State Superannuation Board (N.S.W.) v. Federal Commissioner of Taxation

Sheppard J

Federal Court

Judgment date: Judgment handed down 27 May 1988.

Sheppard J.

This appeal raises the question whether the applicant, the State Superannuation Board of New South Wales, was entitled to a certificate of exemption under the Bank Account Debits Tax Administration Act 1982 (``the Administration Act'') in respect of a bank account operated by it and known as a pension account.

The applicant was formerly a body corporate constituted by sec. 70 of the Superannuation Act 1916 (N.S.W.) (``the Act''). It was abolished on 1 April 1988; see sec. 36 and cl. 2 of Sch. 3 of the Superannuation Administration Act 1987 (N.S.W.). This Act constituted a new Board, the State Authorities Superannuation Board (sec. 4). Clause 3 of Sch. 3 operated to transfer to the new Board the assets and liabilities of a number of former boards including the applicant in this appeal. Subclause (1)(h) of cl. 3 of the Schedule provided that all liquidated and unliquidated claims for which a former Board would, but for its abolition, have been liable, shall be liquidated and unliquidated claims for which the new Board shall be liable. Subclause (1)(b) is a comparable provision dealing with money and liquidated and unliquidated claims payable to or recoverable by one of the former Boards.

It would seem to me that, before the order in this matter is taken out, the title of the proceedings should be amended to substitute for the name of the present applicant, the name of the new Board. I give any necessary leave for this purpose. I have reserved liberty to apply in case what I have said gives rise to any problem.

The change which has come about is of no other relevance or consequence and I propose to proceed as if the old Board were still in existence. On 19 May 1983 the applicant wrote to the Deputy Commissioner of Taxation requesting exemption from the bank account debits tax, operative from 1 April 1983, in relation to its bank account numbered 00-1546 with the Westpac Banking Corporation (``the pension account''), the subject of this appeal. The applicant claimed that the debits from this account fell within subpara. (a)(vii) of the definition of ``excluded debit'' in subsec. 3(1) of the Administration Act. On 1 July 1983, the Deputy Commissioner refused to issue a certificate of exemption and on 30 August 1983 the applicant lodged an objection pursuant to sec. 22 of the Administration Act. This was subsequently disallowed by the Deputy Commissioner and on 30 March 1984 the applicant requested that it be treated as an appeal and forwarded to the Supreme Court of New South Wales pursuant to sec. 23 of the Administration Act. As a result of the Jurisdiction of Courts (Miscellaneous Amendments) Act 1987 the appeal was transferred from the Supreme Court to this Court.

The bank account debits tax is imposed by sec. 4 of the Bank Account Debits Tax Act 1982 (the ``Debits Tax Act'') on each taxable debit to a taxable account. Taxable account is defined in sec. 3 of the Administration Act, with which the Debits Tax Act is to be read as one, as an account other than an exempt account kept in Australia. ``Exempt account'' is defined as an account kept in Australia in respect of which a certificate of exemption is in force.

Section 11(1) of the Administration Act requires the respondent, on application by an account holder in respect of an account kept in Australia, to issue a certificate of exemption in relation to the account if he is satisfied, inter alia, that all debits made or to be made to the account are or are likely to be excluded debits. The relevant provisions of the definition of ``excluded debit'' in subsec. 3(1) of the Administration Act are as follows:

  • ``excluded debit'' means a debit -
  • (a) made to an account kept with a bank in the name of -
    • ...
    • (vii) any of the following:
      • (A) a Department of the Government of the Commonwealth or of a State or Territory;
      • (B) an authority of the Commonwealth or of a State or Territory;

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      • (C) a municipal corporation or other local governing body,

      other than such a Department, authority, corporation or body the sole or principal function of which is to carry on an activity in the nature of a business (whether or not for profit), not being a debit made in relation to a transaction or transactions entered into by or on behalf of the Department, authority, corporation or body in connection with the carrying on of an activity in the nature of a business (whether or not for profit); or

    • ..."

This definition was amended in 1984 by the Bank Account Debits Tax Administration Amendment Act 1984 which came into force on 10 October 1984. The words, ``(other than an activity that forms a minor or insignificant part of the functions of the Department, authority, corporation or body)'', were inserted after the word ``activity'' where it last occurs. It was accepted by counsel that the amendment did not materially affect the outcome of this appeal.

The central question which the appeal raises for decision is whether the applicant is an authority whose sole or principal function is to carry on an activity in the nature of a business.

The purpose of the Superannuation Act, according to its preamble, is to provide a State provident fund for persons employed by the State or by certain other bodies, which are listed in Sch. III to the Act, and their families, and to provide a system of voluntary saving by such persons. The applicant is constituted by sec. 70 of the Act and is charged with the administration of the State Superannuation Fund established by sec. 4 of the Act. The Act was amended on a number of occasions after the disallowance by the respondent of the applicant's objection. Probably the form of the Act which it is relevant to consider is the form of it at the date when the notice of objection was lodged, that is, 30 August 1983. I say ``probably'' because it is unnecessary to decide the question, the amendments made subsequent to that date not making any material difference to the position as it was on 30 August 1983 or before.

At the relevant time the applicant Board consisted of five members, three appointed by the Governor, who were to hold office for a term not exceeding seven years, and two elected by the Fund's contributors and pensioners who were to hold office for a term of three years (sec. 70, 70A and 71). The appointed members had to include an actuary. As at 30 June 1983 the applicant had an administrative staff of about 200, who were employed under the Public Service Act 1979 (N.S.W.). In addition it employed property managers who were responsible for managing the buildings in which the applicant had invested moneys. Their employment was not regulated by the Public Service Act (sec. 82A).

Section 4 of the Act provided that the Fund should not be subject to taxation and that the applicant was exempt from the payment of stamp duty. Section 4A(3) provided that nothing in that section was to constitute the Board as a trustee of the Fund nor imply that it was. The section was concerned to confer on the applicant more extensive powers of investment than those conferred by the Trustee Act 1925 (N.S.W.). Section 10N required every employee of the Government of New South Wales and the bodies listed in Sch. III (subject to certain exceptions contained in the definition of ``employee'' (sec. 3)) to contribute to the Fund in accordance with the Act. As at 30 June 1983 there were over 118,000 contributors and over 24,000 pensioners. The Board was entitled to require employees to undergo a medical examination (sec. 10B). If an employee failed to pass such an examination the Board was obliged, subject to certain other provisions of the Act, to treat the employee as if he had not, for the period of his employment, been an employee (sec. 10C). Section 10N was subject to the provisions for exemption from contribution contained in sec. 10T. The most significant provisions were as follows:

  • (1) The Board might, on application made in accordance with sec. 10U, exempt from contributing to the Fund -
    • (a) any employee who satisfied the Board that he had made adequate provision for himself and his family; or
    • (b) any person of or above the age of 40 years who became an employee.
  • (2) Where the wife of a contributor was also an employee, the Board might, on

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    application made by her in accordance with sec. 10U, exempt her from contributing to the Fund.
  • (3) The Board might, on application made in accordance with sec. 10U, exempt from contributing to the Fund a woman employee who was eligible for a pension under sec. 30 or 31.

It would appear that these provisions were very infrequently availed of. Although the evidence is not clear, it would seem that only about 100 applications for exemption were made each year. There is no indication in the evidence of how many of these applications were successful.

The applicant administered the superannuation scheme established by the Act. It received contributions from defined employees and employers, managed and invested the assets of the Fund, ascertained entitlements, paid benefits and provided information and services to all Fund members in relation to their membership of the scheme. The income of the Fund came from three sources: employer contributions, employee contributions and investment income. The total revenue received and the percentages of revenue from these three sources for the financial years 1982/1983 and 1983/1984 were as follows:

                                     1982/1983                1983/84
      Employer contributions            37.2%                  34.9%
      Employee contributions            26.6%                  26.2%
      Investment income                 36.2%                  38.9%
      Total revenue                   $707.25m               $772.51m

Employer contributions were paid into the Fund by the New South Wales Government from Consolidated Revenue except for contributions relating to employers under Sch. III of the Act. These were paid directly by those employers. Employee contributions were deducted from the individual employees' salaries except for certain exceptional categories of employees, e.g. those on leave without pay who were responsible for payment of both employer and employee contributions directly to the applicant during the period of their leave.

Employee contributions and benefits were calculated on a units-based system, each employee being required to contribute an amount which was determined by the number of units he held. Unit entitlement was determined by the employee's salary level and increased with salary increases. Upon retirement employees were entitled either to receive their full entitlement in the form of a pension adjusted in line with the Consumer Price Index or to take part of their entitlement in a lump sum. Lump sum commutation of pensions was first introduced in 1970 in response to the perceived needs of Fund members. The investment performance of the Fund did not directly affect the level of benefits which were fixed by the Act and calculated according to the number of units held.

Sections 5 to 6 of the Act authorised the applicant to invest in a variety of government and semi-government securities and loans to building societies (sec. 5), certain types of company shares, debt securities and corporate trusts (sec. 5A), land and mortgages over land (sec. 5B), certain other transactions involving securities of various kinds (sec. 5C), joint ventures in projects in which the applicant could invest on its own (sec. 5D) and deposits with the Treasury or a bank (sec. 6). Although it is not strictly relevant, I mention that these sections were repealed in 1985 by the Superannuation (Amendment) Act 1985 (N.S.W.) and replaced by a new sec. 6A which in subsec. (2) provided:

``Subject to this section, the Board may, in such manner as it thinks fit, apply the Fund for the purpose of producing income and for related purposes including entering into such arrangements, and undertaking such obligations, as the Board thinks fit.''

Section 6A(4) required the applicant, so far as is practicable, to ensure that the assets of the Fund included government and semi-government securities the cost of which was not less than 30 per cent of the cost of all the assets of the Fund.

A list of the applicant's investments and their earnings performance for the years ended 30 June 1983 and 30 June 1984 appeared in the applicant's 1983/1984 Annual Report. It was as follows:

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``Investment area                             Year ended         Year ended
                                          30th June 1984     30th June 1983
                                           % p.a. return      % p.a. return
Short-term securities                          11.29               14.64
Commonwealth securities                        14.09               12.94
Semi and local government loans                12.00               11.33
Co-operative housing society loans             12.22               13.00
Company shares                                 10.46               11.88
Corporate debt securities                      13.34               13.04
Mortgages                                      14.02               14.31
Land and buildings -
  Freehold                                     13.91               11.97
  Leasehold                                    10.96               11.49
  Leveraged leasing                            14.56               14.36''

The evidence showed that in order to produce revenue for the Fund, the applicant invested in a wide spread of investments, the management of some of which required its active participation. It was a large landholder, investing in a variety of commercial, retail and industrial properties. One example given in the 1983/1984 annual report was of a shopping complex at Bass Hill which was built and run as a going concern by the applicant. It also constructed a retirement village, ``Peninsula Gardens'', for members of the general public. It had a large shareholding. It had representatives on the boards of some small joint venture companies. The applicant entered into joint ventures with other institutions in relation to a number of projects including an amusement park, ``Australia's Wonderland'', and a coal mining operation at Ulan. Some of these projects were not complete at the time relevant to this appeal. Others were embarked upon afterwards. I mention them only to give an indication of the broad range of investment activities undertaken by the applicant.

The applicant provided a number of services to its members. It provided housing loans to them at a competitive rate of interest. It also operated the voluntary savings scheme provided for in Pt V of the Act. This was a mechanism whereby members might have certain amounts deducted from their salaries and paid into an account to be used by them at a later time. These funds were placed in the general pool of the Fund. The members received a rate of interest on their money which was considered by the applicant's representatives not to be a competitive rate of interest. This money might be withdrawn at call. Section 69 made provision for the holding of accounts jointly with a non-member.

The applicant also operated an advisory service which provided information to contributors regarding their Fund entitlements although it specifically disclaimed providing financial advice. This service organized two-day retirement preparation seminars which covered the topics of superannuation, finance and investment, taxation, health, social aspects of retirement and estate planning. The advisory services of the applicant expanded over the years to take account of the perceived needs of members.

In administering the Fund the applicant operated three bank accounts with the Westpac Banking Corporation: an investment account (No. 00-1562), a general account (No. 00-1554) and the pension account (No. 00-1546) the subject matter of this appeal. The Fund's investments and expenses associated with its investments were paid from the investment account. The general account was used to pay salaries and administrative expenses, voluntary saving account payments, refunds of contributions, costs of election of Board members, retirement seminar costs, publications and advertising regarding contributor services and benefits, Government Actuary's fees, Board member allowances, commuted lump sum payments and the initial pension entitlement if the pension commenced after the normal fortnightly payment day. The pension account was used only for the payment of pensions. Lump sum payments were not made out of the pension account. This was for

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administrative reasons because payments were made from it only fortnightly in a computer run whereas lump sum payments were made daily. The applicant's income was deposited into any of the three accounts according to the needs of each account from time to time.

The appeal concerns only the pension account and thus does not raise the question whether certain debits are made in connection with the carrying on of an activity in the nature of a business. It was agreed that the applicant was an authority of the State of New South Wales so that the only question to be decided is whether the applicant is an authority the sole or principal function of which is to carry on an activity in the nature of a business whether or not for profit. The starting point is to determine the applicant's sole or principal function. The Macquarie Dictionary defines ``function'' as ``the kind of action or activity proper to a person, thing, or institution''. The Shorter Oxford English Dictionary gives as a definition: ``The special kind of activity proper to anything; the mode of action by which it fulfils its purpose''. This latter definition in particular draws attention to the fact that ``function'' is more akin to ``activity'' and is to be distinguished from ``purpose''. In this connection it is relevant to mention that the applicant's 1983/1984 annual report contained the following paragraphs:

``Board Objectives.

In line with the provisions of the Superannuation Act 1916,

  • - to provide superannuation benefits for salaried employees of the New South Wales Public Service, Teaching Service and of various statutory authorities of the State;
  • - to provide such ancillary services as will enable Fund members to obtain the optimum benefit from their Fund membership;
  • - to ensure that the Fund is effectively managed in regard both to general administration and in investment.

Main Functions

Provision of information and services to all Fund members in relation to their membership of the scheme.

Receipt of contributions.

Payment of benefits.

Investment of the Fund.

Management of Fund assets.''

These statements are not determinative of the applicant's sole or principal function, but, in an exercise which involves the ascertainment of that function, as distinct from its purposes or objects, they provide guidance as to what that function is.

There are some similarities between the test in the present case and the test for a financial corporation propounded in
State Superannuation Board v. Trade Practices Commission (1982) ATPR ¶40-326; (1982) 150 C.L.R. 282. That case involved the Victorian State Superannuation Board, a body very like the present applicant. The only significant difference between the two would seem to have been that the present applicant operated a voluntary savings scheme for its members whereas the Victorian Board apparently did not. The issue before the High Court was whether the Victorian Board was a financial corporation within sec. 51(xx) of the Constitution. Thus, the issue was different from whether the Board's function was an activity in the nature of a business.

None the less, in order to characterise the Victorian Board, both the majority and the minority looked to its activities. The majority (Mason J. (as he then was) and Murphy and Deane JJ.) approved and applied the test laid down in
The Queen v. Federal Court of Australia; Ex parte W.A. National Football League (1978-1979) 143 C.L.R. 190 (``Adamson'') in relation to trading corporations, which they said (ATPR pp. 43,976-43,977; C.L.R. p. 304) involved the Court looking beyond its [the corporation's] ``predominant and characteristic activity'' with the ``conclusion being open that it is a trading corporation once it is found that `trading is a substantial and not merely peripheral activity'.'' The majority concluded (at ATPR p. 43,978; C.L.R. p. 306):

``The facts as we have recited them demonstrate beyond any question that the appellant engages in financial activities on a very substantial scale. Even if we confine our attention to such aspects of the appellant's investment activities as involve

ATC 4388

the making of commercial and housing loans, its business in this respect is very substantial and forms a significant part of its overall activities. No doubt these activities are all entered into for the end purpose of providing superannuation benefits to contributors, but, as we have seen, this circumstance constitutes no obstacle to the conclusion that the appellant is a financial corporation.''

But this conclusion is not decisive of the present case because it is the ``sole or principal function'' of the applicant which must be ascertained. The minority in the State Superannuation Board case (Gibbs C.J. and Wilson J.) (at ATPR pp. 43,970-43,971; C.L.R. p. 294) regarded Adamson as authority for no more than the proposition that a corporation, whose principal activity was trading was a trading corporation within sec. 51(xx) and that a majority of the Judges who decided it ``expressly or... implicitly indorsed the predominant and characteristic activity test''. As a result they concluded that the Victorian Board was not a financial corporation. Their Honours said (ATPR pp. 43,972-43,973; C.L.R. pp. 297-298);

``In our opinion, the governmental character of the Board's activities is not irrelevant to the determination whether it falls within the constitutional description. It seems to us to be appropriate and indeed necessary to start with the proposition that here is a statutory body which is formed to carry out a governmental function, namely, the provision of emoluments to the servants of the government and their dependants. Everything that the Board does - the receipt of contributions, the classification of contributors, the determination of benefits and the management of the Fund - derives its significance from that fundamental premise. There is no doubt that, in the course of managing the Fund, the Board may be said to carry on a business of dealing in finance but in our opinion its activities in that regard must be described as ancillary or incidental to the Board's primary activity of administering the scheme. No doubt those activities are substantial in a quantitative sense but they are not such as to determine the character of the corporation. The predominant and characteristic activity of the Board is not to be described in terms of its financial dealings but by reference to the service it provides to government in Victoria by way of a superannuation scheme.''

Although this dictum appears in a dissenting judgment, I find it of assistance in the resolution of the present problem. The point of the minority's departure from the reasoning of the majority was not in relation to a question similar to that being decided here. The two judgments reflect a fundamental difference of opinion in the approach to the determination of what is a financial (or trading) corporation. Once the minority took the view which they did, what they said in the dictum just quoted followed as a logical consequence. Nothing is said by the majority which would indicate that they had a different view in relation to that part of the minority's judgment.

I consider this passage helpful in the present case because it focuses attention on the primary, predominant or characteristic activity of the Board, a concept similar to principal function, and requires one to distinguish it from other ancillary, albeit substantial, activities. The Administration Act makes it clear that a similar exercise must be undertaken when considering the definition of ``excluded debit''. One is searching for the sole or principal function of the authority in question. It is not sufficient that the authority can be said to have as one of its functions the carrying on of an activity in the nature of a business if this is not its sole or principal function.

The investment activities of the applicant were significant. They generated 38.9 per cent of its total revenue in 1983/1984. They involved its active participation in a number of commercial ventures. However, they were conducted in the course of the applicant's management of the Fund and thus as part of its administration of the superannuation scheme. The applicant's main activities: the receipt of contributions, payment of benefits, investment of the Fund and management of Fund assets all indicate that the sole or principal function of the applicant was the administration of a superannuation scheme for government employees. The investment activities were ancillary or incidental to this function. The applicant's advisory service falls into the same category. It was mainly designed to provide contributors with information regarding their

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Fund entitlements, although it might go somewhat beyond that, and as such was very much incidental to the applicant's function of administering the scheme.

The voluntary savings scheme is in a somewhat different category. It was referred to in the preamble to the Act as being one of the purposes of the statute. It therefore assumes a greater importance in the legislative framework. It provided contributors with a savings facility similar to a bank or building society account and was thus in direct competition with other institutions for contributors' savings. According to the evidence the interest rate was not competitive and its popularity was attributed to its convenience. The funds received formed part of the general Fund pool. However, in the applicant's balance sheet as at 30 June 1984 voluntary savings amounted to a liability of $6,579,000 out of a total liability of $43,602,000. This is to be compared with total assets of $2,793,055,000. Accordingly, although it was a function of the applicant to provide a voluntary savings scheme, this does not alter the fact that its principal function was to administer the superannuation scheme. The savings scheme was incidental to this function. The provision of housing loans at competitive interest rates, which was a form of investment for the Fund, was a service to members and should be treated in the same way.

The question remains whether the administration of a superannuation scheme for government employees constitutes the carrying on of an activity in the nature of a business (whether or not for profit). Counsel for the respondent emphasised that it was not necessary to show that the applicant carried on a business. All that was necessary was to satisfy a lower standard, namely, that it carried on an activity in the nature of a business. The Shorter Oxford English Dictionary gives as its first definition of nature:

``The essential qualities of a thing; the inherent and inseparable combination of properties essentially pertaining to anything and giving it its fundamental character.''

In a sense there is little difference to be perceived between the carrying on of an activity which has the nature (the essential qualities or properties) of a business and the carrying on of a business. But I think that in the context in which the words are found there are indications that the draftsman intended the words to have a wider reach than would have been the case if the expression used had been the carrying on of a business. These words are in fact used elsewhere in para. (a) and (b) of the definition of ``excluded debit'' in subsec. 3(1) of the Administration Act. Thus subpara. (ii) of para. (a) uses the words, ``... the carrying on of a business by that person in Australia'', and subpara. (iv) the words, ``... other than purposes related to activities that constitute the carrying on of a business by that person in Australia''. Paragraph (b) refers to the carrying on of banking business in Australia.

It is to be observed that each of these instances refers either to the carrying on of a business by a natural person or a company or indiscriminately to the carrying on of a business by a government or private bank. But when one comes to the provision under consideration, the business activity is, ex hypothesi, the activity of an authority of government. The expression, ``activity in the nature of business'', seems to me to have been used deliberately to distinguish situations falling within subpara. (a)(vii) of the definition from cases falling within other parts of it. The purpose of the distinction is I think clear. It was to ensure that the many activities of government which might be likened to business activity, but which fell short of it because they were so directly concerned with the day to day administration of government, would nevertheless be caught.

That conclusion, however, provides no more than a starting point for the consideration of the problem. One still needs to have a clear idea of what is involved in the carrying on of a business. It will only be as a result of a proper understanding of what that entails that one will be able to come to a conclusion on the ultimate question to be decided.

As Mason J. (as he then was) noted in
F.C. of T. v. Whitfords Beach Pty. Ltd. 82 ATC 4031 at p. 4044; (1982) 150 C.L.R. 355 at pp. 378-379, words such as:

``... `business', `commercial' and `trading'... have about them a chameleon-like hue, readily adapting themselves to their surroundings, different though they may be.''

The word ``business'' must always be read in context. Some help is none the less to be

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derived from examining dictionary and judicial definitions of the term. The Shorter Oxford English Dictionary includes the definitions: ``Trade, commercial transactions or engagements'' and ``A commercial enterprise as a going concern.'' In
Rolls v. Miller (1884) 27 Ch.D. 71 Cotton L.J. noted that ``business'' is a wider concept than ``trade'' and Lindley L.J. said (p. 88):

``The word means almost anything which is an occupation, as distinguished from a pleasure - anything which is an occupation or duty which requires attention is a business...''

Hyde v. Sullivan (1956) S.R. (N.S.W.) 113 Street C.J., Roper C.J. in Eq. and Herron J. (as he then was) said (p. 119):

``Speaking generally, the phrase `to carry on a business' means to conduct some form of commercial enterprise, systematically and regularly, with a view to profit, and implicit in this idea are the features of continuity and system.''

Profit-motive, although relevant, is not always necessary (Rolls v. Miller (supra)). In the present case the wording of the definition, by using the words, ``whether or not for profit'', expressly indicates that it is not essential.

On the other hand, Barwick C.J., in
Hungier v. Grace (1972) 127 C.L.R. 210, in commenting on the statement in
Edgelow v. MacElwee (1918) 1 K.B. 205 at p. 206 that ``the word `business' imports the notion of system, repetition, and continuity'' said (p. 217):

``Whilst no doubt system and regularity are involved in the carrying on of a business, it does not necessarily follow that one who has transactions of the same kind systematically or regularly is carrying on a business in those transactions. One may systematically make regular deposits to a bank account but not be carrying on a business of doing so. In other words, system and regularity of making transactions are not in themselves definitive in this field. Their absence may well deny that a business is being carried on but their presence does not necessarily establish that it is.''

To these references may be added a reference to the judgment of Gibbs J. (as he then was) in
Smith v. Capewell (1979) 142 C.L.R. 509 at pp. 517-519.

In the course of the hearing of the present case considerable discussion centred on the questions whether membership of the Fund was compulsory and whether it was in competition with other private superannuation schemes. This was as a result of a decision of the Administrative Appeals Tribunal (Mr P.M. Roach) in
Re Australian Broadcasting Corporation and F.C. of T. 88 ATC 2019 where the ABC was held not to be an authority whose sole or principal function was to carry on an activity in the nature of a business because it did not compete with its rivals for their principal source of revenue, namely advertising revenue. The Tribunal based its conclusion on a statement contained in the second reading speech in which the Bank Account Debits Tax Administration Amendment Bill 1984 (Hansard, H. of R., 5 September 1984, p. 651) was explained to the House of Representatives. The Minister said:

``This policy of taxing all business activities of government bodies ensures equality of tax treatment with any private sector competitors but has meant that local councils that carry on business activities such as operating swimming pools, child care centres and caravan parks are subject to the tax in respect of those activities even where they represent an insignificant part of a council's functions and are not commercial in a real sense.''

Whilst competition is an aspect of business and is certainly a relevant consideration in the present context, it cannot be decisive of whether an authority's principal function is the carrying on of an activity in the nature of a business. The bracketed phrase ``whether or not for profit'' expressly provides otherwise.

Section 10N of the Superannuation Act provided that, subject to that or any other Act, every employee should contribute to the Fund in accordance with the Act. The exceptions to this were for those who did not pass the required medical examination and those who were granted exemptions from contribution under sec. 10T. From a practical point of view, I think that the evidence establishes that the Fund is in effect one which the employees of the New South Wales Government and the other employer bodies to which the Act refers

ATC 4391

were required to join. The numbers of applications for exemption were comparatively insignificant and the inference which should be drawn is that for all practical purposes membership of the Fund was required of all employees except in the special circumstances which have been earlier mentioned. This view of matters is in line with the opinion expressed by the members of the Court of Appeal of New South Wales in
Athanasiou v. State Superannuation Board (1985) 12 I.R. 204 at pp. 211-212, 213 and 218.

The question to be decided is whether the applicant was an Authority, the sole or principal function of which, was to carry on an activity in the nature of a business (whether or not for profit). Although the applicant was apparently not a trustee (sec. 4A of the Act), the evidence establishes that in substance its sole or principal function was to act as the administrator of a substantial trust, the objects or beneficiaries of which were the employees of the New South Wales Government and the other statutory or semi-Government bodies who were members of the Fund. In order to discharge its function the applicant was obliged to collect and receive contributions from both the employers and the employees. These were invested by it in a variety of ways which have been earlier described. The income of the applicant and thus the trust consisted of the contributions and the investment income which it received from time to time. Out of this income were paid the entitlements to superannuation of the employees determined in accordance with the provisions of the Act. All this activity plainly involved the applicant engaging in a regular and systematic course of conduct. What was, however, absent from its activities was the conduct of a commercial enterprise in the sense in which that expression is understood in ordinary language. The applicant was an organ of Government. Although it invested moneys and received interest and dividends and also surpluses on the sale of investments, it was not intended to make a profit. Nor, so it seems to me, was it intended ordinarily to be competitive although, no doubt, those responsible for its administration kept an eye on the amount of superannuation benefits being received by employees of other governments or in the private sector. But for there to be any substantial increase of benefits, an amendment to the Act would have been necessary so that the applicant was perforce obliged to act within the confines of its Act.

However large a trust may be, it does not necessarily follow that the trustee administering it is carrying on a business. In most cases he will not be unless there are amongst the assets of the trust, specific assets which themselves may be described as businesses. If the question were whether the applicant were carrying on a business, using that expression in the sense indicated by the dictionaries and authorities to which reference has been made, I would have reached the conclusion that the question should be answered in the negative. But one needs to bring into account the omission of profit as a determining or necessary factor and, more importantly, the fact that the question is whether the authority has as its sole or principal function the carrying on of an activity in the nature of a business.

In the course of the argument an attempt was made to draw an analogy between the activities of the applicant and those of the large life insurance companies which provide superannuation benefits to a wide range of employees in the community by a variety of superannuation schemes. I have found it difficult to gain assistance from such an exercise principally because my own understanding of how these schemes are constituted is only a broad and general one and may, for that reason, not be entirely accurate. In any event I do not regard knowledge of the way in which other organizations provide superannuation benefits as being in the category of knowledge which is sufficiently notorious for it to be alluded to by a court without the production of evidence. One knows, of course, that many employers have superannuation schemes for their employees, some constituted independently of any support from or connection with a life insurance company and some not. And I suppose one could ask oneself the question whether the carrying on of such an activity by a non-government trading organization was itself a business as distinct from being part of the general business activity of the organization. But I do not think that these considerations are of assistance in the context of the present problem.

I have looked, as I have indicated, at the Victorian State Superannuation Board case, but

ATC 4392

the questions which confronted the Court in that case were different from those which are raised by this appeal. As earlier said, some of what the minority there said is helpful, but it cannot be decisive of what the outcome of this case should be.

In the end, as is usually the case in these matters, one has to take the evidence and go to the statute in question and endeavour to determine whether the particular activity falls within the Act or not. A starting point for that exercise is to bear in mind that Parliament did intend the tax to be payable by a wide range of government and semi-government authorities and bodies. The fact that a particular authority might be an instrument or agency of the Crown was not of relevance. This is made clear by the Act itself and confirmed, if confirmation were necessary, by what was said by the Minister in the second reading speech made to Parliament in relation to the 1984 amending Act. Then there are the two factors already mentioned, namely, the immateriality of profit making and the careful use of the words ``activity in the nature of a business''. To me the use of those words indicates an intention on the part of the draftsman to cast his net much more widely than would have been the case if he had limited the expression to the carrying on of a business. It would have been understandable if he had limited the language of the Act in this way because many government instrumentalities, whether offshoots of the Crown or not, do carry on business in the ordinary sense of that expression. But the draftsman, in my opinion, had a wider purpose.

All these considerations have led me, not without a deal of hesitation, to conclude that the sole or principal function of the applicant was to carry on an activity, namely, the provision of superannuation benefits to relevant employees, which was in the nature of a business. In my opinion the opposite conclusion would not make sufficient allowance for the language which has been used, the overall purpose and object of the Act and the fact that the provision of superannuation benefits by means of collection of contributions and the earning of income from a wide range of investment has many of the hallmarks of business activity.

In the result the appeal is dismissed with costs.


1. The appeal be dismissed.

2. The applicant pay to the respondent his costs of the appeal.

3. There be liberty to apply.

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