Coal Mining Industry Long Service Leave (Funding) Corp v Commissioner of Taxation
[1998] FCA 1058
•3 SEPTEMBER 1998
FEDERAL COURT OF AUSTRALIA
TAXATION – whether corporation established to administer scheme for collection of contributions to long service leave liability is exempt from income tax – whether such a corporation is a “public authority” – whether such corporation is entitled to Crown immunity –where government does not benefit from the exemption from income tax – Commonwealth utilising its taxation power to achieve an aim other than raising revenue for the Commonwealth.
Coal Mining Industry (Long Service Leave Funding) Act 1992 (Cth) ss 6(1), 7, 8, 9, 11, 13, 27, 29, 35, 36, 37, 39, 40, 41, 42, 43, 44, 51
Income Tax Assessment Act1936 (Cth) ss 17, 23(d)
Taxation Administration Act1953 (Cth) s 14ZZ
Coal Industry Act1946 (Cth)
States Grants (Coal Mining Industry Long Service Leave) Act1949 (Cth)
Coal Excise Act1949 (Cth)
Excise Tariff Act 1921 (Cth)
Coal Mining Industry Long Service Leave Act1950 (NSW)
Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act1992 (Cth) ss 4, 5, 7, 8, 9, 11, 12, 13
Coal Mining Industry (Long Service Leave) Payroll Levy Act1992 (Cth) ss 4, 7, 8
Audit Act1901 (Cth) s 63C
Commissioner of Taxation v Bank of Western Australia (1995) 61 FCR 407, followed
Townsville Hospital board v Townsville City Council (1982) 149 CLR 282, cited
Launceston Corporation v The Hydro Electric Commission (1959) 100 CLR 654, cited
State Electricity commission of Victoria v The City of South Melbourne (1968) 118 CLR 504, cited
Superannuation Fund Investment Trust v Commissioner of Stamps (1979) 145 CLR 330, cited
COAL MINING INDUSTRY LONG SERVICE LEAVE (FUNDING) CORPORATION v COMMISSIONER OF TAXATION
NG 37 of 1998
EMMETT J
SYDNEY
3 SEPTEMBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 37 of 1998
BETWEEN:
COAL MINING INDUSTRY LONG SERVICE LEAVE (FUNDING) CORPORATION
ApplicantAND:
COMMISSIONER OF TAXATION
Respondent
JUDGE:
EMMETT J
DATE:
3 SEPTEMBER 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
HIS HONOUR: The applicant, Coal Mining Industry (Long Service Leave Funding) Corporation (“the Corporation”), is a corporation established under section 6(1) of the Coal Mining Industry (Long Service Leave Funding) Act 1992 (Cth) (“the Funding Act”). By notice of assessment dated 13 June 1996 issued under the Income Tax Assessment Act1936 (Cth) (“the Assessment Act”), the respondent, the Commissioner of Taxation (“the Commissioner”), assessed the Corporation to tax in respect of assessable income in the sum of $3,163,264. The Corporation lodged notice of objection against that assessment dated 29 August 1996. On 1 December 1997, the Commissioner notified his decision on that objection disallowing the objection. On 19 January 1998, the Corporation commenced these proceedings by way of appeal against that objection decision pursuant to section 14ZZ of the Taxation Administration Act 1953 (Cth).
The Corporation contends that its income is exempt from income tax by operation of section 23(d) of the Assessment Act which relevantly provides that the revenue of a public authority constituted under any Act is exempt from income tax. Alternatively, the Corporation contends that it is exempt from income tax on the basis that it is entitled to Crown immunity. When the proceedings were commenced, there was a third issue as to whether, if there is no applicable exemption, the Corporation is liable to tax as a trustee under section 99A of the Assessment Act. The Commissioner no longer contends that the Corporation is a trustee and, consequently, that issue does not arise before me. However, that question could have some bearing on the orders which should be made in any event.
BACKGROUND
The Corporation was established in the course of the implementation of the coal industry policy announced by the Federal Government on 2 December 1991. The policy involved reform of the coal industry’s long service leave arrangements and followed a review of long service leave funding undertaken by Mr L.J. Willett, then chairperson of the Superannuation Fund Investment Trust. In order to understand the scheme established in the implementation of that policy it is necessary to consider the scheme which existed prior to the implementation of the policy and which was put in place in 1949 and 1950 (“the Original Scheme”).
Following a 14 week coal miners’ strike in 1949, the Original Scheme was introduced as a means of providing coal industry employees with access to long service leave on the basis of length of service in the industry. On 7 September 1949, the Coal Industry Tribunal, established under the Coal Industry Act 1946 (Cth), announced the terms of a draft long service leave award for members of the Australian Coal and Shale Employees Federation employed in the coal mining industry throughout the Commonwealth.
On 26 September 1949, the Tribunal published the draft award as settled (“the Award”). The Award provided for long service leave for employees in the coal mining industry on the following basis:
(i)Thirteen weeks’ long service leave with pay shall become due to each employee upon accumulation by him of 65 shifts of entitlement in the manner prescribed in sub-clauses (ii) and (iii) of this clause, and an additional thirteen weeks’ long-service leave with pay shall become due upon accumulation by him of each additional 65 shifts of entitlement.
(ii)For periods of employment in the coal-mining industry prior to the 19th June, 1949, a person employed in the industry on 19th June, 1949, shall accumulate five shifts of entitlement for each completed year of such employment with one or more employers, provided that periods of such employment aggregating thirteen years or more shall count as thirteen years’ employment only.
(iii)On and after the 19th June, 1949, each employee shall accumulate one-eight of a shift of entitlement for each five consecutive ordinary shifts worked by him in the industry with one or more employers which commence on or after the said 19th June, 1949.
The significant aspect of those provisions is that an employee was entitled to accumulate leave entitlement with more than one employer. It was not uncommon for employees to move from one employer to another. The consequence was that an employer could become liable for long service leave in respect of an employee who had accumulated much of his entitlement with other employers, some of whom might no longer be in business.
On publishing the draft of the Award, the Tribunal stated that the Award itself would issue upon an intimation that the Government would finance the long service leave scheme which the Award embodied. That intimation was apparently given and, on 14 October 1949, the Award was issued. However, since it was considered that it would not be uniformly practicable to make payments under the Award until a fund had been established and become operative, liability by employers for such payments was not to arise until further order. That order was to issue immediately the Tribunal was officially notified that the proposed fund was in operation.
A Bill was subsequently introduced into Federal Parliament, the purpose of which was to arrange for the financing of long service benefits granted by the Award. The Minister said, on the second reading of the Bill, that the Government was proceeding to provide the machinery for the running of the scheme necessary to give effect to the Award. In the course of his speech, the Minister said the following:
It will doubtless be evident to honourable members that it would be impracticable for the cost of the leave to be made the full financial responsibility of the individual employers. I shall mention some of the reasons. During their working lives, many employees have changed from one employer to another, and it would be inequitable to place the cost of all such employment solely on present day employers. Some collieries are not financially capable of meeting the additional cost involved by the leave. Many employees have been employed in the past by colliery companies that are no longer in existence. Moreover, employers would be reluctant to employ men with previous employment in the industry because of the additional liability for long service leave that their employment would involve. This would tend to make labour less mobile than is desirable within the industry, and could result in a loss of skilled labour to the industry. It is also not unreasonable to provide some protection to employees against employers going out of business or becoming insolvent. Under these circumstances, the award can only be financed on an industry-wide basis. To make this possible the establishment of a central fund is necessary in order to spread the liability evenly amongst employers, and particularly to finance the heavy burden of retrospective liability.
The scheme then placed before the Parliament involved the following:
(a)An excise was to be imposed on coal produced by those employees in the coal mining industry who will receive the benefit of long service leave.
(b) The proceeds of that excise were to be placed in a Commonwealth trust fund.
(c)From that fund, the Treasurer of the Commonwealth was to be empowered to make grants to the States.
(d)Each State to which the Award applied was to pass complementary State legislation to authorise the State to reimburse employers for their long service leave liability under the Award and for the State to recoup that expenditure from the Commonwealth by means of the grants.
(e)A formal agreement was to be entered into between the Commonwealth and each State to provide in detail for payments from the Commonwealth trust fund to the State.
The States Grants (Coal Mining Industry Long Service Leave) Act 1949 (Cth) (“the States Grants Act”) was then enacted. Its long title was as follows:
An Act to make provision for the grant of financial assistance to the States in respect of the cost of long service leave granted under industrial awards to employees in the coal mining industry.
The Commonwealth Parliament also enacted the Coal Excise Act 1949 (Cth) and amendments were made to the Excise Tariff Act 1921 (Cth) in order to impose the excise on coal. The States passed complementary legislation. For example, the New South Wales Parliament enacted the Coal Mining Industry Long Service Leave Act 1950 (NSW), the long title of which was as follows:
An Act to constitute a coal mining industry long service leave trust fund; to provide for the payment therefrom to employers in the coal mining industry of amounts paid by them to employees in respect of long service leave accrued to such employees under certain awards; to validate certain matters; and for purposes connected therewith.
Subject to amendment which is not presently relevant, the Original Scheme remained in place and operated until 1992.
Thus, under the Original Scheme, the excise did not directly benefit the Commonwealth. Rather, the excise was to be placed in a fund from which grants would be made to reimburse long service leave liability of employers in the coal industry. However, while those employers benefited to that extent, they had no control over the level of the excise or the investment of the funds. Further, liability of an employer for contributions was determined by reference to production, irrespective of the number of employees of that employer.
On the introduction to the Federal Parliament in 1992 of the Bill for the Funding Act and cognate Bills, the Minister for Finance said:
The current scheme is funded by way of an excise on coal production levied at 20 cents per tonne. Under the proposed arrangements, long service leave will be funded by a levy on payroll. The new scheme has been agreed to by the relevant States and all elements in the industry affected have been consulted in relation to the proposed reforms.
After referring to the report by Mr L.J. Willett, the Minister went on to say:
The report recommended changes to the present funding scheme. It also proposed that the scheme should be fully funded so as to facilitate the portability of long service leave in the industry and to ensure the preservation of benefits in the event of companies going out of business.
The Government agrees with the general thrust of Mr Willett’s report and believes that responsibility for administering the fund should be returned to the industry. It recognises, however, that in the short run this may impose significant cost burdens on sections of the industry.
………………………………
…industry parties and State governments agreed that outstanding liabilities and future accruals should be funded on a more equitable and rational basis related to employment costs. The Government believes that the new arrangements safeguard the public interest in maintaining a viable coal mining industry whilst representing an appropriate balance between the principles of efficiency and equity and the interests of the disparate parties.
The Bills terminate the present excise funding arrangement and implement a new industry managed, fully funded scheme…
The principal features of the scheme are as follows: there is to be a single national scheme under Commonwealth legislation, and its management is to be the responsibility of a board of directors made up of employer and union representatives. The legislation will establish a Coal Mining Industry (Long Service Leave Funding) Corporation. The Corporation will be wholly self-financing and will have two functions. The first will be to manage the coal mining industry long service leave trust fund for the purpose of reimbursing participating companies for long service leave taken by coal miners and other eligible employees. The second will be to collect levies from companies for the purpose of funding long service leave and meeting the costs of the Corporation.
………………………………
…there are compelling reasons for continuing government involvement through a statutory corporation.
First, the new arrangements will substantially increase long service leave funding costs for many companies, especially by reason of the requirement to fully fund accrued liabilities. The formation of a statutory corporation, rather than a private company, has enabled company income tax deductibility of contributions to the fund.
………………………………
Secondly, the new long service scheme removes the inefficiencies and inequities associated with the present arrangements and its full funding will ensure the portability and preservation of benefits. It is an important complementary component of the Government’s coal industry policy reforms, which are designed to respond to changed circumstances and help secure the industry’s future into the next century.
Thirdly, continuing Commonwealth involvement provides a guarantee of continuity and for a smooth transition to the privately funded scheme or schemes with a minimum of industrial friction. (My emphasis added)
The Funding Act, the Coal Mining Industry (Long Service Leave) Payroll Levy Collection Act 1992 (Cth) (“the Collection Act”) and the Coal Mining Industry (Long Service Leave) Payroll Levy Act 1992 (Cth) (“the Levy Act”) were then enacted.
Both the Original Scheme and the current scheme are unusual in so far as they both involve use of the taxing power of the Commonwealth in order to achieve an aim which has nothing to do with the raising of money for Commonwealth purposes. The intervention of the Commonwealth was necessary to provide the element of compulsion required for both schemes. The taxing power of the Commonwealth is utilised as a mechanism to compel contributions by employers.
The purpose of the legislation establishing the new scheme was to overcome problems with the Original Scheme identified by the report of Mr L.J. Willett. The current scheme is designed to achieve the same object sought to be achieved by the Original Scheme but in a different way. One object of the Original Scheme was to encourage portability of benefits and mobility of labour in the industry. Another object may have been to protect employees against employers going out of business or becoming insolvent. Both schemes are directed to ensuring that long service leave benefits are available to eligible employees and that the burden of that benefit be shared among all employers, both present and future.
The current scheme is no more than a refinement of the Original Scheme to deal with specific problems. The two specific purposes for establishing the current scheme in place of the Original Scheme are indicated by the material emphasised in the extract from the Minister’s speech set out above. First, the responsibility for the administration of the fund raised as a consequence of Commonwealth legislation was to be returned to the industry. Secondly, outstanding liabilities and future accruals were to be funded on a basis related to employment costs rather than coal production.
THE PRESENT LEGISLATIVE SCHEME
It is necessary to refer to the relevant provisions of the Acts establishing the current scheme before considering the questions which arise in the proceedings.
The Funding Act
The object of the Funding Act is stated in section 6 to be to provide for a new long service leave funding scheme in the black coal mining industry by:
(a) establishing the Corporation;
(b)requiring the Corporation to establish and maintain a Coal Mining Industry (Long Service Leave) Fund and to make payments out of the Fund to employers in the industry to reimburse them for long service leave payments made to eligible employees; and
(c)appropriating money for the purposes of the Fund in respect of the amounts of payroll levy paid by employers under the Collection Act.
Under section 7 the functions of the Corporation are:
(a) to establish and maintain the Fund; and
(b)to make payments into and out of the Fund, and invest the Fund, in accordance with this Act and the Payroll Levy Collection Act; and
(c)to advise the Minister as to the rates of payroll levy that should be imposed on employers; and
(d)to monitor payments of the payroll levy and keep the Minister informed of any failure by an employer to pay the payroll levy, and
(e)to advise the Minister generally on the operation of this Act, the Payroll Levy Act and the Payroll Levy Collection Act; and
(f)such other functions as are conferred on the Corporation by the Payroll Levy Collection Act.
Under section 8 the Corporation has power to do all things that are necessary or convenient to be done for, or in connection with, the performance of its functions. However, except with the written consent of the Minister, the Corporation must not enter into a contract under which, or as a result of which, the Corporation would or might be liable to pay, in respect of any one transaction, any commission, brokerage or fee exceeding $100,000.
Under section 9, there is to be a board of directors of the Corporation. The directors are to be appointed by the Minister. The persons to be appointed are to represent bodies and organisations specified in the section. The Minister must consider any person so appointed to be suitable to represent those bodies or organisations, after consultation with the bodies or organisations. The Minister may terminate a director’s appointment for misbehaviour or physical or mental incapacity. The Minister may also terminate a director’s appointment if the body or organisation which the director represents requests the Minister to terminate that director’s appointment. Under section 29, a director holds office on such terms and conditions as are determined by the Minister.
Under section 35, the amount standing to the credit of the Coal Mining Industry Long Service Leave Fund established under the States Grants Act was to be paid to the Corporation as soon as practicable after commencement of that section. Upon the payment being made, the States Grants Act was to be repealed.
Under section 36(1), there are to be payable to the Corporation out of the consolidated revenue fund of the Commonwealth, amounts equal to the amounts of payroll levy under the Collection Act. However, under section 36(2) the amounts payable are to be reduced by such amount or amounts as are determined by the Minister to represent the expenses incurred by the Commonwealth in procuring the enactment of, and in connection with the administration of, the Funding Act, the Levy Act and the Collection Act.
Under section 37, the Corporation may not borrow money in excess of $50,000 for a single purpose without the written approval of the Minister.
Section 63C(1) of the Audit Act1901 (Cth) provides that where an Act declares a body corporate, incorporated for a public purpose by the Act, to be a public authority to which a division of Part XI applies, the provisions of that division apply to and in relation to the body corporate. Section 39 of the Funding Act provides that the Corporation is a public authority to which Division 2 of Part XI of the Audit Act applies. Division 2 provides for maintaining bank accounts, investment of moneys, keeping proper accounts and records in accordance with the accounting principles generally applied in commercial practice, audit by the Auditor-General and the preparation and submission of an annual report and financial statements to the Minister.
Part VI of the Funding Act deals with the Coal Mining Industry (Long Service Leave) Fund (“the Fund”). Under section 40, the Corporation must establish, and maintain in its books of account, the Fund. All money received by the Corporation, other than payments made by employers under the Collection Act in respect of payroll levy, is to be paid into, and is taken to be part of, the Fund. Under section 41, the Fund is to be applied only in making payments that are required or permitted by the Funding Act or the Collection Act to be made out of the Fund.
Section 42 of the Funding Act provides for investment of the Fund. Under section 42(1), the Minister may set out principles or guidelines to be followed in respect of the investment of the Fund. The Board is required to prepare a plan for the investment of the Fund and must revise that plan every 12 months. Any plan for the investment of the Fund must, under section 42(4), conform with any principles or guidelines set out by the Minister under section 42(1). If the Minister is of the opinion that a plan or revised plan prepared by the Corporation does not conform with any principles or guidelines set out by the Minister, the Minister may return the plan to the board of the Corporation for reconsideration in accordance with any directions given by the Minister. The board must then revise the plan in accordance with the Minister’s directions and send a copy of the revised plan to the Minister.
Under section 43, the board of the Corporation must obtain advice from an actuary as to:
(a)the amount that is estimated will be the liability of employers to make payments to eligible employees; and
(b)the rate of the payroll levy that, having regard to the amount to be transferred under section 35 from the Original Scheme to the Fund, needs to be imposed to ensure that:
(i)the Fund will be sufficient to discharge the liability of employers to make payments to eligible employees; and
(ii)the Fund will be sufficient at the end of the period of 10 years to discharge so much of the liability of employers to make payments as is not discharged prior the end of that period.
Three years, five years and seven years after the commencing date of the Funding Act, the board of the Corporation is required to obtain advice from an actuary as to:
(a)whether the rate of payroll levy imposed when the advice is given would be adequate to ensure that:
(i)the Fund will be sufficient to discharge the liability of employers to make payments to eligible employees;
(ii)the Fund will be sufficient at the end of the period of 10 years to discharge so much of the liability to the employees to make payments to eligible employees as is not discharged; and
(b)if not, the rate that would be so adequate.
Under section 44, when an employer makes a payment to an eligible employee (as defined) in respect of the employee’s entitlement to long service leave, an amount is payable to the employer out of the Fund. The amount is to be equal to whichever is the lesser of the amount of the payment to the employee and a maximum amount determined in accordance with a formula set out in section 44. Under section 51, expenses incurred by the Corporation are also to be paid out of the Fund.
The Collection Act
Under section 4, levy in respect of eligible wages (as defined) paid to eligible employees (as defined) is payable at the end of the period within which a return is required by the Act to be made in respect of those wages. Section 5 requires that a person who employs eligible employees at any time during a month must make a return of the eligible wages paid by the person to those employees during that month. A return:
(a) must be made to the Corporation or any other person specified by the Corporation;
(b) must be in accordance with the form approved by the board of the Corporation;
(c) must contain such information as is required by that form.
Under section 7, if any levy remains unpaid on any day after the time when it became payable, additional levy is payable by way of penalty by the person liable to pay the levy. However, under section 8, if additional levy is payable, the person may request the Corporation in writing to remit the additional levy or a part of the additional levy. If such a request is made and the Corporation is satisfied as to certain matters specified in section 8, the Corporation may remit the additional levy or part of the additional levy. An application may be made to the Administrative Appeals Tribunal for review of a decision by the Corporation in relation to such a request.
Under section 9, an amount of levy is a debt due to the Commonwealth and is payable either to the Corporation or to any other person specified by the Corporation. An amount of levy or an amount of additional levy that is payable but has not been paid may be sued for and recovered by the Corporation or by such other person.
Under section 11(1), the Corporation is to have the following functions on behalf of the Commonwealth under the Act:
(a) to receive returns made, or financial statements or certificates given, under the Act;
(b) to receive payments of levy made under the Act;
(c) to receive payments of additional levy made under section 7;
(d)to sue for and recover amounts of levy and amounts of additional levy that have not been paid.
Under section 11(2) the Corporation may, on behalf of the Commonwealth, enter into an agreement with a person authorising that person to perform on behalf of the Commonwealth any one or more of those functions. Under section 11(3) the Commissioner has power to enter into an agreement with the Corporation for the performance by the Commissioner of a function referred to in subsection (1). Thus, the Funding Act contemplates that the Corporation may, but is not bound to, retain the Commissioner to perform the tax gathering function.
The Levy Act
Under section 4, levy is imposed on eligible wages paid to eligible employees after commencement of the Act. The rate of the levy is the prescribed percentage of the eligible wages paid. The Governor-General is authorised by section 8 to make regulations prescribing a percentage for that purpose. However, before making such a regulation, the Governor-General is to take into consideration any advice given to the Minister by the Corporation under the Funding Act as contemplated by section 7(c) of that Act.
PUBLIC AUTHORITY
The Legal Principles
The expression “public authority”, as used in section 23(d) of the Assessment Act, and the expression “authority” in the context of similar provisions have received judicial consideration on a number of occasions. In Commissioner of Taxation v Bank of Western Australia (1995) 61 FCR 407 Hill J (with whose conclusions Wilcox and Drummond JJ generally agreed) reviewed the cases in which these expressions have been considered. His Honour (at page 428) made the following observation:
Most of the cases have considered the meaning of the word “authority” in the context of the expression “public authority”. It is difficult, however, to see that the addition of the word “public” significantly alters the meaning of the word “authority”, particularly where it is used, as in the present context, in relation to governmental authorities. To the extent that the word “public” does affect the meaning of the word “authority” it can only be in the emphasis upon the public character of the body, or the public nature of the activity with which the body is concerned rather than the intrinsic characteristics of the body itself.
Hill J then set out (at page 429) a number of propositions which his Honour concluded can be derived from the cases. They are as follows:
the question whether a particular entity is an authority will be a question of fact and degree dependent upon all the circumstances of the case. No one factor will be determinative, rather there will be a range of considerations.
A private body, corporate or unincorporated, established for profit will not be an authority.
Incorporation by legislation is not necessary before a body may be classified as an authority.
For a body to be an authority of a State or of the Commonwealth, the body in question must be an agency or instrument of government set up to exercise control or execute a function in the public interest. It must be an instrument of government existing to achieve a government purpose.
The body in question must perform a traditional or inalienable function of government and have governmental authority for so doing.
It is not necessary for a person or body to be an authority that he, she or it have coercive powers, whether of an administrative or legislative character. Conversely the fact that a person or body has statutory duties or powers will not of itself suffice to characterise that person or body as an authority.
At least where the question is whether a body is “a public authority” the body must exercise control, power or command for the public advantage or execute a function in the public interest. The central concept is the ability to exercise power or command.
Hill J was also of the view that there is a further requirement that before a person or body will be found to be an authority, he, she or it will have exceptional powers or authority (at 430). That last requirement, together with the requirements in propositions (4), (5) and (7), can be characterised as positive requirements for an “authority”. If those requirements are not satisfied, at least in some degree, the body in question will not be an authority.
Under section 17 of the Assessment Act, income tax is levied upon the taxable income derived during a year of income by any person. In so far as a governmental body derives income, income tax would be levied by the operation of section 17. The exemption afforded by section 23(d) must be considered in that context. The object of section 23(d) of the Assessment Act is to ensure that governments do not pay income tax.
Where a governmental body has funds under its control for the purposes of that body and income is derived from those funds, the governmental body, and the purposes for which the body exists, would benefit. That income would normally be available to be applied for the purposes of the body. A policy which would exempt that income from the levy of income tax is understandable. The relevant government, be it Commonwealth or State or Territory, is intended to benefit from the income without any charge to income tax. The rationale for such an exemption, however, is clearly that the body which has the benefit of the exemption is truly of government. The term “public authority” in section 23(d) must be considered with that object in mind.
The kinds of considerations identified by Hill J indicate that Courts have had regard to that object. Thus, looking at the positive criteria identified by Hill J, the body must be one set up to exercise control or execute a function in the public interest, being a function of government. The body must exercise control, power or command for the public advantage or execute a function in the public interest. In relation to the negative criteria, a private body, established not for the purpose of performing a government function but for profit, will not be a public authority.
Application of the Principles
The Corporation is subject to the control of the Minister in certain respects. The aspects of control of the Corporation which appear to be relevant are as follows:
Under section 11 of the Funding Act, the board of the Corporation is required to prepare guidelines for the management of the affairs of the Corporation and submit them to the Minister for approval. If the Minister refers them back to the board for revision, the board must revise the guidelines and submit the revised guidelines to the Minister for approval. The Minister thus retains the means of regulating the affairs of the Corporation to some extent. However, his power of regulation is limited to setting guidelines. The actual management of the Corporation’s powers is in the hands of the board.
There are requirements for seeking consent of the Minister in relation to transactions involving a payment of commission, brokerage or fee exceeding $100,000 or borrowings in excess of $50,000 for any one purpose. Subject to those requirements, however, the Corporation has unfettered power to do all such things as are necessary or are convenient to be done for or in connection with the performance of its functions.
While directors of the Corporation are appointed by the Minister, each person appointed must be a person who the Minister considers, after consulting the relevant bodies or organisations, is suitable to represent specified bodies and organisations specified in section 13. The Minister’s discretion is therefore significantly constrained. Further, once appointed, a director may only be removed for misbehaviour or physical or mental incapacity or if the body or organisation whom the director represents requests the Minister to terminate the appointment.
Under section 27 of the Funding Act, a director must not engage in any paid employment that, in the Minister’s opinion, conflicts with the proper performance of the director’s functions. In one sense that restriction does not go any further than the general law relating to a director of a company. It does not constitute a means of supervision or control by the Minister. Rather, the Minister’s opinion, which could not be formed arbitrarily or irrationally, is simply the arbiter for determining whether a director is capable of the proper performance of his functions.
Under section 36(3) the Minister may give directions as to the amounts and times of payments to the Corporation from the consolidated revenue fund. Theoretically, therefore, the Minister could frustrate the functioning of the current scheme by simply refusing to give a direction as to when payments are to be made to the Corporation. However, that discretion is not so much a means of control over the Corporation as a means of preserving the Minister's control over the consolidated revenue fund.
The Minister retains a degree of control over the investment of the fund by reason of his control over investment guidelines pursuant to section 42. The Minister’s power probably goes beyond mere prudential supervision. On the other hand, the power is limited to setting out principles or guidelines to be followed in respect of investments. It is not a direct control over the investment of the Fund. That is a matter for the board of the Corporation.
Thus, while the Minister exerts a degree of supervision over the Corporation, there are significant areas where the Minister cannot control the exercise of powers and functions by the Corporation. One of the Corporation’s most important functions is to advise the Minister as to the rates of payroll levy. In giving that advice, the Corporation is clearly acting independently of the Minister. Its board comprises representatives of bodies and organisations who can be expected to discharge their duties as directors in the interests of the bodies and organisations whom they represent. Another function is to advise the Minister generally on the operation of the legislative scheme. That function must also be one performed independently of the Minister.
The application of the Audit Act tends to suggest that the Corporation is a public body. However, it is not surprising that a degree of accountability is imposed on the Corporation. It represents the whole of the black coal mining industry and the functions which it performs, such as collecting moneys from all employers and dealing with those moneys both by investment and disbursement, require independent scrutiny. The mere application of the Audit Act by itself, however, does not mean that the Corporation is performing a function of government.
The Corporation exhibits some characteristics of a public authority. Certain of the functions of the Corporation under the Collection Act are certainly in the nature of governmental functions. Receiving returns and payments of levy and additional levy and recovering unpaid levy and penalty would normally be governmental functions. However, it is significant that the tax gathering function of the Corporation is not for the purpose of raising revenue and the Fund is operated and administered under the direction and at the cost of the employers.
The fact that the Corporation is given such extraordinary powers is an indication that it is not performing a function of government. Normally the Commissioner would exercise such powers. The fact that the Corporation is given the powers emphasises the fact that the Commonwealth is utilising its taxing power in order to provide the element of compulsion necessary for the effective operation of the current scheme. If the tax gathering function of the Corporation was a function of government one would expect the Commissioner to be performing it. The fact that the Corporation is authorised to engage in an activity which is normally undertaken by the Commissioner is an indication that the Corporation is not performing a function in the interests of the public generally but in the interests of the employers in the coal mining industry.
Notwithstanding that a tax gathering function is conferred on the Corporation, other powers which are conferred on the Commissioner in aid of his tax gathering functions are not conferred on the Corporation. Thus, if the Corporation enters into an agreement under section 11 authorising the Commissioner to perform the Corporation’s tax gathering functions, sections 12 and 13 of the Collection Act apply. In that event, an officer of the Commonwealth authorised by the Commissioner to exercise powers under those sections is entitled to access to premises and books and to obtain information and evidence under compulsion. No such powers are conferred on the Corporation or any other person authorised by the Corporation to perform its tax gathering functions. That is a recognition of the lack of control of the Corporation by government and its lack of answerability to government.
Clearly enough, the Commonwealth has an interest in the continued viability of an industry such as the black coal mining industry. That was certainly the perception of the Minister when the Original Scheme was introduced in 1949. It was also the view of the Minister who introduced the current scheme in 1992. Accordingly, the current scheme is in the public interest in so far as it is directed to the assistance of the black coal mining industry in Australia.
However, while the current scheme may advance that public interest, the income in question in these proceedings does not benefit any government function or public interest. Accordingly, no government function or public interest would benefit if that income were exempt from tax. Nor would the availability of such an exemption bear on the long service leave entitlements of eligible employees because those entitlements are determined by the Award. Rather, it is the employers who benefit from the income and who would benefit from any exemption. It is they who have a liability under the Award to make payments in respect of long service leave to eligible employees and who are liable to pay the payroll levy. If the income of the Corporation is exempt, the levy which the employers would be required to pay would be less than if it is subject to tax.
That is to say, if the income of the Corporation is not exempt and liability for income tax is imposed on the Corporation, a higher levy would have to be fixed under the Levy Act to be paid by employers under the Collection Act. The level of the payroll levy is determined after considering the advice of the Corporation. One of the functions of the Corporation is to furnish advice as to the rates that should be imposed. That will be done after actuarial assessment. The clear expectation is that the board, representing, as it does, various elements within the coal industry, will set the levy at a rate which will ensure that the obligations of employers under the Award will be adequately funded. So much would be required by section 43 of the Funding Act. Any charge to income tax is one of the matters which the Corporation would have to take into account in giving advice to the Minister under section 7(c) of the Funding Act as to the rates of payroll levy.
It is significant that the costs of establishing the current scheme and administering it are, in effect, to be borne by employers in the coal industry. That is the effect of section 36 of the Funding Act: the Corporation receives an amount equal to the payroll levy imposed on employers less an amount representing the expenses incurred by the Commonwealth in administering the current scheme. Thus the clear legislative intention is that the employers who pay the levy and who benefit from the operation of the current scheme will bear the cost of administering the scheme. That is indicative of an arrangement which is divorced from the functions of government.
The Corporation, in performing the functions which it has and exercising the powers conferred upon it, does so only in the interests of those employers who have eligible employees. It does not exercise its powers in the interests of the community generally or in the public interest. That is not to say that there was no public interest in the Commonwealth establishing the Original Scheme or the current scheme. There is a public interest in assisting in the preservation of the black coal mining industry for the benefit of Australia as a whole. However, the Corporation’s functions are performed in the interest of the employers and, more indirectly, in the interests of eligible employees. It is not performing a function of government. While one could not say that the Corporation is a private body established for profit, it is not government which benefits from its activities. Rather, it is the employers whose liability to pay payroll levy is lessened by the income generated within the Fund.
In my opinion the Corporation is not a public authority within the meaning of section 23(d) of the Assessment Act.
CROWN IMMUNITY
If the Commonwealth Parliament had intended to confer the privileges and immunities of the Crown on the Corporation, it would not have been difficult to do so in express terms. Where the Parliament does not do so, it should not readily be concluded that it had that intention (see Townsville Hospital Board v Townsville City Council (1982) 149 CLR 282 at 291). There is a strong tendency of Courts to regard a statutory corporation formed to carry on public functions as distinct from the Crown unless Parliament has by express provision given it the character of the Crown (see Launceston Corporation v The Hydro Electric Commission (1959) 100 CLR 654 at 662, State Electricity Commission of Victoria v The City of South Melbourne (1968) 118 CLR 504 at 510 and Townsville Hospital Board v Townsville City Council at 291).
Here, the relevant statute does not indicate whether or not the Corporation is entitled to Crown immunity. In such a case, the most important factors in determining whether Crown immunity was intended to be conferred will be the functions of the body in question and the degree of control exercised over it by a government (see Superannuation Fund Investment Trust v Commissioner of Stamps (1979) 145 CLR 330 at 348-350, 355, 365-366).
A consideration of the Corporation’s functions above in the context of the question of whether or not it is a “public authority” is also relevant in the present context. While the tax gathering functions of the Corporation are normally those of government, the reasons for conferring those functions is a pragmatic and practical one. The tax gathering function is not to raise revenue for the Commonwealth but is a means of imposing on all employers compulsory contribution to the scheme.
While it is fair to say that the Corporation is subject to supervision by the Minister in many important respects, it is not controlled by the Minister and there are significant areas of discretionary conduct left to the board of the Corporation. Having regard to the limited extent of ministerial supervision and the essentially private nature of the functions of the Corporation, coupled with the fact that the Corporation’s activities are, in substance, funded by the contributions from the employers, the Corporation should not be characterised as an agent or emanation of the Crown so as to be entitled to Crown immunity.
CONCLUSION
It follows from the above that the Corporation is not entitled to an exemption under section 23(d) of the Assessment Act and is not entitled to Crown immunity in respect of any liability which otherwise arises under the Assessment Act. Accordingly, the application should be dismissed with costs, subject to any question which arises from the Commissioner’s having issued assessments under section 99A of the Assessment Act. I propose to stand the proceedings over for a short period to enable the parties to bring in short minutes of orders to reflect my conclusions.
I certify that this and the preceding nineteen (19) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett
Associate:
Dated: 3 September 1998
Counsel for the Applicant: R.J. Ellicott QC and M. Richmond Solicitor for the Applicant: Allen Allen & Hemsley Counsel for the Respondent: R.M. Henderson and C.H.P. Colborne Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 30 July 1998 Date of Judgment: 3 September 1998
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