Victoria v Commonwealth [1957] HCA 54

High Court of Australia Dixon C.J. McTiernan, Williams, Webb, Fullagar, Kitto and Taylor JJ. Victoria v Commonwealth [1957] HCA 54

ORDER Order in each case:— Demurrer overruled. Declare that par. (a) of s. 221 (1) of the Income Tax and Social Services Contribution Assessment Act 1936-1956 is ultra vires and void. Refuse all other relief claimed. Order that the parties abide their own costs.

Cur. adv. vult.

The following written judgments were delivered:—

Aug. 23 Dixon C.J.

The validity of two distinct provisions of laws of the Commonwealth is attacked in these proceedings. The provisions are s. 221 of the Income Tax and Social Services Contribution Assessment Act 1936-1956 and ss. 5 and 11 of the States Grants (Tax Reimbursement) Act 1946-1948. If ss. 5 and 11 are invalid the whole Tax Reimbursement Act must, it is said, go with them, for they cannot be severed from the rest of the provisions of that Act, but that is not a necessary part of the attack.

On behalf of the two States who seek to establish the invalidity of the provisions in question we are told that the provisions are indispensable to the system which is called uniform taxation and that without them that system must come to an end. No satisfactory legal reason could be advanced in support of this prophecy. So far as the law goes, all that can be said is that the invalidation of s. 221 of the Income Tax and Social Services Contribution Assessment Act would remove one obstacle to the States breaking away from the system and the invalidation of the States Grants (Tax Reimbursement) Act would remove one powerful inducement to the States to abide by it.

No attempt is made to invalidate the imposition by the Commonwealth Parliament of income tax at rates which suffice to produce revenue large enough to cover payments to the States of grants on the same scale as heretofore made to the States by way of tax reimbursement. Nor is there any attempt to deny that the power of the Commonwealth Parliament would enable it to authorise such payments unconditionally as grants of financial assistance. The denial of power is very much more limited. What is denied amounts to two things. First, it is denied that the power of that Parliament enables it to enact, as a condition of the grant, that the federal Treasurer must be satisfied that the State has not imposed a tax on incomes, or to enact that, if he makes advances, they shall be repaid by a State that in the event fails to observe the condition. Second, the power is denied to say that a taxpayer upon whom a State Parliament might impose a liability to pay to the State a tax upon income for any given year must not pay the tax until first he has discharged his liability to the Commonwealth to pay income tax in respect of the same year. This in effect is what is done by s. 221 (1) (a) of the Income Tax and Social Services Contribution Assessment Act. These provisions, the States say, are the buttress of the system of uniform taxation.