I wasn’t getting the nine hundred bucks anyway

All subjects are linked to crocodiles. Just ask the NT News (via Flickr)

High Court challenge jeopardises $900 bonus – Sydney Morning Herald (19 March) –

THE High Court has agreed to hear a challenge to the legality of the Federal Government’s proposed $900 tax bonus to 8.7 million taxpayers. The case has been brought by a law lecturer and former National Party office holder, Bryan Pape, a champion of states’ rights. The High Court will hear the case on March 30 and 31.

At least some of Pape’s constitutional arguments are outlined in a paper he gave to the Samuel Griffith Society in 2005 entitled “The Use and Abuse of the Commonwealth Finance Power“.  The arguments revolve around Constitution section 96 (financial assistance grants to the States) and section 81 (appropriations), as well as questions of whether citizens have standing to challenge such Commonwealth decisions and whether such a challenge is justiciable.  

I doubt that Pape’s current argument has anything to do with section 96 grants, because the $900 bonus payments are characterised as refunds to individuals of tax they have paid rather than as grants to the states.  My best guess is that Pape will argue that the payments can’t genuinely be characterised as refunds of tax (and hence supported by the Commonwealth’s taxation power in Constitution section 51(ii)), in that the flat $900 “refund” bears no quantifiable relationship to the amount of tax originally paid.  Thus it isn’t really a refund of tax but a gift, and the Commonwealth possesses no independent constitutional head of power permitting it to make gifts to citizens.  It’s an interesting argument because the Commonwealth can only enact an appropriation under s81 for the “purposes of the Commonwealth”.  However the argument could only succeed if the High Court is prepared to overrule previous authority (e.g. the AAP Case) holding on various different grounds that Commonwealth appropriations are not ordinarily susceptible to successful challenge.

UpdateGeorge Williams reaches similar conclusions in the SMH, only more succinctly.

For any readers interested in a bit more detail on this fairly technical area, here’s an extract from my constitutional law study guide:

  • Some Justices (notably Jacobs J in Victoria v Commonwealth and Hayden (AAP Case) (1975) 134 CLR 338) have regarded matters relating to appropriation as non-justiciable i.e. they are for Parliament and not the Courts to decide.
  • Stephen J in the AAP Case held that the State of Victoria lacked standing to bring an action impugning a mere appropriation (because the appropriation itself could not in any way hamper the freedom of citizens of the State). Stephen J’s position is fairly similar in effect to treating the question as non-justiciable.
  • Mason J in the AAP Case adopted a wide view of the appropriation itself, but held that any legislation establishing machinery for administering and spending the money so appropriated was limited to subjects where the Commonwealth had express legislative power. Thus, although the Commonwealth could appropriate funds for whatever purposes it liked, it could only spend the funds for purposes where it lacked express legislative power if it could do so in the absence of enabling legislation.

The net result of the AAP Case was that 3 Justices (McTiernan, Murphy and Jacobs JJ) held that the Australian Assistance Scheme was valid, 3 Justices (Barwick CJ, Gibbs and Mason JJ) held that it was invalid, and Stephen J held that the plaintiff Victoria had no standing. Accordingly the Plan survived.

In Davis v Commonwealth (1988) 166 CLR 79 (mostly about the “implied nationhood” power), Mason CJ, Deane and Gaudron JJ summarised the results of the AAP Case (and therefore the current law on sections 81 and 83 appropriations) as follows:

“The case therefore stands as an authority for the proposition that the validity of an appropriation act is not ordinarily susceptible to effective legal challenge. It is unnecessary to consider whether there are extraordinary circumstances in which an appropriation of money by the Parliament may be susceptible to such challenge. It suffices to say that, if there be such cases, the present is not one of them.”

Incidentally, Justice Jacobs in the AAP Case, as well as deciding the matter was non-justiciable, also opined that the Australian Assistance Plan could be supported under the Commonwealth’s social welfare powers (Constitution section 51(xxiii) and (xxiiA)) in any event, and hence a “purpose of the Commonwealth” under section 81.  That might conceivably be an argument available to the Commonwealth in relation to the $900 bonus payment, although I wouldn’t like to be arguing that it’s a tax refund or in the alternative a social welfare pension payment!!

About Ken Parish

Ken Parish is a legal academic, with research areas in public law (constitutional and administrative law), civil procedure and teaching & learning theory and practice. He has been a legal academic for almost 20 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in the early 1990s.
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17 Responses to I wasn’t getting the nine hundred bucks anyway

  1. Jacques Chester says:

    My suspicion is that it will stand.

    My best guess is that Pape will argue that the payments cant genuinely be characterised as refunds of tax (and hence supported by the Commonwealths taxation power in Constitution section 51(ii)), in that the flat $900 refund bears no quantifiable relationship to the amount of tax originally paid.

    This argument presupposes that the scheme has to be proportional or progressive. The Constitution does not specify a tax system. Taking the usual post-Engineers approach of reading heads of power as widely as possible, there’s no reason why any one part of the tax system implies anything about another part.

    If that fails, the argument becomes that taxation powers are not constrained to single years; from a certain point of view taxation is a lifelong relationship with the Commonwealth. Taxing power is exercised across a person’s entire lifetime; so reducing the tax bill by $900 in one year doesn’t matter, as it can be thought of as bringing forward tax from previous years, or back from future years.

    These are the sort of legal gymnastics to justify the expansion of Commonwealth power that the High Court almost never rejects.

  2. pedro says:

    Ken, are the payments welfare payments? 51(xxiii) and (xxiiA) provide quite a grab bag, but the payments, if I understand it, cannot be ascribed as particularly being for any of those purposes because different people will get the same money despite different circumstances. But if the payments are to stimulate the economy then surely they must come under trade and commerce if they are to be valid?

  3. pedro says:

    Jacques, other than GST, some of the people getting the payment will almost certainly never have paid any tax.

  4. Jacques Chester says:


    they may still do so.

  5. Ken Parish says:

    I doubt that an argument that they are social welfare payments would succeed. Nor do I think there could be any plausible argument that the payments are somehow incidental to interstate or overseas trade and commerce (section 51(i)).

    On Jacques’ point, I think an argument that the payments do not bear a sufficient connection to taxation is a respectable one. The bonus payment does not create or abolish a tax or vary any rate of tax, nor does it really refund tax already paid in any real sense. Everyone eligible receives the same amount irrespective of the rate or amount of tax they originally paid. As Toohey J observed in Re Dingjan; Ex parte Wagner in 1995:

    “…In the end the question is whether there is a sufficient connection between the law and the subject matter to be able to say that the law is one with respect to the subject matter.

    it may be said that some circularity is involved in a proposition expressed in those terms. But there is a qualitative assessment to be made and sufficiency of connection draws attention to the need for such an assessment. it emphasises that the connection must be substantial, not merely tenuous.”

    I reckon the connection between the bonus payment and tax is fairly tenuous to say the least. The reason I suspect Pape’s challenge will fail is that a majority will hold, as in the AAP case, either that Pape lacks standing or that a dispute of this nature is non-justiciable. However, I wouldn’t want to put money on it. Pape might well succeed on the approach taken by either Barwick CJ, Gibbs J or Mason J in AAP. It’s certainly true that no coherent basis for dealing with section 81 challenges has ever emerged from the High Court, which is no doubt why they’ve agreed to hear this case so promptly. Moreover, we have no clear idea what any of the current Justices think about these questions. It’s a fascinating case, because if a majority WERE to hold that appropriations are susceptible to effective judicial review then a major part of the Commonwealth’s fiscal stranglehold over the States would be undermined. Thus it’s an important case for federalism.

  6. pedro says:

    I read (well, skimmed) Pape’s SGS paper and it will be interesting to see what happens. Not being a constitutional lawyer I don’t know how widely trade and commerce has been interpreted, I mentioned that power as it was the only arguable base I could see. I suppose one would argue that the stimulus is to encourage trade between the states.

  7. JC says:

    Thus it isnt really a refund of tax but a gift, and the Commonwealth possesses no independent constitutional head of power permitting it to make gifts to citizens. Its an interesting argument because the Commonwealth can only enact an appropriation under s81 for the purposes of the Commonwealth.

    Does that mean that say foreign aid could also fall under this question he’s raised, or is FA a direct Federal Government responsibility and therefore not an issue?

  8. robertcorr says:

    It’s worth noting what Mr Gageler told the Court at the leave hearing. He said the Government would rely upon:

    The appropriations power read with the incidental power – that is the primary way in which we will put it the implied national power, the external affairs power, the trade and commerce power and the taxation power. … [i]n descending order, your Honour, probably, although I might tinker with the order…

    pedro is wrong — the only requirement is that they have paid tax, though that could be as little as $0.01. However, even the 1c-payers get the full $900, which does give it the flavour of a gift. I wonder if the Government should have characterised it as a rebate, so that those who paid less than $900 simply get their tax back?

    I’d be interested to hear from Ken and Jacques about the other powers.

  9. robertcorr says:

    Foreign aid would be pretty squarely under the external affairs power, I would have thought, JC.

  10. Jacques Chester says:

    Ah, Foreign Affairs. I forgot about that popular loophole. The Government can make the case that the stimulus package is part of our international relations with allies and partners, who are doing the same as us. Or whistle up a treaty for it. The possibilities are endless.

  11. Tel_ says:

    If that fails, the argument becomes that taxation powers are not constrained to single years; from a certain point of view taxation is a lifelong relationship with the Commonwealth.

    That’s already true, plenty of existing ATO rules span multiple years. What comes to mind quickly is the rule that a business must make a profit for three years in every five to pass the “Profits test”, see:


    Also, the calculation of PAYE component in a BAS based on previous years earning (aka Provisional Tax rides again). There’s also a bunch of tax credits that roll across years (but don’t ask me for details) and some schemes for artists and people who make “windfall” profits to amortise over lean years (thus optimising against our nonlinear income tax function).

    These are the sort of legal gymnastics to justify the expansion of Commonwealth power that the High Court almost never rejects.

    Not fair to blame the High Court, most Australians have no interest whatsoever in constraining Commonwealth power and they get the government they deserve (this being a Democracy don’t you know).

    We all know Pape is gonna lose, probably he knows it himself, presumably he wants a reputation.

  12. robertcorr says:

    Actually, now that I think about it, Mr Gageler is still relying on the standing appropriation in s 16 of the Taxation Administration Act, so even if they hang it on some other head of constitutional power, they still need to characterise it as “a law of the Commonwealth or of a Territory imposing a tax or otherwise dealing with Australian tax”.

  13. robertcorr says:

    We all know Pape is gonna lose, probably he knows it himself

    Perhaps, but we’re still interested in precisely how he is gonna lose!

  14. Ken Parish says:

    The appropriations power read with the incidental power – This submission would rest on some judgments in various cases which suggest that the “purposes of the Commonwealth” in section 81 means whatever the Commonwealth decides are its purposes (independent of whether there is otherwise an express head of legislative or exeuctive power to be found). That’s essentially Latham CJ’s position in the Pharmaceutical Benefits Case, and Mason J doesn’t stop all that far short of that position in AAP. However, it’s never been the majority position as such. The majority has always been made up by other Justices as well who based their decision on lack of standing, justiciability etc

    the implied nationhood power – It’s certainly true that the boundaries of the implied nationhood power remain to be explored. See especially Davis v Commonwealth. It is a respectable argument that (arguably – and it’s the government that determines it – the High Court certainly won’t second guess such an assessment) the preservation of the nation currently requires a massive short-term financial stimulus to boost liquidity and avoid depression.

    the external affairs power – Presumably this would be an argument that there are international agreements, however informal, brokered in G20 meetings and elsewhere that Australia is implementing by its Financial Stimulus package. It is certainly fairly well accepted that you don’t need to have a formally ratified treaty for this aspect of the external affairs power to be engaged. I don’t know exactly what international agreements have been made or how specific they are as to required measures, however. The Industrial Relations case (1996) says that the Commonwealth can only rely on an international agreement/treaty to support a law if and to the extent that the agreement lays down fairly specific obligations that the law is implementing. It can’t just be “aspirational”.

    the trade and commerce power – I reckon this is the weakest Commonwealth argument. I think the connection between the $900 payments and interstate or overseas trade and commerce is fairly tenuous (but Gageler thinks – or at least asserts – otherwise). The Commonwealth doesn’t have power over “trade and commerce”, it has power only over interstate and overseas trade and commerce. A law must directly impact interstate or overseas commerce to engage the power, and the High Court has repeatedly said that a mere economic impact on them is not enough. Thus, for example, an argument that the activity in question will/may make interstate or overseas commerce more viable/profitable would not suffice to engage the power, especially when the $900 payment will in fact boost interstate and intrastate trade indiscrimately, and most of the money will in fact be spent with local retailers and only benefit interstate trade indirectly and partially. I would be extremely surprised if this argument succeeds.

    the taxation power – I’m not surprised that Gageler puts this one low on his list, for the reasons I’ve already outlined. There’s no discernible relationship between the amount of tax paid and the amount of “refund” being given. It looks like a bullshit pretext rather than a constitutionally “sufficient connection”.

    In summary, my own assessment is that the implied nationhood power and (subject to its specificity) international agreement/external affairs power look like the Commonwealth’s best arguments, assuming they can’t win it on the usual basis of persuading the Court to find against the applicant on standing or justiciability. What do you think Rob, to the extent that your old constitutional law lectures aren’t now just a dim bad memory??!!

  15. Jacques Chester says:

    Not fair to blame the High Court…

    I blame Isaacs J and all who’ve followed his precedent.

  16. robertcorr says:

    I can’t disagree with you, Ken. It would be a brave High Court that overturned a key plank of the stimulus package as being outside the implied national power — the GFC is the economic equivalent of wartime, which suggests a broader reading is likely.

    On the appropriations power: didn’t the WorkChoices advertising challenge lead to a broadening of this power? That might give some idea where the current bench might fall.

  17. Tel_ says:

    For what it’s worth… http://www.hcourt.gov.au/media/Pape.pdf

    Not much detail available yet.

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