Peter Wilson and Commissioner of Taxation
[2012] AATA 452
•18 July 2012
[2012] AATA 452
Division Taxation Appeals Division File Number(s)
2011/0268-0272
Re
Peter Wilson
APPLICANT
And
Commissioner of Taxation
RESPONDENT
Decision
Tribunal Deputy President D G Jarvis
Date of written
Reasons18 July 2012
Place Adelaide The objection decision under review is affirmed.
.......... [Signed] ...........
Deputy President D G Jarvis
Catchwords
TAXATION - Superannuation contributions surcharge - executive officer of South Australian public service - implied constitutional limitation on Commonwealth legislative power - held that Commonwealth legislation validly applied to applicant - decisions under review affirmed.
PRACTICE AND PROCEDURE - Jurisdiction of tribunal to determine issues of constitutional validity - consideration of power to refer question of law to Federal court.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth), s 45
Commonwealth of Australia Constitution 1900 (Imp) 63 and 64 Vic, c 12
Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (Cth)Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997
Cases
Austin v Commonwealth (2003) 215 CLR 185
Clarke v Commissioner of Taxation (2009) 240 CLR 272
Re Australian Education Union; Ex parte the State of Victoria (1995) 184 CLR 188
Re Walsh and Commissioner of Taxation [2012] AATA 451Re Bridge and Commissioner of Taxation [2012] AATA 453
REASONS FOR DECISION
Deputy President D G Jarvis
18 July 2012
The applicant, Peter Wilson, applied to this tribunal for review of a decision made by the Commissioner of Taxation to disallow objections which he had lodged to superannuation contributions surcharge assessments for the years 30 June 1997 to 30 June 2001. His objections were based on the decision of the High Court of Australia in Clarke v Commissioner of Taxation[1], to which I will refer below.
[1] (2009) 240 CLR 272.
These reasons for decision should be read in conjunction with my reasons for decision in Re Walsh and Commissioner of Taxation[2] and Re Bridge and Commissioner of Taxation[3], which decisions I have also delivered today.
[2] [2012] AATA 451.
[3] [2012] AATA 453.
The laws which imposed the superannuation contributions surcharge were the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 (Cth) and the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 (Cth) (the Surcharge Acts). The Acts were part of a legislative scheme which provided for the imposition of a superannuation surcharge on contributions made by or on behalf of taxpayers in receipt of taxable income above certain thresholds. The legislation that applied generally throughout Australia imposed liability for the surcharge on the trustees of superannuation funds, who were entitled to discharge their liability from the assets of the funds, but separate legislation was enacted in the form of the Surcharge Acts, to apply to “constitutionally protected superannuation funds”, which were funds established by State legislation specified in regulations, and included the South Australian Superannuation Fund. This separate legislation imposed liability upon individual members of State superannuation schemes, and not the trustees of the funds, apparently so as to avoid the operation of s 114 of the Australian Constitution, which prohibits the imposition of Commonwealth taxes on State property.
The Surcharge Acts provided for liability to pay the surcharge to be deferred until the superannuation benefit became payable to the member of the fund, and for interest to accrue on the deferred amount. In 1999, the South Australian Parliament enacted legislation to permit members of certain State superannuation funds to commute so much of their pensions as were required to provide a lump sum equivalent to the amount of the surcharge imposed on them by the Surcharge Acts. The commutation factors to be applied to the commutation of a pension were to be determined by the Treasurer on the recommendation of an actuary[4].
[4] Statutes Amendment (Commutation for Superannuation Surcharge) Act 1999 (SA), s 6, which inserted s 40A into the Superannuation Act 1988 (SA).
In Clarke (supra) the High Court held that the provisions of the legislation that imposed the superannuation contributions surcharge were invalid insofar as they purported to create a liability on the part of Mr Clarke, who was a member of the House of Assembly of the Parliament of South Australia, in respect of his membership of certain constitutionally protected superannuation funds established under Acts of the South Australian Parliament.
In the present matter, the Commissioner allowed Mr Wilson’s objections in respect of the assessments for the years ended 30 June 2002 to 30 June 2005. He served as a Magistrate in South Australia during those years and beyond, until he retired on 12 February 2010. The Commissioner disallowed the objections in respect of the years ended 30 June 1997 to 30 June 2001, during which period he was employed as a Managing Solicitor in the Crown Solicitor’s Office. Mr Wilson contended that this constituted a position at the higher levels of the South Australian government, and that consistently with the decision in Clarke (supra), the Surcharge Acts could not validly apply to him.
jurisdiction to consider constitutional validity of surcharge acts
Early in the interlocutory stages of all three groups of applications the Commissioner submitted that this tribunal had no jurisdiction to determine a question involving the constitutional validity of the Surcharge Acts, because this required the exercise of the judicial power of the Commonwealth, which had not been vested in the tribunal. On the morning of the hearing, the Commissioner accepted that the tribunal had jurisdiction. I am satisfied that I have jurisdiction to form an opinion regarding this issue, notwithstanding that it raises a constitutional question, and I refer to and repeat paragraphs 7-20 of my reasons in Walsh.
should the tribunal refer a question of law to the federal court of australia?
The Commissioner further contended that the tribunal should refer the issue of constitutional validity to the Federal Court pursuant to s 45 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act), thus enabling that Court to be seized of the constitutional issue which was said to be beyond the tribunal’s jurisdiction to determine. In the circumstances of these proceedings, I thought it inappropriate to exercise my discretion to refer a question of law to the Federal Court of Australia, for the reasons referred to in paragraphs 21-26 of Walsh.
can the surcharge acts validly apply to the applicant?
The Commissioner rejected Mr Wilson’s objections on the grounds that he was not a person engaged at the “higher levels of government” for the purposes of the proposition enunciated by the High Court in Re Australian Education Union; Ex parte the State of Victoria[5]. In that case, the Court recognised that the arbitration power in the Constitution did not authorise the Industrial Relations Commission to make awards concerning the terms and conditions of employment of high level office holders and senior public servants. The Court said:
In our view, also critical to a State’s capacity to function as a government is its ability, not only to determine the number and identity of those whom it wishes to engage at the higher levels of government, but also to determine the terms and conditions on which those persons shall be engaged. Hence, Ministers, ministerial assistants and advisers, heads of departments and high level statutory office holders, parliamentary officers and judges would clearly fall within this group. The implied limitation would protect the States from the exercise by the Commission of power to fix minimum wages and working conditions in respect of such persons and possibly others as well ... .[6]
[5] (1995) 184 CLR 188.
[6] (1995) 184 CLR 188 at 233, per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ.
I referred in some detail in paragraphs 27-30 of my reasons in Walsh to the principles formulated in two subsequent High Court decisions, namely Austin v Commonwealth[7] and Clarke. I repeat what I there said.
[7] (2003) 215 CLR 185.
applicant’s contentions
Mr Wilson submitted, by reference to Austin (supra) and Re Australian Education Union; Ex parte the State of Victoria[8], that having regard to his position as a senior lawyer employed at an executive level in the Crown Solicitor’s Office he came within the category of persons who were employed in offices “at the higher levels of government”, and so he should receive the benefit of the implied constitutional limitation. He also submitted that he came within the immunity for “ministerial assistants and advisers” referred to in Re Australian Education Union.
[8] (1995) 184 CLR 188.
I summarised the submissions made by Mr Walsh at paragraphs 33-37 of my reasons, and I referred in paragraph 38 of my reasons to further submissions made by the applicant, Peter Bridge, in support of applications that he had lodged for review. Although Mr Wilson did not expressly adopt the submissions made by those other applicants, I have taken them into account in considering his applications to the extent that they are relevant to his circumstances.
I referred to a brief summary of the submissions made by Dr Melissa Perry QC, counsel for the Commissioner, in paragraph 39 of my reasons in Walsh.
The issues raised by Mr Wilson’s objections entailed considering the structure and function of the executive arm of the government of South Australia. I refer in relation to those matters to paragraphs 40-44 of my reasons in Walsh.
situation of the applicant
There was no issue as to the relevant facts in this matter, and I make the following findings partly from the evidence of Mr Wilson, and partly from documentary material before me.
Office held by the applicant
During the financial years in respect of which the objections were disallowed, Mr Wilson was, as I have said above, a Managing Solicitor in the Crown Solicitor’s Office. The current Crown Solicitor, Mr Greg Parker, provided the information in this paragraph and in paragraphs 17 to 20 below at Mr Wilson’s request, and Mr Wilson adopted this information as part of his case, and confirmed its correctness. Mr Wilson was first appointed to his position as a Managing Solicitor for a period of five years, with a commencing date of 9 September 1991, pursuant to the Government Management and Employment Act 1985 (SA), and his appointment was subsequently extended for a further term of five years. His appointment to the position of Managing Solicitor followed a merit-based selection process, and his appointment was made by the Chief Executive of the Attorney-General’s Department[9]. He resigned on 22 August 2001 to take up his position as a Magistrate[10]. The section of the Crown Solicitor’s Office in respect of which Mr Wilson held a position of Managing Solicitor is now called the Administrative and Environment Section, and was previously known as the Administrative and Summary Section, and the Administrative and Industrial Section.
[9] Exhibit A1, pages 16-17.
[10] Exhibit A2, page 5.
Mr Parker described Mr Wilson’s role and functions as follows:
(c) As Managing Solicitor you would have led a team of legal practitioners. The number of practitioners in the team would have generally been in the range of ten to twenty. The Managing Solicitor would have personally attended to the most difficult matters within the relevant area of practice, would have supervised the performance of other practitioners and, where necessary and appropriate, settled their work and given guidance on the conduct of litigation.
The Managing Solicitor would also give advice where required concerning issues arising in the relevant area of practice to Ministers, Chief Executives of government departments and other public sector agencies and holders of high public office. From time to time the Managing Solicitor would also be called upon to provide advice to Ministers and Chief Executives about law reform proposals or might personally initiate recommendations for law reform.
The team that you led as Managing Solicitor would have been responsible for the conduct of summary prosecutions under a very wide range of State legislation in areas such as occupational health and safety, consumer protection, fisheries management, environmental protection, native vegetation, significant motor vehicle matters and the like. In addition, you and your team would have been responsible for the conduct of appeals in the Supreme Court in the areas just described and also on behalf of SA Police in relation to summary prosecutions and, at times, some indictable matters.
As Managing Solicitor you would also have been responsible for the provision of advice, oversight of investigations and the conduct of proceedings in relation to matters of professional conduct concerning medical and dental practitioners, veterinary surgeons, nurses, psychologists, architects and a number of other professions.[11]
[11] Exhibit A1, page 17.
The Government Management and Employment Act 1985 drew a distinction between persons classified as executives and non-executives, the former being appointed on a fixed term contract for a maximum of five years, and the latter being appointed on an ongoing basis. During the relevant years, Managing Solicitors were classified at the MLS-1 level, Assistant Crown Solicitors and equivalent positions in the Offices of the Director of Public Prosecutions (DPP) and of Parliamentary Counsel, were classified at MLS-2. The Deputy Crown Solicitor, the Deputy DPP and the Deputy Parliamentary Counsel were MLS-3 positions, and the Crown Solicitor, the DPP and the Parliamentary Counsel were classified at MLS-4[12].
[12] Exhibit A1, page 17.
The Crown Solicitor’s Office was during the relevant years a division of the South Australian Attorney-General’s Department. It was responsible to the Attorney-General for the provision of all forms of legal services to the South Australian Government and its many public sector agencies, other than the conduct of prosecutions for major indictable offences and the drafting of legislation (which matters are dealt with by the Office of the DPP and the Office of Parliamentary Counsel)[13]. The Crown Solicitor’s Office was headed by the Crown Solicitor and was divided into seven sections, each headed by an Assistant Crown Solicitor. There was also a Deputy Crown Solicitor who was largely responsible only for practice administration. The Assistant Crown Solicitors were themselves assisted by between one and four Managing Solicitors, who were responsible for the provision of legal services in particular areas of practice, with each Managing Solicitor leading a team of two or more practitioners and carrying out the functions referred to in paragraph 17 above. A Managing Solicitor might provide advice directly to the Attorney-General, another Minister or to the Chief Executive of a department or public sector agency, or the holder of a high public office such as the Auditor-General, the Ombudsman or the Commissioner of Highways. In other instances his or her advice might be sent through the Crown Solicitor or an Assistant Crown Solicitor.
[13] Exhibit A1, page 18.
Mr Parker provided the following further information as to the provision of advice or reports by Mr Wilson.
(h) As I have already noted, as Managing Solicitor you would have been responsible for providing very high legal advice to the Attorney-General and other Ministers, Chief Executives and other holders of high public office. In your case that advice would have dealt with investigation and prosecution of relevant offences, lodgement of appeals and, in some instances, recommendations for law reform.
Such advice would have been provided in response to a specific request or may have become necessary during the conduct of legal proceedings on behalf of a Minister or agency. Recommendations for law reform may have been made of your own initiative where you identified a need or in response to a request from a client.
I note that your successors as Managing Solicitor in the Administrative and Environment Section have recently been called upon to provide very sensitive and complex legal advice to the Attorney General and other Ministers in relation to highly controversial matters. I refer by way of example to a widely publicised and long-running case involving an allegation of professional misconduct against a legal practitioner and another much publicised matter involving the investigation of the affairs of a local council.
I have referred to these examples as the fact that advice has been provided has been disclosed publicly although, of course, the content of the advice remains subject to legal professional privilege. If issues of similar importance and complexity had arisen whilst you held the position of Managing Solicitor you would have been similarly called upon to provide advice to Ministers.[14]
[14] Exhibit A1, page 19, paragraph (h).
The Fund reported surchargeable contributions for Mr Wilson for the years in dispute. In accordance with a direction that I made following the conclusion of the hearing, the Commissioner provided further information from SuperSA as to the assessment of the surcharge. It appears from this information that a Notional Surcharge Contribution (NSC) amount was determined using a Notional Surcharge Contribution Factor (NSCF) determined by actuaries. The NSC amount was calculated by multiplying the annual salary by the NSCF. A commutation factor was calculated as at Mr Wilson’s retirement date, and for each dollar of annual pension commuted Mr Wilson would receive $15.80[15]. The assessment amounts for the period 30 June 1997 to 30 June 2001 came to a total of $12,765.50[16]. The commutation of a surcharge debt of that amount would accordingly result in a reduction in his pension of approximately $808.00 per annum[17].
[15] Exhibit R3, Annexure A.
[16] Exhibit R1, T1, page 10.
[17] The above figure of $12,765.50 does not include accrued interest, and if this is taken into account, the commutation cost, and the reduction in pension would be increased correspondingly. Mr Wilson said that he paid the assessments of superannuation contributions surcharge amounting to $19,609.93 on 28 January 2011.
consideration
In paragraphs 58-65 of my reasons in Walsh, I review various “points” or factors relevant to the implied constitutional limitation as explained by the High Court in Clarke, and at paragraph 66-68, I observed that a number of those “points” or facts are directly applicable to the present proceedings, and support the contention by Mr Wilson and the other applicants that the Surcharge Acts were invalid in their application to them. However, as I also explained in Walsh, it remains necessary to consider the position which each applicant occupied in the office(s) that he held in the State government, and his role and functions in the office(s), and to evaluate the degree to which the exercise of, or the capacity for the exercise of, the constitutional powers and functions of the State would be impaired, curtailed or weakened by the application to him of the Surcharge Acts. I set out my views as to the nature of the inquiry to be made and the importance of two further factors to be taken into account when considering the executive arm of government in paragraphs 69-80 of my reasons in Walsh. I adopt those matters for the purpose of the present decision.
I referred above to the role and functions of Mr Wilson, and to the fact that the advice that he prepared or for which he was responsible was given to Ministers, Chief Executives of departments and other agencies, and the holders of high public office. I accept that on occasions that advice would relate to sensitive and controversial matters, and that it would relate to complex issues. However, it was the role of the Crown Solicitor’s Office to provide advice to the government, including Ministers and other positions holding high offices, and I do not accept Mr Wilson’s contention that he fell within the category of “ministerial assistants and advisers” referred to in Re Australian Education Union. I think that in its context, the High Court intended that description to refer to senior members of the Minister’s personal staff. I accept that Mr Wilson held an important executive position within the Crown Solicitor’s Office, but having regard to the structure of the department and the hierarchy of the executive positions to which I referred in paragraph 19 above, and having regard also to my analysis of the implied constitutional limitation as explained in my reasons in Walsh, I do not consider that Mr Wilson occupied a position where it could be said that he was “within that class of persons ‘at the higher levels of governments’ in respect of whom it (was) critical to the State’s capacity to function as a government” that it retained the ability to fix his terms and conditions of remuneration[18].
[18] See Clarke (2009) 240 CLR 227 at [62].
I referred to the impact of the Surcharge Acts on Mr Wilson in paragraph 21 above. In paragraph 78 of my reasons in Walsh I discussed the effect of the Surcharge Acts on the plaintiff’s entitlements in Austin, and to the Court’s conclusion in that case that the Surcharge Acts would interfere with the ability of the State to attract and retain competent persons to serve as judges. I also referred to the lack of evidence that the Surcharge Acts would have made it more difficult for the State to attract or retain persons in senior positions in the public service, and the relevance of that aspect. The considerations there discussed are also applicable to the present proceedings.
For the sake of completeness, I add that in Re Bridge and Commission and Taxation[19] I rejected the submission made by the applicant Peter Bridge, to which I alluded in paragraph 12 above, to the effect that the implied immunity extended to all persons to whom the Surcharge Acts applied.
[19] [2012] AATA 453 at [26]-[27].
After carefully weighing the various factors and considerations to which I have referred above and in my reasons in Walsh, I have concluded that the effect of the Surcharge Acts on Mr Wilson in the position in issue did not significantly burden, curtail or weaken either the capacity of the State of South Australia to carry out its proper constitutional functions, or its exercise of those functions, and that accordingly, those Acts were not invalid in their application to him.
decision
The objection decision under review is affirmed.
I certify that the preceding twenty seven (27) paragraphs are a true copy of the reasons for the decision herein of Deputy President D G Jarvis .... [Signed] ...
AssociateDated 18 July 2012
Date(s) of hearing 13 and 14 June 2012 Applicant In person Counsel for the Respondent Dr M Perry QC
Mr J VaughanSolicitors for the Respondent Australian Government Solicitor
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