• The impact of this case on ATO policy is discussed in Decision Impact Statement: TT-Line Company Ltd v Commissioner of Taxation (Published 1 September 2011).

TT-LINE COMPANY PTY LTD v FC of T

Judges: Emmett J
Edmonds J

Perram J

Court:
Full Federal Court, Sydney

MEDIA NEUTRAL CITATION: [2009] FCAFC 178

Judgment date: 18 December 2009

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Perram J

65. I have had the advantage of reading in draft the reasons of Edmonds J with which I agree. I would only add these few additional remarks.

66. Section 114 of the Constitution prohibits the imposition by the Commonwealth of " any tax on property of any kind belonging to a State " . That prohibition made impossible the imposition by the Commonwealth upon the States of a tax on supplies of the kind contemplated in the legislation introducing the GST. At least in relation to the provision of supplies of property, the interposition of a State at any point along the supply chain would have disrupted the process of credits upon which the system depends. The introduction of the GST could not practically proceed therefore unless the States voluntarily agreed to subject themselves to it. This they promised to do by the Financial Relations Agreement (Consequential Provisions) Bill (Cth) 1999. Clause 17 of that agreement provided:

" The Parties intend that the Commonwealth, States, Territories and local government and their statutory corporations and authorities will operate as if they were subject to the GST legislation. They will be entitled to register, will pay GST or make voluntary or notional payments where necessary and will be entitled to claim input tax credits in the same way as non-Government organisations . All such payments will be included in GST revenue. "

(emphasis added)

67. Two aspects of this are worth noting. First , as envisaged by cl 17 the liability of the States and their organs to the GST is achieved not by federal taxation legislation but instead by a series of State acts: e.g. s 5 Intergovernmental Agreement Implementation (GST) Act 2000 (NSW). Secondly , and more significantly for present purposes, what cl 17 contemplated was liability " in the same way " as non-government organisations. That principle of equality of treatment is a practical one but encounters conceptual difficulties where the governmental activity in question bears no resemblance to the activities of any non-government organisation. At that point, the imposition of liability to tax " in the same way " as a non-governmental organisation makes little sense.

68. Of course, to make that observation provides little assistance in locating the demarcation between the governmental and the non-governmental. However, cl 17, which is certainly part of the background against which ss 9-15(3)(c) is to be interpreted, suggests that the expression " specifically covered by an appropriation " is seeking to draw a line between those matters where a government organisation might be exposed to a GST liability " in the same way " as a non-governmental one, and those where that might not be so. So viewed, the fact in this case that the payments could be made, under the appropriation, to non-government organisations who, unlike the appellant, would have to collect GST rather tends to suggest that the principle of equality of treatment embodied in cl 17 is undermined if the appellant ' s construction of ss 9-15(3) be correct.

69. That observation, however, does not easily resolve the construction issue which arises. This is because the language used by the Parliament - " specifically covered by an appropriation " - does not, at least as a matter of first impression, present some meaning which might be seen as serving the end identified in cl 17. The learned primary judge thought that " specifically " should be interpreted to mean " expressly " or " explicitly " and that those words qualified the payment. The appellant, on the other hand, contended that all that is meant is that appropriation be sufficiently specific to cover the payment claimed to attract GST. The trial judge ' s view is, with respect, more consistent with cl 17. This is for the positive reason that expenditure by way of specific appropriation is unlikely to resemble any expenditure which a non-government organisation might make and hence to fall outside what is contemplated by cl 17. It is also for the negative reason identified by Emmett and Edmonds JJ that the appellant ' s position leaves non-government operators having to collect the GST whilst exempting the appellant, an outcome inconsistent with the principle of equality underpinning cl 17.

70. I would dismiss the appeal.