for the purposes of a prosecution − say, for stealing − is not property of the kind intended in that section, which appears rather to refer to taxation imposed upon property qua property.^[54]

It is easy to share the difficulty expressed by Gibbs CJ^[55] of the High Court and King CJ^[56] of the Supreme Court of South Australia in determining the meaning of the “cryptic expression”^[57] of “property qua property”. Equally unconvincing is the Court’s ruling that the imposition of a tax on a receipt does not constitute a tax on property. The reasoning of Barwick CJ in the First Superannuation Fund case^[58] is more persuasive. The Chief Justice held that s 114 exempted the Trust from paying stamp duty on memoranda of transfer of land to the Trust:

if stamp duty were payable it would be payable by the Commonwealth. It is an exaction falling on the Commonwealth. Further, in form it is a tax upon the document by which the Commonwealth acquires the land to which the instruments relates. It falls upon the document when the document has itself become the property of the Commonwealth. Unless the document is stamped, ie, the tax upon it paid, its function as a document is largely, if not indeed entirely, stultified ... Thus, even in the most technical sense, the duty, in my opinion, is a tax upon the property of the Commonwealth. It falls squarely, in my opinion, within the operation of s 114, which is expressed in universal terms, ‘any tax on property of any kind’.^[59]

The Chief Justice’s reasoning was applied by the Supreme Court of South Australia in the subsequent case of Superannuation Fund Investment Trust v Commissioner of Stamps (SA) (No 2) (“the Second Superannuation Fund case”),^[60] decided after the Commonwealth Act regulating the Trust was amended so as to exempt the Trust from taxation to which the Commonwealth is not subject.^[61] The Supreme Court held, by a majority,^[62] that the imposition of stamp duty on memoranda of transfer of land to the Trust breached the s 114 prohibition. The following passage from King CJ’s judgment encapsulates the reasoning of the majority Justices:

the document is not chargeable with stamp duty until it becomes an instrument which is legally effective to affect legal rights. In the case of a memorandum of transfer this occurs when it is delivered to the transferee or when some other act occurs which indicates unequivocally that the transfer is available to the transferee ... When such delivery or other act occurs the instrument ... becomes the property of the transferee. It follows, in my opinion, that stamp duty, being a tax on a memorandum of transfer which has become effective as a transfer, is a tax on an instrument which is the property of the transferee. It would seem to follow that where the transferee is the Commonwealth the memorandum of transfer is the property of the Commonwealth for the purpose of s 114 of the Constitution.^[63]

The recent decision of the High Court in Allders International Pty Ltd v Commissioner of State Revenue of Victoria (“the Allders case”)^[64] also raises some doubts as to the correctness of the outcome in D’Emden v Pedder. This case concerned the grant of a lease by the Federal Airports Corporation (“the FAC”) to the appellant, a private company, of premises at the Tullamarine Airport to conduct its business of operating duty free stores. Pursuant to s 29(1) of the Federal Airports Corporation Act 1986 (Cth), the FAC holds Tullamarine Airport “for and on behalf of the Commonwealth”. The respondent advised the appellant that the instrument of lease was dutiable pursuant to the provisions of the Stamps Act 1958 (Vic) (“the Act”).

All the Justices agreed that Tullamarine Airport is a place acquired by the Commonwealth for a public purpose within the meaning of those words in s 52(i) of the Constitution.^[65] Consequently, the central issue that had to be considered by the Court was whether the Act:

by imposing a stamp duty on the instrument of lease, [does] in fact place a tax upon the Commonwealth’s disposition of a leasehold estate in the premises or place a tax upon the lessee’s use of the premises? Or is the connection between the tax imposed by the Act and that transaction or that use so tenuous or distant that ... the Act cannot be characterised as a law with respect to [a Commonwealth place]?^[66]

The Court, held by a majority,^[67] that the Act could be characterised as a law with respect to a Commonwealth place and was therefore in breach of s 52(i).^[68] The difference between the approach adopted by the Court in the Allders case and that followed in D’Emden v Pedder is substantial. In the former, the conclusion that the law imposing the stamp duty was a law with respect to a Commonwealth place was reached despite the fact that the tax was payable by someone other than the Commonwealth. Conversely, in D’Emden v Pedder the fact that a Commonwealth officer paid the duty in relation to Commonwealth property was not sufficient to support a finding of invalidity.

The ruling on s 52(i) in the Allders case made it unnecessary for the Court to consider whether the Act violated s 114. Before the High Court handed down its judgment in the Allders case, Keyzer and Manion persuasively argued that a ruling in favour of Allders should be made by the Court on the s 114 issue:

s 114 of the Commonwealth Constitution immunises the Commonwealth from the operation of State stamp duties in respect of instruments creating an interest in Commonwealth property. This is because an instrument creating a legal interest in property is a type of property itself and s 114 prohibits taxes on property of any kind, where the Commonwealth is liable. Where the Commonwealth is not liable, it is further submitted that taxes on the use of property, including a lease of property, are, in substance, ‘taxes on property’ within s 114.^[69]

The other early s 114 pronouncement that is often relied upon to justify the definition of tax on property currently favoured by the Court is the Steel Rails case where it was held that the imposition of customs duties on property belonging to a State did not constitute a tax on property for the purpose of s 114. The two most referred to judicial observations from this case were uttered by O’Connor and Higgins JJ, respectively:

a tax on property ... is an exaction made in respect of the holding or ownership of property. That meaning would not include Customs duty on goods imported.^[70]

the phraseology is such as to point to taxation of property as property as being the subject of this express prohibition ... There is a fundamental difference between taxing men for having property, and taxing men for moving property and, in particular, for moving property into the country from overseas.^[71]

There were two basic reasons for the Court’s conclusion that the imposition of customs duties on State property did not breach s 114.^[72] The most important reason was that the existence of the Commonwealth Parliament’s exclusive control over, inter alia, customs duties was inconsistent with the existence of a constitutional immunity of State property from customs duties.^[73] A second reason was that s 114 applied only to a tax on property within the Commonwealth, thereby excluding a customs duty.^[74] Therefore, the comments of O’Connor and Higgins JJ were obiter dicta and, as was indicated by Gibbs CJ,^[75] Wilson^[76] and Dawson JJ^[77] in the Fringe Benefits Tax case, the Steel Rails case can only be regarded as authority for the proposition that, for the purpose of s 114, a tax on property does not encompass a customs duty. It must also be said that the distinction drawn by Higgins J between a tax for having property and a tax for moving property is inconsistent with the Court’s acceptance, in recent cases, that a tax on the Commonwealth’s (or a State’s) use of its property is in violation of s 114. In fact, the act of moving one’s property is surely an example of an owner’s use of property.

It is important to note that the restrictive construction of s 114 adopted by the High Court in the Steel Rails case and D’Emden v Pedder was probably influenced by the so-called doctrine of the immunity of instrumentalities. This doctrine was first formulated in D’Emden v Pedder as follows:

when a State attempts to give to its legislative or executive authority an operation which, if valid, would fetter, control, or interfere with, the free exercise of the legislative or executive power of the Commonwealth, the attempt, unless expressly authorised by the Constitution, is to that extent invalid and inoperative.^[78]

In Federal Amalgamated Government Railway and Tramway Service Association v New South Wales Railway Traffic Employees Association^[79] the High Court held that the doctrine laid down in D’Emden v Pedder was reciprocal.

The almost total restriction on the ability of one level of government to affect, through its laws, the other level of government, as a result of the doctrine of the immunity of instrumentalities,^[80] meant that s 114, with its very limited and specific prohibition on taxes on Crown property, became virtually superflous. In light of this state of affairs, the narrow formulation of the scope of s 114 by the Court was a reasonable, and indeed logical, step. But this doctrine was, of course, swept away in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd.^[81] In this case, commonly referred to as the Engineers case, the High Court enunciated the general principle that:

laws validly made by authority of the Constitution, bind, so far as they purport to do so, the people of every State considered as individuals or as political organisms called States - in other words, bind both Crown and subjects.^[82]

In conclusion, the decisions of the High Court in the early cases of Steel Rails case and D’Emden v

Pedder hardly constitute well reasoned and binding authorities for the adoption of a narrow interpretation of s 114.

5.2 Literal Considerations

In the Fringe Benefits Tax case Mason, Brennan and Deane JJ argued that their narrow interpretation of s 114:

gives effect to the popular or common understanding of what is involved in the prohibition of a tax of any kind of property of a State, namely a tax on the ownership or holding of property.^[83]

Three comments may be made in relation to this judicial finding. First, it is rather surprising that whilst no consensus has been possible in relation to the precise boundaries of the concepts of tax^[84] and property, when considered separately, it is, nevertheless, possible to clearly identify a popular or common understanding when these two elusive concepts “come together” in s 114. Secondly, the interpretation of the expression “acquisition of property”, which appears in s 51(xxxi) of the Constitution,^[85] indicates that the High Court itself is not always prepared to enunciate definitions of terms appearing in the Constitution which give effect to the common understanding of those terms. In fact, as has been noted by Dawson J, the term “property”, for the purpose of s 51(xxxi), was “to be given a generous interpretation [which encompasses] innominate and anomalous interests not recognised as proprietary either at law or in equity”.^[86] It is interesting to note that s 51(xxxi) is drafted more narrowly than s 114 as it merely refers to “property” rather than “property of any kind”. The final point to note is that, as the discussion below indicates, it is unlikely that the common understanding identified by the Court is what the drafters of the Constitution intended for s 114.

Section 114 is drafted in the widest possible manner as immunity is provided in respect of any tax imposed on property of any kind belonging to a State or the Commonwealth. The wide nature of the drafting of s 114 is also highlighted by the fact that the exemption is conferred on particular categories of property rather than particular categories of tax-payers. That is to say, the terms of s 114 do not limit the potential beneficiaries of this exemption from tax to a State or the Commonwealth. This feature of s 114 was recognised by Murphy J when he indicated that “there may be a tax on the property of the Commonwealth although it is payable by someone other than the Commonwealth”.^[87]

The practical effect of the narrow interpretation of s 114 has been to redraft this provision along the following lines:

a State shall not without the consent of the Parliament of the Commonwealth ... impose any tax on the Commonwealth in respect of the Commonwealth’s ownership or holding of property, nor shall the Commonwealth impose any tax on a State in respect of a State’s ownership or holding of property.

The difference between the version of s 114 set out above and the actual s 114 is quite significantand the most obvious question which arises is: why would the drafters of the Constitution draft s 114 in such broad terms if what they really intended was to introduce a fairly narrow exemption from taxation?

A study of the successive drafts of s 114 presented and discussed at the Convention Debates tells a different story as each amendment effected to s 114 had the effect of expanding, rather than restricting, the scope of s 114. The first draft of s 114 was as follows:

a State shall not, without the consent of the Parliament of the Commonwealth, ... impose any tax on any land or other property belonging to the Commonwealth.^[88]

The first amendment entailed the addition of the phrase “nor shall the Commonwealth impose any tax on any land or property belonging to a State”.^[89] By the time the final version of s 114 was agreed upon the phrase “any land or other property” was replaced by the expression “property of any kind”.

5.3 Contextual Considerations

In the SA Trust case Mason CJ, Deane, Toohey and Gaudron JJ expressed the view that:

the need to interpret the section in the context of other provisions of the Constitution, particularly the legislative powers possessed by the Parliament under s 51(i) and (ii), as well as s 90, played a large part in the adoption of the strict view of the immunity conferred by the section.^[90]

Section 51(ii) is the taxation power; s 51(i) confers power on the Commonwealth to legislate with respect to overseas and interstate trade and commerce while s 90 dictates that the power to impose

excise duties and customs duties is exclusive to the Commonwealth. The last two provisions were crucial to the Court’s conclusion, in the Steel Rails case, that s 114 was not meant to encompass customs duties. But these provisions have no relevance as far as the general operation of s 114 is concerned. It is also difficult to see what relevance the taxation power can have in determining the scope of s 114. As was acknowledged by Griffith CJ, “s 114 must, no doubt, be construed as an exception from s 51(ii), but the extent of the exception is the point to be determined”.^[91] To construe narrowly an exception to a legislative power on the basis of the very existence of the power is, with respect, an illogical step which defeats the purpose of the exception. A similar conclusion was reached by the Supreme Court of Canada:

the immunity conferred by s 125 [Canada’s version of our s 114] must override the express powers of taxation contained in ss 91(3) and 92(2). The legislative powers conferred by Part VI (ss 91 to 95) must be regarded as qualified by provisions elsewhere in the Act. Otherwise those other provisions are meaningless.^[92]

5.4 Policy Considerations

The major policy consideration underpinning the narrow construction of s 114 was outlined by Mason, Brennan and Deane JJ in the Fringe Benefits Tax case:

it gives a powerful measure of protection to the financial integrity of a State without preventing the Commonwealth from taxing every form of transaction to which a State is a party. No compelling reason has been advanced for giving the constitutional immunity any wider operation.^[93]

Conversely, the Supreme Court of Canada has observed that:

the purpose of this immunity ... is to prevent one level of government from appropriating to its own use the property of the other, or the fruits of that property. This immunity would be illusory if it applied only to taxes ‘on property’ but not to a tax ... in respect of a transaction affecting its [the Crown’s] property or on the transaction itself.^[94]

The two passages quoted above indicate that the divergence of views between the High Court and the Supreme Court of Canada is attributable, not to conflicting assessments of the objects of s 114 and its Canadian counterpart, but instead to different approaches as to the “legal measures” that are appropriate for the fulfilment of such objects. The Canadian Court sees a broad interpretation as the only effective way of providing the level of protection envisaged by this constitutional prohibition. On the other hand, the High Court is of the view that the conferral of a full immunity from taxes on Crown property is not desirable as it would unduly restrict the ability of the Commonwealth to exercise its taxation power in relation to transactions involving the States and their agencies.

Even if one’s preference is for the policy under-pinnings of the concept of tax on property enunciated by the High Court, it can hardly be said that such considerations are so overwhelming as to compel the approval of the High Court’s approach, especially when one considers the assessment formulated above of the other arguments furnished by the Court.

6. CONCLUSION

This article has explored the leading pronouncements of the High Court on s 114 of the Commonwealth Constitution which prohibits State taxes on Commonwealth property and Commonwealth taxes on State property. It has been highlighted that the scope of s 114 has been curtailed as a result of:

the High Court’s formulation of a fairly narrow definition of the terms “tax on property” pursuant to which immunity from taxation is only provided in relation to taxes on the Commonwealth’s (or a State’s) ownership or holding of property; and

the Court’s tendency to apply this definition by focusing on the legal operation of the Act under challenge, instead of utilising what the Court has unambiguously indicated as the appropriate technique for s 114, and indeed many constitutional provisions,^[95] namely, a determination of the substance or practical effect of the law in question.

Finally, the reasons for the Court’s rejection of a broader interpretation of s 114 have been critically evaluated and have been found to be unpersuasive.

^[1] In relation to the ability of one State to levy taxes on another State, the High Court has recently made the following comments: "no argument was advanced that there is any constitutional impediment to the Crown in right of one State imposing liability by way of a stamp duty upon the Crown in right of another State. There is no provision as between States such as s 114 of the Constitution which forbids a State from imposing a tax on CommonweaIth property or the CommonweaIth from imposing a tax on State property. No doubt there remain territorial limitations upon the legislative powers of the States which arise from the federal structure of which each State is a part": State Authorities Superannuation Board v Commissioner of State Taxation (WA) 96 ATC 5167, 5171 (per Brennan CJ, Dawson, Toohey and Gaudron JJ) ("the State Authorities case").

^[2] Queensland v Commonwealth 87 ATC 4029, 4037 ("the Fringe Benefits Tax case").

^[3] [1904] HCA 50; (1904) 1 CLR 208.

^[4] Ibid 232.

^[5] 79 ATC 4429.

^[6] The Trust "consists of a chairman and two members appointed by the Governor-General and its function is to manage the Superannuation Fund created by that Act, for that purpose attending to investment of the moneys of the fund": 79 ATC 4429, 4432 (per Stephen J).

^[7] Ibid 4443 (per Mason J).

^[8] Ibid 4431.

^[9] Ibid 4450. Aickin J reviewed s 160(1) whilst determining whether the Trust could be regarded as the Crown in right of the Commonwealth.

^[10] 79 ATC 4429.

^[11] Ibid 4433-4434.

^[12] Ibid 4447-4448.

^[13] Ibid 4441. Barwick CJ did not provide any explanation for his conclusion that the Trust was a manifestation of the Crown in right of the Commonwealth.

^[14] "But in this respect to give a strict construction to s 114 would be more likely to frustrate than to achieve the attainment of its object, namely, the protection of the property of the Commonwealth and the States from the imposition of taxation by each other in the interests of their respective financial integrity": DFC of T v State Bank of New South Wales 92 ATC 4079, 4083 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ) ("the State Bank case").

^[15] 92 ATC 4079.

^[16] The manner in which the Court deaIt with the First Superannuation Fund case was not, however, entirely satisfactory. The Court indicated that "Stephen J's remarks [concerning the need to satisfy the Court that the entity claiming the s 114 immunity is the Crown in right of the CommonweaIth] do not support the plaintiff's submission because his Honour was not enunciating a proposition of the kind proposed by the plaintiff; he was merely recounting a step in an argument which fell for consideration": 92 ATC 4079, 4083 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ). As has been noted above, the four Justices who, in the First Superannuation Fund case, considered the issue of whether the Trust was entitled to the immunity offered by s 114, based their rulings on an assessment of whether the Trust could be equated to the Crown in right of the CommonweaIth. Had their Honours been of the view that the concept of the Crown in right of the CommonweaIth was not the appropriate test to be applied in relation to s 114, it is logical to expect that their attention would have then turned to a consideration and application of more suitable principles and concepts. This did not take place.

^[17] 92 ATC 4079, 4083.

^[18] Ibid 4084.

^[19] [1904] HCA 50; (1904) 1 CLR 208.

^[20] Ibid 239 (per O'Connor J).

^[21] Ibid 242 (per O'Connor J).

^[22] See Bank of New South Wales v Commonwealth [1948] HCA 7; (1948) 76 CLR 1, 363 (per Dixon J); Crouch v Commissioner for Railways (1985) 159 CLR 22; State Bank of New South Wales v Commonwealth Savings Bank of Australia [1986] HCA 62; (1986) 161 CLR 639; State Authorities case 96 ATC 5167, 5178 (per McHugh and Gummow JJ); and Re Residential Tenancies Tribunal of New South Wales; Ex parte Defence Housing Authority (1997) 146 ALR 495. Section 75 confers upon the High Court original jurisdiction in all matters "in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party" (s 75(iii)) as well as matters "between States, or between residents of different States, or between a State and a resident of another State" (s 75(iv)).

^[23] In Queensland Electricity Commission v Commonwealth (1985) 159 CLR 182, 218 Mason J indicated that the immunity from discriminatory CommonweaIth laws conferred upon the States pursuant to this implied doctrine of intergovernmental immunity also extends to entities that do not represent the Crown in right of a State as long as they are agencies or instrumentalities of the State in question. For more details on this doctrine, see V Morabito, "CommonweaIth Taxes, State Governments and the Doctrine of Intergovernmental Immunity" (1997) 26 Australian Tax Review 182.

^[24] State Bank case 92 ATC 4079, 4081-4082 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).

^[25] "The question whether a particular tax is properly to be characterised, for the purpose of s 114, as a tax 'on property of any kind belonging to a State' must be determined by reference to matters of substance rather than mere form": Fringe Benefits Tax case 87 ATC 4029, 4040 (per Mason, Brennan and Deane JJ).

^[26] State Bank case 92 ATC 4079, 4081-4082 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).

^[27] 87 ATC 4029.

^[28] Mason, Brennan, Deane, Wilson and Dawson JJ; Gibbs CJ dissenting.

^[29] Fringe Benefits Tax case 87 ATC 4029, 4041.

^[30] Ibid 4038.

^[31] "In all but one of the judgments in that case [the Fringe Benefits Tax case], a tax on the use of State property or a tax on the use of property for State purposes was instanced as an illustration of a tax which fell within the prohibition contained in s 114": State Bank case 92 ATC 4079, 4082 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).

^[32] Gibbs CJ went one step further by arguing that his conclusion would be arrived at regardless of whether form or substance was considered: Fringe Benefits Tax case 87 ATC 4029, 4038.

^[33] Ibid 4043.

^[34] Ibid 4044.

^[35] This section provides that the power to levy excise duties and customs duties is an exclusive power of the Commonwealth Parliament. For more details see C Caleo, "Section 90 and Excise Duties: A Crisis of Interpretation" [1987] MelbULawRw 20; (1987) 16 Melbourne University Law Review 296; N Dixon, "Section 90 - Ninety Years On" (1993) 21 Federal Law Review 228; and N McLeod, "State Taxation: Unrequited Revenue and the Shadow of Section 90" (1994) 22 Federal Law Review 476.

^[36] The shortcomings of the criterion of the liability test were vividly highlighted by the High Court's judgment in Dennis Hotels Pty Ltd v Victoria [1960] HCA 10; (1960) 104 CLR 529. The High Court, by a majority, upheld the validity of certain licence fees imposed on sellers of liquor in Victoria which were equal to 6% of the value of the liquor purchased by the holder of the licence during the 12 months, ending on 1 June, preceding the date of the application for the renewal of the licence. Kitto, Menzies and Taylor JJ concentrated on the legal operation of the legislative scheme and reached the unpersuasive conclusion that the fees did not constitute taxes on goods, and were therefore not excise duties, as the carrying on of a business, rather than the taking of a step in the distribution of the goods, was the criterion of liability chosen by the Victorian legislation. The minority Justices - Dixon CJ, McTiernan and Windeyer JJ − determined the character of the fees as a matter of substance, rather than form, and correctly concluded that the practical operation of the Victorian Act indicated unambiguously that it imposed a tax on goods. Dennis Hotels was accepted in subsequent cases as authority for the principle that a licence fee, imposed for the privilege of carrying on a business of selling goods, did not constitute an excise duty where it was calculated "by reference to the value of the quantity of [the commodity] sold [or purchased] during a period preceding that in respect of which the licence is granted": HC Sleigh Ltd v South Australia (1977) 136 CLR 475, 491 (per Gibbs J). The "historical anomaly" (Capital Duplicators Ply Ltd v Australian Capital Territory [No 2] [1993] HCA 67; (1993) 178 CLR 561, 605 (per Dawson J)) created by the Dennis Hotels doctrine has been substantially removed by the recent judgment of the High Court in Ngo Ngo Ha v New South Wales [1997] HCA 34; (1997) 71 ALJR 1080. For more details on this recent development see V Morabito and N Bellamy, "State Licence Fees, the Constitution and the High Court" [1997] LawIJV 312; (1997) 71(10) Law Institute Journal 60 and RA Dick, "A Loss of State Autonomy: Implications of the Ha and Hammond Decisions" (1998) 27 Australian Tax Review 30.

^[37] As was vigorously argued by a Canadian judge, in relation to the Canadian Constitution's corresponding provision, "it would be an extraordinary result if the proper interpretation of this exemption were to be said to be that while taxes imposed upon the owner in respect of his ownership of these things fall within the exemption, nevertheless taxes imposed upon the owner in respect of his use of the same items do not": statement by Kellock J of the Supreme Court of Canada quoted with approval by Viscount Simon of the Privy Council in A-G Sask v CPR Co [1953] AC 594, 616.

^[38] 92 ATC 4066.

^[39] Mason CJ, Deane, Toohey, Gaudron and Dawson JJ; Brennan and McHugh JJ dissenting.

^[40] 92 ATC 4066, 4072.

^[41] In Nowegijick v The Queen (1983) 1 SCR 29, the Supreme Court of Canada held that a tax on income constitutes a tax on property because money acquired as gain or profit from capital or labour is property. Mason CJ, Deane, Toohey and Gaudron JJ rejected the relevance of this Canadian precedent on the basis that it "did not address, even less decide, the question whether income tax is a tax on the ownership or holding of property in the sense in which s 114 has been interpreted and that is the critical question to be decided": 92 ATC 4066, 4071. It is submitted that this reasoning is, with respect, unconvincing as it would remove, if applied generally, the influence of overseas jurisprudence on Australian case law. In fact, it essentially requires that the overseas Courts make adjudications in relation to provisions which are, not only very similar to the Australian provisions in question, but which have also been interpreted through the application of judicial tests that are identical to those formulated by Australian Courts, before the High Court will even consider these overseas pronouncements.

^[42] 92 ATC 4066, 4075 (per Brennan and McHugh JJ).

^[43] Ibid 4074.

^[44] Ibid. On the other hand, Mason CJ, Deane, Toohey and Gaudron JJ commented that "were the immunity to extend to a tax on income ... the CommonweaIth Parliament would be denied power to subject a corporation owned by a State to a liability to pay income tax even if the corporation is engaged in commercial competition with private enterprise": 92 ATC 4066, 4070.

^[45] Ibid 4072.

^[46] S Waters and P Stone, "Immunity from Taxation under Section 114 of the Constitution" (1992) 66 Australian Law Journal 601, 603.

^[47] 92 ATC 4079.

^[48] See the discussion above under the heading "a State ... [and] the Commonwealth".

^[49] 92 ATC 4079, 4082 (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ).

^[50] In Re Federal Tax on Exported Natural Gas (1982) 136 DLR (3d) 385 ("the Exported Natural Gas case"). Section 125 of the British North America Act 1867 (renamed the Constitution Act 1867 by the Constitution Act 1982, s 53(1), Sch, item 1) provides that "no lands or property belonging to Canada or any Province shall be liable to taxation".

^[51] Fringe Benefits Tax case 87 ATC 4029, 4040-4041 (per Mason, Brennan and Deane JJ) and 4045 (per Dawson J); State Bank case 92 ATC 4079, 4081 (per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ); and SA Trust case 92 ATC 4066, 4069 (per Mason CJ, Deane, Toohey and Gaudron JJ).

^[52] [1904] HCA 1; (1904) 1 CLR 91.

^[53] [1908] HCA 28; (1908) 5 CLR 818.

^[54] [1904] HCA 1; (1904) 1 CLR 91, 108 (per Griffith CJ, Barton and O'Connor JJ).

^[55] Fringe Benefits Tax case 87 ATC 4029, 4035.

^[56] Superannuation Fund Investment Trust v Commissioner of Stamps (SA) (No 2) 80 ATC 4392, 4395 ("the Second Superannuation Fund case").

^[57] Fringe Benefits Tax case 87 ATC 4029, 4035 (per Gibbs CJ).

^[58] 79 ATC 4429.

^[59] Ibid 4431. The Chief Justice was the only Justice to consider the question of whether the stamp duty could be regarded as a tax on property belonging to the Trust. It will be recalled from the discussion of this case appearing in the earlier sections of this article, that Stephen and Aickin JJ ruled that s 114 did not apply as the Trust could not be regarded as the Crown in right of the Commonwealth while Murphy and Mason JJ held that no violation of s 114 had taken place as the stamp duty was levied with the consent of the Commonwealth Parliament.

^[60] 80 ATC 4392.

^[61] This amendment forced the Supreme Court to address the legal issue that was avoided in the First Superannuation Fund case by all the High Court Justices other than Barwick CJ, namely whether the imposition of State stamp duties on instruments to which the Trust was a party was contrary to the terms of s 114.

^[62] King CJ and Mitchell J; Matheson J dissenting.

^[63] 80 ATC 4392, 4395.

^[64] 96 ATC 5135.

^[65] This section confers upon the Commonwealth the exclusive power to make laws with respect to "all places acquired by the Commonwealth for public purposes".

^[66] 96 ATC 5135, 5140 (per Brennan CJ).

^[67] Brennan CJ, Gaudron, McHugh, Gummow and Kirby JJ; Dawson and Toohey JJ dissenting.

^[68] For more details see G Mann, "The Impact of the Allders Decision on State Taxes" (1997) 26 Australian Tax Review 196.

^[69] P Keyzer and D Manion, "Commonwealth Places Acquired for Public Purposes and State Taxes on Commonwealth Property: A Consideration of Some Constitutional Issues Relating to Stamp Duties" [1996] UNSWLawJl 4; (1996) 19 University of New South Wales Law Journal 33, 44.

^[70] [1908] HCA 28; (1908) 5 CLR 818, 844.

^[71] Ibid 854

^[72] Fringe Benefits Tax case 87 ATC 4029, 4036 (per Gibbs CJ).

^[73] "Looking at the fact that the powers to impose Customs duties and to regulate commerce with other countries are exclusive, to construe s 114 in the way contended for would be to cut down in that section what the exclusive grant in itself involves, namely, the absolute power to select the subjects and prescribe the quantum of Customs duty": Steel Rails case [1908] HCA 28; (1908) 5 CLR 818, 838-839 (per Barton J).

^[74] "Neither the Commonwealth nor a State can impose tax upon property which is not within the geographical limits of its jurisdiction": [1908] HCA 28; (1908) 5 CLR 818, 831 (per Griffith CJ).

^[75] Fringe Benefits Tax case 87 ATC 4029, 4036-4037.

^[76] Ibid 4042.

^[77] Ibid 4046.

^[78] [1904] HCA 1; (1904) 1 CLR 91, 111 (per Griffith CJ, Barton and O'Connor JJ). The application of this doctrine resulted in the invalidity of State law that purported to levy income tax on the salaries of Commonwealth officers as well as State legislation that sought to impose stamp duty on an instrument necessary for the acquisition of property by the Commonwealth: see Deakin v Webb [1904] HCA 57; (1904) 1 CLR 585 and Commonwealth v New South Wales [1906] HCA 16; (1906) 3 CLR 807, respectively.

^[79] [1906] HCA 94; (1906) 4 CLR 488. Therefore, the Conciliation and Arbitration Act 1904 (Cth) could not bind State railways.

^[80] For a discussion of the exceptions to this doctrine see L Zines, The High Court and the Constitution (4th ed, 1997) 3-5.

^[81] [1920] HCA 54; (1920) 28 CLR 129.

^[82] Ibid 153 (per Knox CJ, Isaacs, Rich and Starke JJ).

^[83] 87 ATC 4029, 4041.

^[84] See, for instance, the divergence of views among the High Court Justices in Australian Tape Manufacturers Association Ltd v Commonwealth (1993) 176 CLR 480 in relation to the definition of tax for the purpose of the taxation power. For more details see V Morabito and S Barkoczy, "What is a Tax? - The Erosion of the 'Latham Definition'" (1996) 6 Revenue Law Journal 43.

^[85] This constitutional provision confers upon the Commonwealth Parliament the power to make laws with respect to "the acquisition of property on just terms from any State or person for any purpose in respect of which the Parliament has power to make laws".

^[86] Georgiadis v Australian & Overseas Telecommunications Corporation [1994] HCA 6; (1994) 179 CLR 297, 314. Similarly, the term "acquisition" has been construed in a very broad manner. See, generally, P Hanks, Constitutional Law in Australia (2nd ed, 1996) 499-510.

^[87] Bevelon Investments Pty Ltd v Melbourne City Council [1976] HCA 49; (1976) 135 CLR 530, 551.

^[88] Sydney, Convention Debates, 8 April 1891, 883.

^[89] Ibid.

^[90] 92 ATC 4066, 4070.

^[91] Steel Rails case [1908] HCA 28; (1908) 5 CLR 818, 829.

^[92] Exported Natural Gas case (1982) 136 DLR (3d) 385, 435 (per Martland, Ritchie, Dickson, Beetz, Estey and Chouinard JJ).

^[93] Fringe Benefits Tax case 87 ATC 4029, 4041.

^[94] Exported Natural Gas case (1982) 136 DLR (3d) 385, 444 (per Martland, Ritchie, Dickson, Beetz, Estey and Chouinard JJ).

^[95] See, for instance, Cole v Whitfield [1988] HCA 18; (1988) 165 CLR 360 and Street v Queensland Bar Association [1989] HCA 53; (1989) 168 CLR 461.

Vince Morabito is a Senior Lecturer in Law at Monash University's Department of Business Law and Taxation. He holds BEc, LLB (Hons) and LLM degrees. Vince has written several articles in the areas of taxation law, tax administration, constitutional law, civil procedure and judicial administration. He is also the co-author of three books including the 1998 Core Tax Legislation and Study Guide published by CCH Australia Limited.