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3.2B s96 Detailed Notes.doc

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Queensland University of Technology

Section 96: Grants Power 96 Financial assistance to States During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit. Intended originally to be a transitional provision: text 1120 Compare with s87 (now irrelevant… how convenient) 87 [Revenue from customs and excise duties] During a period of ten years after the establishment of the Commonwealth and thereafter until the Parliament otherwise provides, of the net revenue of the Commonwealth from duties of customs and of excise not more than one-fourth shall be applied annually by the Commonwealth towards its expenditure. The balance shall, in accordance with this Constitution, be paid to the several States, or applied towards the payment of interest on debts of the several States taken over by the Commonwealth. Victoria v Commonwealth (Federal Roads Case) (1926) 38 CLR 399 Grants to finance work on roads: “plainly warranted by the provisions of sec 96”: 406 Deputy Federal Commissioner of Taxation (NSW) v WR Moran Pty Ltd (1939) 61 CLR 735 Wheat tax appropriated back to the states, disputed on basis of discrimination under ss51(ii)&(iii) • Discrimination is prohibited in laws o Taxation: s51(ii) o Bounties: s51(iii) o Regulation of trade & commerce: s99 • “ ‘equal’ laws may produce very unequal results”: Latham CJ, 764 • → s96 “provides means for adjusting such inequalities in accordance with the judgment of the parliament”: 764 • → can grant money “when it thinks proper”: 763 WR Moran Pty Ltd v Deputy Commissioner of Taxation for New South Wales [1940] AC 838 Privy Council reached the same conclusions • “There are no restrictions whatever in this section, and it is clear that … the Parliament … may in the matter of financial assistance discriminate between the States as much as it thinks fit.”: Viscount Maugham (for their Lordships) 857 • Limitation: Except where the effect is a discrimination in taxation o “Cases may be imagined in which a purported exercise of the power to grant financial assistance under s 96 would be … to effect discrimination in regard to taxation.”: 859 Andrew Trotter Constitutional Law 2009-1 Income Tax Arrangements • Most federations—income tax collected by both governments o Australia was like this until WWII o State collected Cth income tax on its behalf—taxpayer only paid once • 1942 Restructure o Only Cth levies income tax o Proportion of proceeds granted to states under s96 o Steps establishing Cth monopoly 1 2  Fixed Cth income tax at high rate (18 shillings / pound = 90%)  Given amounts appropriated back to states if they have not charged income tax in that year 3  All staff, offices and property r4lating to tax assessment and collection transferred to the Cth  Cth income tax takes precedence to State 5 • Loophole: Cth can’t tax states discriminatorily (s51(ii)), but can tax highly at the same rate and then refund at different rates to achieve the same purpose…? South Australia v Commonwealth (First Uniform Tax Case) (1942) 65 CLR 373 During wartime → Validity of above legislation challenged Barwick CJ (in majority) • The validity of the acts must be determined individually, not as an entire ‘scheme’ that achieves some unlawful purpose: Latham CJ at 411 • The Cth may use grants to induce o Rejected the argument that “the Cth cannot lawfully make an offer of money to a State which, … the State cannot, on political or economic grounds, really refuse”: 417  Does this eliminate any last limitation from Moran?  “Temptation is not compulsion”  There is no “legal compulsion” 417 on states to stop income tax —just they won’t get the money • Cth may legislate to weaken or destroy state activity (cf Melbourne Corporation v Commonwealth (1947) 74 CLR 31) p1125 of text o “Commonwealth legislation may be valid though it does in fact weaken or destroy, and even if it is intedned to weaken or destroy, some State activity”: 423-424 Starke J (in dissent) • Looked at the purpose of the acts (not considered by the majority) 1Alfred Deakin prophecy: States would find themselves “legally free, but financially bound to the chariot wheels of the Central Government” (A Deakin, Federated Australia: Selections from Letters to the Morning Post 1900-1910 (JA La Nauze (ed), Melbourne University Press, 1968) at 97 2Income Tax Act 1942 (Cth) 3States Grants (Income Tax Reimbursement) Act 1942 (Cth) s 4 4Income Tax (War-time Arrangements) Act 1942 (Cth) 5Income Tax Assessment Act 1942 (Cth) s 221… in order to ensure Cth revenue for the “efficient prosecution of the present war” – policy Andrew Trotter Constitutional Law 2009-1 o Doesn’t merely “offer them an inducement [without] interfere[ing] with … constitutional power” 443 o “in substance is the same thing” 444 Victoria v Commonwealth (Second Uniform Tax Case) (1957) 99 CLR 575 • States Grants Act repealed, but replaced permanently by States Grants (Tax Reimbursement) Act 1946 (Cth) • Tax Assessment Act expiration date (one year after war) repealed (gave precedence to Cth taxes) o Purpose: ‘for the efficient prosecution of the present war’ → ‘for the purposes of the Commonwealth” HELD • s 96 not to be interpreted narrowly as a transitional power o “It seems a not improbably supposition that the framers had some such conception of the purpose of the power. But the course of judicial decision has put any such limited interpretation of s 96 out of consideration.”: Dixon CJ at 601 • Although a suggestion of a narrower interpretation?
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