TOTALIZATOR AGENCY BOARD v FC of T

Judges: Hill J
Tamberlin J

Sundberg J

Court:
Full Federal Court

Judgment date: Judgment handed down 19 August 1996

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Sundberg J

I agree with Hill J's reasons for his conclusion that the TAB is not entitled to exemption under Item 126(1)(a). I share his

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ATC 4796

Honour's views on the so-called principle of construction which requires that sales tax exemption items be given a liberal interpretation.

I also agree with Hill J that the TAB is not entitled to exemption under Item 126(1)(b), but I will express my own reasons for this conclusion. There does not appear to be behind Item 126 any intention to encourage a particular activity so that it should be accorded a construction which promotes that activity. The item is therefore to be given its ordinary meaning in accordance with customary principles of interpretation.

An ``expenditure'' is a disbursement or payment: Macquarie Dictionary . To ``bear'' something is to accept or have it as an obligation - e.g. to bear responsibility, cost or blame: Macquarie . Something is ``borne'' which is ``carried, sustained or endured'': Oxford English Dictionary . Thus, in the ordinary meaning of words, a person's expenditure is borne by another when the latter pays the former's bills or provides the funds with which the former pays his bills. Item 126(1)(b) contemplates that the authority and not the government will actually make the disbursement or payment, and accordingly ``borne'' does not have the narrow meaning of ``paid''. To use the example employed in argument - if I give my daughter $2 to buy her lunch, which she does, I bear the expenditure though she pays over the money. I bear the expenditure exclusively, because no one else contributes any part of the $2. If my wife and I pay $1 each, I no longer bear the expenditure exclusively. Nor do I, if my daughter contributes $1 out of her pocket money. So with the entities the subject of Item 126(1)(b). A government bears an authority's expenditure when it provides money with which the authority discharges its financial obligations. The government bears the expenditure exclusively when it alone provides the money. If the Commonwealth government and a State government together provide the funds, neither bears the authority's expenditure exclusively. If the authority uses money of its own (perhaps generated by fees and charges), in addition to funds provided by a government, the government does not bear the expenditure exclusively.

Item 126 exists in a constitutional environment in which funds provided by the executive government, whether for its own use or for the uses of entities which it controls or otherwise wishes to fund, are paid out of consolidated revenue and must be the subject of Parliamentary appropriations. This constitutional principle that no money can be taken out of consolidated revenue into which the revenues of the State have been paid except under a distinct authorization of Parliament is entrenched in the Commonwealth Constitution by ss. 81 and 82:
Brown v. West (1990) 169 CLR 195 , at 205-206 ;
Northern Suburbs General Cemetery Reserve Trust v. The Commonwealth 93 ATC 4118 , at 4124-4126; (1993) 176 CLR 555 , at 572-575 . Comparable provisions exist in the constitutions of the various States. The New South Wales provisions are ss. 39 and 45 of the Constitution Act 1902 and s. 21 of the Public Finance and Audit Act 1983. Item 126(1)(a) exempts only the Commonwealth and the States as political entities. It does not apply to bodies which may for other purposes be regarded as the Crown in right of the Commonwealth or a State. Certain of those bodies are exempt under Item 126(1)(b). But to be exempt a body must have the three characteristics mentioned in par. (b): it must be an authority, it must be completely controlled by a government, and its expenditure must be exclusively borne by the government. If a State were required to pay sales tax, the cost would come out of its consolidated revenue. If a State body having the required characteristics were required to pay tax, the cost would be borne by the State's consolidated revenue. In each case the tax would find its way into the Commonwealth's consolidated revenue. In the context provided by the Constitutional principle, the intention behind Item 126 as a whole can be seen to be to avoid the payment out of one consolidated fund into another, and in the case of Commonwealth authorities, out of and into the one consolidated fund.

If, as the appellant contended, few authorities will qualify under par. (b) on the view I prefer, that is a consequence of the verbiage of Item 126(1)(b), and of the rejection of the notion that a liberal interpretation should be accorded to the exemption. It should not occasion surprise that niggardly language - ``completely controlled'' and ``exclusively borne'' - produces a niggardly result.

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ATC 4797

The view I have taken does not accord with the opinion of Hill J, concurred in by the other members of the Full Court, in the Bank of Western Australia Case 96 ATC 4009, at p 4029; (1995) 133 ALR 599, at p. 621. But his Honour's view that ``expenditure of an authority will be exclusively borne by a government where the government is liable for funding any loss which may arise after there is deducted from the income of that authority the actual payments which the authority is required to meet'', was, as he said, unnecessary for the decision in the case, and does not bind me to desert my own opinion. The Bank Case approach, in my respectful opinion, travels beyond the ordinary meaning of the words in Item 126(1)(b). In the ordinary use of language one would not say the expenditure of a trading company the debts of which are guaranteed by a bank are exclusively (or at all) borne by the bank.

The TAB's expenditure is not exclusively borne by the government of New South Wales in the sense I have described, and it is not entitled to the exemption in Item 126(1)(b).

I agree that the appeal should be dismissed.

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellant pay the respondent's costs.