State of Queensland v. Commonwealth of Australia.

Judges: Gibbs CJ
Mason J

Wilson J
Brennan J
Deane J
Dawson J

Court:
Full High Court

Judgment date: Judgment handed down 3 February 1987.

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Wilson J.

The circumstances which give rise to the stated case, the questions which require the consideration of the Court and the relevant legislative provisions are all set out in other judgments. It is not necessary to repeat them. Section 114 of the Constitution declares that the Commonwealth shall not "impose any tax on property of any kind belonging to a State". The plaintiff, supported by the State of Tasmania intervening, argued that the fringe benefits legislation can have no application to a State in so far as the State makes cars and housing owned by it available to its employees in the form of fringe benefits. It was submitted that in purporting to impose on a State a tax on an amount (described as the fringe benefits taxable amount of an employer) calculated by reference, inter alia, to the taxable values of the car and housing fringe benefits provided to its employees, the legislation imposes a tax on the property of the State and thereby offends against sec. 114.

The earlier decisions of this Court, in my opinion, do not provide any authoritative solution to the problem that is raised for decision in this case. I hesitate to draw more in terms of authority from the decision in
A.-G. of N.S.W. v. Collector of Customs for N.S.W. (1908) 5 C.L.R. 818 ("the Steel Rails case ") than the proposition that a customs duty is not a tax of the kind referred to in sec. 114. The deceptively simple words in which the prohibition is couched are capable of encompassing a wide field of meaning. But it can hardly be supposed that it was intended that the immunity extend to every transaction which involved, however incidentally or indirectly, the property belonging to a State. Some more limited meaning must therefore be discerned in the provision. At the same time, however, I think it preferable to refrain from embarking on a general discussion in order to ascertain a precise meaning that may facilitate the resolution of future cases. The proper construction of sec. 114 will emerge over time through the process of case-by-case decision.

Confining my attention, therefore, to the present case, I have come to the conclusion that the submission advanced for the States should not succeed. The tax is not a tax on the property of the State of Queensland ("the State") within the meaning of the material words in sec. 114. That part of the tax which relates to a car fringe benefit is a tax imposed on the State as a consequence of the following circumstances:

• (a) the State is an employer;
• (b) its employee has a car made available to him for his private use (described as a "benefit");
• (c) the benefit is provided to him in respect of his employment.

Similarly, a tax payable by the State is attracted by the circumstance that its employee has provided to him in respect of his employment accommodation which constitutes a housing fringe benefit. Although on the facts of the present case both the cars and housing are owned by the State, that circumstance is immaterial. Liability to tax is in no way dependent on the employer being the owner or enjoying any right to possess the property that is made available to the employee. It is sufficient that there is an arrangement by which the employee receives the benefit in respect of his employment. The legislation applies to all employers. It does not single out the States. It is not limited to benefits associated with property. "Benefit" includes, inter alia, any right, privilege, service or facility. The emphasis is upon the provision to an employee of fringe benefits in respect of the employment.

Counsel for the plaintiff submitted that the prohibition contained in sec. 114 extends to a tax imposed on a State in respect of the use of

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ATC 4043

its property. That may well be so in a case where it can be seen that the tax is imposed on the property by reason of the use that the State makes of it. For example, a Commonwealth law which imposed a tax on the owner of land within the Commonwealth that is used in a particular way, say for mining or commercial purposes, would clearly be invalid, in my opinion, in its purported application to land belonging to a State. Such a tax, however it be computed, is imposed expressly by reference to the ownership of property. But the tax now in question is not of that character. It takes as the criterion of liability the provision to an employee of a fringe benefit in respect of the employment. The fringe benefit may take various forms. The fact that in the present case it involves making available to the employee a motor car for his use or a housing right does not shift the focus of the tax from the fringe benefit to the property in question. The involvement of the property of the State is merely fortuitous and peripheral to the operation of the legislation. The incidence of the tax would be precisely the same if instead of making its property available to the employee the State were to arrange for a hire car to be available to the employee for his private use or arranged for him to reside in a motel as his usual place of residence. This is because the tax is imposed, not on property belonging to a State but on the provision of a fringe benefit.

It was also submitted that the true character of the tax as a tax on property was exposed by the fact that the value of the fringe benefit is assessed, not by the value that it represents to the employee but by reference to the cost to the employer of providing it. The value of the benefit to the employee is immaterial. This comes about because the value of the property that is made available forms an important component in the formulae provided for the calculation of the value of the benefit. In this connection it was observed that one of the formulae prescribed by the legislation for calculating the value of a car fringe benefit takes account of the period during which the car is available to the employee for his private use regardless of whether he actually uses it. But I do not think that these considerations are material to the characterisation of the tax; they merely reflect the fact that the tax is imposed upon the employer, not the employee. In substance it is a tax on the cost to the employer of providing the benefit.

I would answer both questions asked in the case in the negative.