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Clarke v Commissioner of Taxation

[2009] HCA 33

(Decision by: French CJ)

Clarke
vCommissioner of Taxation

Court:
High Court of Australia

Judges:
French CJGummow J
Hayne J
Heydon J
Kiefel J
Bell J

Subject References:
Constitutional Law (CTH)
Powers of Commonwealth Parliament
Taxation
Superannuation contributions surcharge
State parliamentary pensions
Implied limitation on Commonwealth legis-lative power
Melbourne Corporation doctrine
Where appellant former member of South Austra-lian Parliament
Where appellant eligible for parliamentary pension
Whether Acts assessing and imposing superannuation contributions surcharge invalid in application to appellant
Relevance of fact that State Acts passed in response to surcharge
'Curtailment of capacity of the States to function as governments'
'Dis-crimination'
'Special burden'

Legislative References:
Constitution - s 7; s 9; s 10; s 15; s 25; s 29; s 30; s 31; s 41; s 51(ii); s 95; s 107; s 108; s 111; s 123; s 124
Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 - s 5; s 8; s 9; s 11; s 15(6); s 15(7); s 38
Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 - s 4
Superannuation Guarantee (Administration) Act 1992 - The Act
Parliamentary Superannuation Act 1974 (SA) - The Act
Southern State Superannuation Act 1994 (SA) - The Act
Statutes Amendment (Commutation for Superannuation Surcharge) Act 1999 (SA) - s 4
Statutes Amendment (Miscellaneous Superannuation Measures) Act 2004 (SA) - s 14
Superannuation (Benefit Scheme) Act 1992 (SA) - The Act

Case References:
-

Hearing date: 2 September 2009
Judgment date: 2 September 2009

Decision by:
French CJ

Introduction

[1] Under the authority conferred upon it by the Constitution the Parliament of the Commonwealth can make laws affecting the States and their agencies. It cannot, however, make laws which destroy or significantly burden, curtail or weaken either the capacity of the States to carry out their proper legislative, executive and judicial functions or their exercise of those functions. An Act of the Commonwealth Parliament imposing a surcharge specifically upon the pension entitlements of State politicians is said to be such a law.

[2] Ralph Desmond Clarke, who was born on 4 October 1951, was elected in 1993 to the Parliament of South Australia as a member of the House of Assembly. He commenced his term on 11 December 1993. He was re-elected in December 1997 and served as a member until 8 February 2002, when he lost his seat at the State election.

[3] Between 15 February 2000 and 15 February 2005 the Commissioner of Taxation ("the Commissioner") issued assessments of superannuation contribution surcharge in respect of Mr Clarke's entitlements under three State superannuation schemes for the financial year ended 30 June 1997 up to and including the financial year ended 30 June 2001. The funds were the contributory Parliamentary Superannuation Scheme ("the PS Scheme") established by the Parliamentary Superannuation Act 1948 (SA) and continued under the Parliamentary Superannuation Act 1974 (SA) ("the PS Act"); the Southern State Superannuation Scheme ("the SSS Scheme") established by the Southern State Superannuation Act 1994 (SA) ("the SSS Act"); and the State Superannuation Benefit Scheme, which was established by the Superannuation (Benefit Scheme) Act 1992 (SA) ("the SBS Act"), and was effectively rolled over into the SSS Scheme by the Southern State Superannuation (Merger of Schemes) Amendment Act 1998 (SA).

[4] The Commissioner's assessments were issued pursuant to the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (Cth) ("the CPSF Assessment Act") and the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 (Cth) ("the CPSF Imposition Act").

[5] Mr Clarke objected to the assessments. His objections were disallowed and on 2 May 2006 he sought review by the Administrative Appeals Tribunal ("the Tribunal") of the Commissioner's disallowance decisions. [1] On the basis of a statement of agreed facts the Tribunal referred questions of law to the Full Court of the Federal Court, including the question:

3. Are the [CPSF Imposition Act] and/or the [CPSF Assessment Act] invalid in their application to the applicant:

(a)
on the ground that they so discriminate against the State of South Australia or so place a particular disability or burden upon the operations and activities of the State of South Australia, as to be beyond the legislative power of the Commonwealth.

Mr Clarke relied upon the decision of this court in Austin v Commonwealth , [2] in which the CPSF Assessment and Imposition Acts were held invalid in their application to the statutory pension entitlements of a judge of the Supreme Court of New South Wales. The Full Court distinguished Austin and answered the question in the negative. [3] On 13 November 2008, this court gave special leave to appeal from the judgment and orders made on 13 June 2008. [4]

[6] Further details of the factual and procedural history are set out in the joint judgment, as are details of the relevant State and Commonwealth legislation beyond what appears in the outline that follows. [5]

[7] In my opinion, the appeal should be allowed and question 3(a) should be answered in the affirmative. I agree with the orders proposed in the joint judgment.

The challenged superannuation surcharge legislation

[8] By legislation of general application enacted in 1997, a surcharge was imposed on superannuation contributions made by or for taxpayers above certain taxable income thresholds. [6] The liability was imposed upon the providers of the superannuation benefits. [7] This, in effect, required payment to be made out of the superannuation funds. [8] The surcharge did not apply to the Commonwealth [9] or property of any kind belonging to a State. [10]

[9] A varied superannuation surcharge scheme was established by the CPSF Assessment and Imposition Acts for "constitutionally protected funds", a class defined by regulations made under Pt IX of the Income Tax Assessment Act 1936 (Cth). [11] The regulations referred to funds established under a number of listed State Acts including the PS Act, the SBS Act and the SSS Act. [12]

[10] Liability under the CPSF Acts was imposed upon a fund member if the member's adjusted taxable income exceeded a defined threshold amount. [13] The Acts applied, inter alia, to persons entitled to benefits under a subset of constitutionally protected funds, including the PS Scheme, which were designated "defined benefits superannuation schemes". [14] Surchargeable contributions, in respect of a defined benefits superannuation scheme, were calculated by reference to the actuarial value of the benefits accrued to the member for a given financial year, plus the actuarial value of the administration expenses and risk benefits provided in respect of the member for that year. [15]

[11] The CPSF Assessment Act provided for deferral of liability to pay the surcharge. Where a member became liable, the Commissioner was required to give the member a notice of liability. The amount was to be paid within three months of the date on which the notice was issued. [16] If the surcharge was not paid when due, the person was liable to pay the general interest charge [17] on the unpaid amount. [18]

Commutation rights

[12] It was open to Mr Clarke, under s 21(1) of the PS Act, to commute part of his PS Scheme pension. By so doing he could have covered the potential or actual surcharge liability, in respect of his membership of the PS Scheme. This was true of all members affected by the surcharge. It was also an agreed fact that the commutation factor of $10 for every $1 reduction in the pension would be likely to result in the lump sum payable being less than the present value of the amount of pension foregone for members aged under 75 at the date of commutation.

[13] In 1999, s 21AA was introduced into the PS Act [19] to ameliorate the position of members of the South Australian Parliament. It provided for PS Scheme members to commute enough of their pension entitlement to pay the deferred superannuation contribution surcharge. The applicable commutation factors were to be determined by the South Australian Treasurer on the recommendation of an actuary. [20] Similar amendments were made to the Judges' Pensions Act 1971 (SA), the Police Superannuation Act 1990 (SA) and the Superannuation Act 1988 (SA).

[14] In the Second Reading Speech for the 1999 Bill introducing s 21AA the Minister said that the surcharge debt at retirement could be substantial, leading "to the problems which are to be addressed by this Bill". One of the problems was that it might be up to 18 months after retirement before the member was aware of the extent of the total debt. Another problem was that persons receiving benefit in the form of an income stream or pension might not have funds readily available to pay the debt. He said: [21]

The general aim of the Bill is to ensure that persons with an accumulated surcharge debt with the Australian Taxation Office, have at retirement a method of obtaining a lump sum to expunge the debt with the Australian Taxation Office.

A similar provision was made for the SSS Scheme and is described in the joint judgment.

Implied limits on Commonwealth legislative power affecting the States

[15] The Constitution assumes the continuing existence of the States, their co-existence as independent entities with the Commonwealth, and the functioning of their governments. This assumption is readily inferred from the reference to "one indissoluble Federal Commonwealth" in the Preamble and the terms of ss 3, 5 and 6 of the Commonwealth of Australia Constitution Act 1900 (Imp) [22] and the provisions of Ch V of the Constitution itself. It underpins an implied limitation on Commonwealth power to make laws affecting the States. The existence of that limitation, variously expressed, has been acknowledged repeatedly in the decisions of this court. In the early, post-Engineers [23] authorities, it was expressed in terms of "reservations" from the Engineers principle. The "reservations" evolved into propositions, sometimes treated as discrete principles or elements, that the Commonwealth could not make laws singling out the States by placing special burdens on them, nor could it make laws of general application which would destroy or curtail the continued existence of the States or their capacity to function as governments. [24]

[16] In their joint judgment in Austin , Gaudron, Gummow and Hayne JJ identified "but one limitation" requiring the assessment in any given case of "the impact of particular laws by such criteria as 'special burden' and 'curtailment' of 'capacity' of the States 'to function as governments'". [25] These criteria required consideration of the form, substance and actual operation of the relevant federal law. [26] They would involve "matters of evaluation and degree and of 'constitutional facts' which are not readily established by objective methods in curial proceedings". [27] Kirby J expressed a similar view. [28] Gleeson CJ, in like vein, put it thus: [29]

Discrimination is an aspect of a wider principle; and what constitutes relevant and impermissible discrimination is determined by that wider principle.

Gleeson CJ referred back to the identification by Mason J in the Queensland Electricity Commission Case [30] of the foundation for the implied limitation in the "constitutional conception of the Commonwealth and the States as constituent entities of the federal compact having a continuing existence reflected in a central government and separately organised State governments". [31] The identification in Austin of a generally stated implied limitation, variously manifested, is consistent with the origins and evolution of the implication through decisions of this court after the Engineers Case .

[17] In the Engineers Case , the court held that the Parliaments of the Commonwealth and the States each have the power to enact laws, within their legislative competency, binding on the Commonwealth, the States and the people. [32] The effect, on specific legislative powers such as taxation, of the words "subject to this Constitution" at the commencement of s 51 was left open. So too was the position of the State prerogative, [33] although that reservation has since been eroded. [34] The court did not specifically refer to an implied limitation on the legislative powers of the Commonwealth or the States. But as Dixon J was later to point out in West v Cmr of Taxation (NSW ), [35] Isaacs J, who delivered the plurality judgment in the Engineers Case , referred in his dissenting judgment in Pirrie v McFarlane [36] to the:

natural and fundamental principle that, where by the one Constitution separate and exclusive governmental powers have been allotted to two distinct organisms, neither is intended, in the absence of distinct provision to the contrary, to destroy or weaken the capacity or functions expressly conferred on the other. (emphasis in original)

Such destruction or weakening, according to Isaacs J, was prima facie outside the respective grants of power. [37] The implied limitation was expressed in general terms. So expressed, it was capable of being applied by reference to the attributes and consequences of a Commonwealth law including whether it singled out the States, the nature and extent of the burden which it imposed upon State functions, and the nature of the functions which it burdened. There was never any constitutional imperative to treat as the only elements of the general principle, or as distinct and exhaustive rules, particular ways in which it could be infringed or its infringement ascertained.

[18] What Isaacs J said in dissent in Pirrie v McFarlane might have to be considered in the light of the distinction which he made, again in dissent, in the Teachers' Case [38] between "the primary and inalienable functions of a constitutional Government", and other functions "voluntarily undertaken by the State, but which are ordinarily or primarily the subject of private individual enterprise". The distinction was rejected by Windeyer J in the Professional Engineers' Case . [39] A similar distinction between "governmental functions" and "trading functions" was rejected in the AEU Case . [40] The rejection of such distinctions makes no difference to the content of the limitation, but rather widens the scope of its application.

[19] The principle emerging from the Engineers Case was formulated by Dixon J in a number of cases as requiring a broad interpretation of Commonwealth legislative power, and an acceptance of the capacity of the Commonwealth to enact legislation affecting States and their agencies. [41] But no law of the Commonwealth could "impair or affect the Constitution of a State". [42] In Farley's Case , [43] in obiter on the constitutional question, Dixon J referred to the identification in the Engineers Case of the taxation power as one which might come up for special consideration in relation to the States. [44] And in Essendon Corporation v Criterion Theatres Ltd [45] he said that the extent of the taxation power was a third reservation in relation to the principle in the Engineers Case , as he had reformulated it. Nevertheless, the States have no general immunity from the taxation power of the Commonwealth. [46] State employees or what might broadly be described as "constitutional office holders" do not enjoy such an immunity. The imposition of income tax on the salaries of members of Parliament, State Ministers, and judges does not infringe any implied prohibition. Nor does the imposition of fringe benefits tax in respect of benefits provided to them by the State. These are laws of general application which do not inhibit the capacity of the States to appoint and remunerate public officers. [47]

[20] In a multifactorial approach to ascertaining whether a law of the Commonwealth infringes the general limitation against laws which destroy or weaken the capacity or functions of the States, the nature and subject matter of the law may be relevant. Thus a law with respect to taxation may be viewed differently from a law with respect to defence. As was said in the joint judgment in Austin : [48]

Special considerations arise where it is the reach of the federal legislative power with respect to taxation that is in question.

One such consideration was "the lack of ingenuity needed to burden the exercise of State functions by use of the taxation power". [49] By way of comparison, laws with respect to "the naval and military defence of the Commonwealth and of the several States" [50] involve the protection of all polities making up the federation. The court's decision in the First Uniform Tax Case [51] suggests that the limitation, which was there propounded in terms of discrimination, had little purchase on the defence power at the time. The court upheld legislation authorising the temporary transfer from the States to the Commonwealth public service of officers concerned with the assessment and collection of State income tax.

[21] Consistently with the broad approach to the interpretation of Commonwealth legislative power enunciated in the Engineers Case , a Commonwealth bankruptcy law under which a court ordered a weekly contribution to creditors out of a bankrupt State parliamentarian's allowances survived scrutiny in Stuart-Robertson v Lloyd . [52] It did so on the basis that it did not impose any burden upon legislators as such. [53] It was unnecessary to consider how much further the power of the Commonwealth Parliament could have extended. [54] The law was evidently, although not expressly, upheld on the basis that it was a law of general application and did not interfere with governmental functions. A submission to the contrary was made and implicitly rejected. [55]

[22] Although characterisation was sufficient in R v Commonwealth Court of Conciliation and Arbitration ; Ex parte Victoria [56] to invalidate regulations purporting to control the conditions of Victorian public servants not engaged in war-related work, Starke J foreshadowed a formulation of the limitation in terms of laws "singling out the States". [57] While he did not use that expression, he said that the Engineers Case was not authority for the general proposition that the States were subject "as such" to the legislation of the Commonwealth. [58]

[23] It was primarily the character of the law under challenge in the Melbourne Corporation Case as "singling out another government and specifically legislating about it" [59] that led to its invalidation. The law prohibited banks from dealing with States or their authorities without written consent from the Treasurer. Latham CJ relied upon its characterisation as a law with respect to State government functions, which did not fall within any head of Commonwealth power. [60] Rich J, on the other hand, held it invalid because it impaired the powers of the States, essential to the effective working of their governments, to freely use banking functions. [61] Starke J saw it as "a practical question" whether legislation or executive action by the Commonwealth destroyed, curtailed or interfered with the operations of a State. He said: [62]

No doubt the nature and extent of the activity affected must be considered and also whether the interference is or is not discriminatory but in the end the question must be whether the legislation or the executive action curtails or interferes in a substantial manner with the exercise of constitutional power by the other.

One question was posed, and one principle applied.

[24] Dixon J relied upon the character of the statutory prohibition as one which was "directed to control or restrict" the States. [63] In that respect it fell within a reservation to his previously repeated restatement of the principle in the Engineers Case . That reservation was related to: [64]

the use of federal legislative power to make, not a general law which governs all alike who come within the area of its operation whether they are subjects of the Crown or the agents of the Crown in right of a State, but a law which discriminates against States, or a law which places a particular disability or burden upon an operation or activity of a State, and more especially upon the execution of its constitutional powers. (emphasis added)

The second disjunctive limb, relating to a law which places "particular disability or burden" upon an operation or activity of a State, on its face extended to general laws but was expressed widely enough to pick up "discriminatory" laws singling out the States. Williams J held the law to be invalid on similar grounds, describing it as legislation which clearly discriminated against the States and their agencies. [65]

[25] Characterisation is anterior to the application of the implied limitation to a Commonwealth law affecting the States or their agencies. But consideration of the two questions may overlap. The approach adopted by Latham CJ in the Melbourne Corporation Case demonstrated that kind of overlap. In the Professional Engineers' Case , [66] Dixon CJ in considering the scope of s 51(xxxv) of the Constitution referred to the "inapplicability of the federal industrial power to the administrative services of the States notwithstanding the interpretation placed upon it in the Engineers Case ". Barwick CJ, McTiernan and Owen JJ upheld the Pay-roll Tax Act 1941 (Cth) upon characterisation grounds in the Payroll Tax Case . [67] Rather than relying upon an implication, their Honours took the view that the Constitution did not give the Commonwealth legislative power over the States or their powers and functions of government as subject matters of legislation. In R v Coldham ; Ex parte Australian Social Welfare Union , [68] the court found that the reasons for the conclusion in the Professional Engineers' Case that federal industrial power was inapplicable to the administrative services of the State were no longer fully acceptable. Nevertheless, that conclusion, which had been based on characterisation, might be supportable by reference to the prefatory words of s 51 whereby the power is made "subject to this Constitution": [69]

The implications which are necessarily drawn from the federal structure of the Constitution itself impose certain limitations on the legislative power of the Commonwealth to enact laws which affect the States (and vice versa).

The court observed that the nature of the limitation had been discussed in the Melbourne Corporation Case and in the Payroll Tax Case . Their Honours agreed [70] with the observation of Walsh J in the Payroll Tax Case [71] that "the limitations ... have not been completely and precisely formulated".

[26] It was the imposition of a special burden or disability on a State or its agencies not imposed on persons generally which spelt invalidity for the law under challenge in the Queensland Electricity Commission Case . Nevertheless, Gibbs CJ referred to "two distinct rules, each based on the same principle, but dealing separately with general and discriminatory laws". [72] The two rules were: [73]

A general law, made within an enumerated power of the Commonwealth, will be invalid if it would prevent a State from continuing to exist and function as such ... A Commonwealth law will also be invalid if it discriminates against the States in the sense that it imposes some special burden or disability on them.

[27] Mason J referred back to the formulation of the principle by Dixon J in the Melbourne Corporation Case , [74] quoted above. [75] He identified "two elements" of the "now well established" principle, namely: [76]

(1)
the prohibition against discrimination which involves the placing on the States of special burdens or disabilities; and (2) the prohibition against laws of general application which operate to destroy or curtail the continued existence of the States or their capacity to function as governments.

The identification of the two elements did not negate the existence of a general principle of which they were expressions. It did not inhibit the application of that general principle to the variety of circumstances which might call for its consideration. In the event, Mason J focussed upon the discriminatory character of the impugned law. [77] Brennan J took a similar approach but noted that a general law may operate in the context of particular circumstances to single out States for discriminatory treatment. [78] Deane J said: [79]

The character of a law as a law of general application is ordinarily a factor, and sometimes a conclusive factor, militating against the conclusion that it discriminates against the States or a State in the relevant sense. The question whether a law does so discriminate ... is however, for the purposes of the law of the Constitution, a question of substance which is not susceptible of being resolved by the mere inquiry whether, as a matter of form, the law is a general or a special one.

To the extent that this approach sought to frame the implication within an extended concept of discrimination, including operational discrimination, it would seem to have been unnecessarily restrictive. However, even within the rubric of laws "discriminating against the States", it illustrated a flexible and multifactorial approach to determining whether a law impermissibly burdens the States or a particular State. Importantly, Brennan J made the point in the Queensland Electricity Commission Case that: [80]

It would state the implication too widely to say simply that the Commonwealth is prohibited from making any discriminatory law which involves the placing on the States of special burdens or disabilities affecting the exercise of their powers. It is not consistent with the plenary nature of the powers of the Commonwealth to deny the validity of a discriminatory law enacted under a power which supports the discrimination.

He drew attention to a similar observation made by Mason J in Victoria v Australian Building Construction Employees' and Builders Labourers' Federation . [81] What Brennan J said in this respect was cited in the joint judgment in Austin . [82] It requires that attention be directed to the discriminatory character of the law as a relevant but not determinative factor in assessing whether the law trespasses beyond constitutional boundaries in its effect upon the States.

[28] The joint judgment in the AEU Case acknowledged that, while the comments of Dixon J in the Melbourne Corporation Case were couched principally in terms of discrimination against the States and the imposition of a particular disability or burden upon the operation or activities of the States or upon the exercise of their constitutional powers, "his Honour clearly had in mind ... that the legislative powers of the Commonwealth cannot be exercised to destroy or curtail the existence of the States or their continuing to function as such". [83] Nevertheless the joint judgment left open the question whether there are two implied limitations, two elements or branches of one limitation, or simply one limitation. [84] That question was answered in favour of one limitation by a majority of the court in Austin .

[29] In Austin , the court held that the CPSF Assessment Act and the CPSF Imposition Act were invalid in their application to the statutory pension entitlements of a judge of the Supreme Court of New South Wales. But for invalidity, a judge would have been liable to pay a surcharge calculated on "the amounts that constitute the actuarial value of the benefits that accrued to, and the value of the administration expenses and risk benefits provided in respect of, the member for the financial year". [85]

[30] Gleeson CJ based his decision upon the difference in the treatment of the State judge under the CPSF Assessment Act and other high-income earners. He said: [86]

That differential treatment is constitutionally impermissible, not because of any financial burden it imposes upon the States, but because of its interference with arrangements made by States for the remuneration of their judges.

[31] Gaudron, Gummow and Hayne JJ referred to the significance of the provision of secure judicial remuneration in attracting persons to accept appointment as judicial officers. [87] They referred to the selection of State judicial officers for attention by the federal legislature as "high-income members" of non-contributory unfunded schemes [88] and said that differential treatment may be indicative of infringement of the limitation upon legislative power with which the doctrine in the Melbourne Corporation Case is concerned, but was "not, of itself, sufficient to imperil validity". [89] The question upon which their Honours focussed was the significance of the impairment of the exercise by the State of its freedom to select the manner and method for discharge of its constitutional functions respecting the remuneration of the judges of the courts of the State. That significance was to be taken to be "considerable". [90] Their Honours then asked the "practical question" identified by Starke J in the Melbourne Corporation Case , [91] which they formulated as follows: [92]

This, in the end, is whether, looking to the substance and operation of the federal laws, there has been, in a significant manner, a curtailment or interference with the exercise of State constitutional power.

The effect upon the State of the law was indicated by its move to vary the method of judicial remuneration by legislating to offset the impact of the surcharge: [93]

The liberty of action of the State in these matters, that being an element of the working of its governmental structure, thereby is impaired.

Gaudron, Gummow and Hayne JJ expressed their conclusion thus: [94]

[I]n its application to the first plaintiff, the [CPSF Imposition Act] and the [CPSF Assessment Act] are invalid on the ground of the particular disability or burden placed upon the operations and activities of New South Wales.

[32] The constitutional implication considered in Austin and its precursors means that the Commonwealth cannot, by the exercise of its legislative power, significantly impair, curtail or weaken the capacity of the States to exercise their constitutional powers and functions (be they legislative, executive or judicial) or significantly impair, curtail or weaken the actual exercise of those powers or functions. The Constitution assumes the existence of the States as "independent entities". This implies recognition of the importance of their status as components of the federation. The "significance" of a Commonwealth law affecting the States' functions is not solely to be determined by reference to its practical effects on those functions. This is not a return to any generalised concept of inter-governmental immunity. It simply recognises that there may be some species of Commonwealth laws which would represent such an intrusion upon the functions or powers of the States as to be inconsistent with the constitutional assumption about their status as independent entities.

[33] The application of the implied limitation is evaluative. It has always been thus. There is a normative element in the criterion of "significance" by which the adverse effects of a Commonwealth law on State capacities or functions must be characterised, before such a law will be held to be invalid. Whether the effects of a law upon the capacities or functions of the States are "significant" is to be judged qualitatively and also, but not only, by reference to its practical effects. To take an extreme example, a law of the Commonwealth purporting to subject the Governor of each of the States to a special "gubernatorial privileges tax" might fix the tax at a level which, in a financial sense, would be of little practical importance to the States or to their Governors. It might be thought, nevertheless, that the nature of such a law would mark it as asserting an intrusive legislative authority with respect to the constitutional office of Governor that was inconsistent with the status of the States as independent entities under the Constitution.

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

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

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

[35] In the present case, the factors relevant to the validity of the CPSF Assessment and Imposition Acts in their application to members of the South Australian Parliament are:

1.
The State is singled out by reference to benefits and funds established by State laws which are specifically designated by the Commonwealth laws.
2.
The laws, in so far as they relate to the PS Scheme, impose a tax specifically upon persons holding office as members of the Parliament of the State.
3.
The laws effectively and specifically burden the pension and superannuation benefits able to be enjoyed by members of the State Parliament.
4.
Unlike income tax laws and other tax laws of general application, the impugned laws are specifically aimed at the remuneration arrangements between the State and members of its legislature.
5.
The significance of the effects of the surcharge upon State legislators was reasonably evidenced by the amendment which the State made to the commutation provisions affecting pension and superannuation entitlements.

[36] In my opinion, when these factors are taken together, the CPSF Assessment and Imposition Acts, read with their specific application to funds designated in reg 177 of the Income Tax Regulations 1936 (Cth), significantly interfered with the remuneration arrangements made between the State and its legislators and, to that extent, significantly burdened the exercise by the State of its powers and functions in fixing the remuneration of its legislators. As to the effect of the laws upon Mr Clarke's entitlement to benefit under the SSS Scheme and the State Superannuation Benefit Scheme, I agree, for the reasons expressed by Hayne J, [95] that they are invalid in their application to those Schemes.

Conclusion

[37] For the preceding reasons, in my opinion, the appeal should be allowed and question 3(a) should be answered in the affirmative. I agree with the orders proposed in the joint judgment.


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