Airport Handling Services Australia Pty Ltd v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (VID 48 of 2021)
Judgment date: 15 November 2021
Date published: 15 September 2022

Summary of decision:
This Decision impact statement outlines the ATO's response to this case, which concerns amendments made to the 'sovereign entity' exclusion in subsection 7(2) of the Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 (JobKeeper Rules). | All legislative references in this Decision impact statement are to the JobKeeper Rules, unless otherwise indicated.

Overview of facts:
The applicants operated businesses in Australia in the aviation and hospitality industries. Each was wholly owned by the Dubai Government and employed an Australian workforce. | Between 30 March and 1 May 2020, the applicants made wage payments of at least $1,500 to their employees in anticipation that the payments would be subsidised under the JobKeeper scheme. | To be entitled to JobKeeper payments, the applicants must have satisfied the conditions for entitlement in section 6. One requirement was that the applicants not be excluded by subsection 7(2). [1] Until 30 April 2020, paragraph 7(2)(e) excluded an entity that was a 'sovereign entity' within the meaning of section 880-15 of the Income Tax Assessment Act 1997. None of the applicants came within this definition. | On 1 May 2020, an instrument amending the JobKeeper Rules (Amending Instrument) was registered, extending the sovereign entity exclusion to Australian subsidiaries of sovereign entities. [2] The applicants fell within this extended definition. The commencement section of the Amending Instrument provided that it commenced immediately after registration. [3] However, the application provision specified that the amendment would apply to JobKeeper fortnights beginning on or after 30 March 2020. [4] | By the time of the Amending Instrument's registration, the applicants [5] had satisfied the requirements for entitlement in section 6, apart from the requirement to provide information about the entitlement to the Commissioner in the approved form. [6] | The applicants contended that they were entitled to JobKeeper payments for the first 2 JobKeeper fortnights, notwithstanding the amendment to the JobKeeper Rules. This was because the Amending Instrument purported to have retrospective effect and the applicants had accrued rights to JobKeeper payments, which were preserved by subsection 12(2) of the Legislation Act 2003 (LA 2003). Alternatively, the applicants contended that section 20 of the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (CERP Act) did not authorise the Treasurer of Australia to make retrospective rules. | The Commissioner decided that the applicants were not entitled to the JobKeeper payments they sought. That decision was affirmed by the Commissioner on objection. The applicants appealed to the Federal Court. | Issues decided by the Court | The 3 issues considered by the Court were: • whether the Amending Instrument commenced before it was registered, within the meaning of subsection 12(2) of the LA 2003 ( retrospectivity issue ) • if the Amending Instrument had retrospective operation, whether the applicants had any 'rights' that were adversely affected within the meaning of paragraph 12(2)(a) of the LA 2003 under either of sections 6 or 7 (of the JobKeeper Rules) at the time that the Amending Instrument was registered ( rights issue ) • to the extent that the Amending Instrument had retrospective operation, whether it was ultra vires the rule-making power in section 20 of the CERP Act ( ultra vires issue ). | • whether the Amending Instrument commenced before it was registered, within the meaning of subsection 12(2) of the LA 2003 ( retrospectivity issue ) • if the Amending Instrument had retrospective operation, whether the applicants had any 'rights' that were adversely affected within the meaning of paragraph 12(2)(a) of the LA 2003 under either of sections 6 or 7 (of the JobKeeper Rules) at the time that the Amending Instrument was registered ( rights issue ) • to the extent that the Amending Instrument had retrospective operation, whether it was ultra vires the rule-making power in section 20 of the CERP Act ( ultra vires issue ). | His Honour found that the applicants were not entitled to the JobKeeper payments sought. His Honour's decision on each of the issues is summarised as follows: | Retrospectivity issue | The term 'commences' in subsection 12(2) of the LA 2003 is not limited to when an instrument formally commences but is synonymous with 'takes effect' and 'comes into operation'. [7] Accordingly, the Amending Instrument commenced on 30 March 2020, which was prior to its registration. [8] | Rights issue | The authorities [9] establish that the existence of a 'right' depends on the terms of the enactment giving rise to its creation. [10] Under section 6, no entitlement to a JobKeeper payment arises until all the requirements in that section are satisfied. Further, nothing in the text of the CERP Act or the JobKeeper Rules suggest that some criteria were of greater significance than others. [11] | It followed that, for the purposes of subsection 12(2) of the LA 2003, the applicants had no rights of any relevant kind at the time the Amending Instrument commenced. | Ultra vires issue | Because of the way that the retrospectivity issue was decided, it was not necessary for the Court to decide on the ultra vires issue. [12] | However, had it been necessary to decide, his Honour would have held that section 20 of the CERP Act authorised the making of rules with retrospective effect. [13] This intention could be inferred from the breadth of the subject matters that section 7 of the CERP Act permitted the JobKeeper Rules to deal with, the broad language of the rule-making power in section 20 and the need for the Treasurer of Australia to be able to adjust the JobKeeper scheme promptly in response to the COVID-19 pandemic. [14]

Issues decided:
The 3 issues considered by the Court were: • whether the Amending Instrument commenced before it was registered, within the meaning of subsection 12(2) of the LA 2003 ( retrospectivity issue ) • if the Amending Instrument had retrospective operation, whether the applicants had any 'rights' that were adversely affected within the meaning of paragraph 12(2)(a) of the LA 2003 under either of sections 6 or 7 (of the JobKeeper Rules) at the time that the Amending Instrument was registered ( rights issue ) • to the extent that the Amending Instrument had retrospective operation, whether it was ultra vires the rule-making power in section 20 of the CERP Act ( ultra vires issue ). • whether the Amending Instrument commenced before it was registered, within the meaning of subsection 12(2) of the LA 2003 ( retrospectivity issue ) • if the Amending Instrument had retrospective operation, whether the applicants had any 'rights' that were adversely affected within the meaning of paragraph 12(2)(a) of the LA 2003 under either of sections 6 or 7 (of the JobKeeper Rules) at the time that the Amending Instrument was registered ( rights issue ) • to the extent that the Amending Instrument had retrospective operation, whether it was ultra vires the rule-making power in section 20 of the CERP Act ( ultra vires issue ). His Honour found that the applicants were not entitled to the JobKeeper payments sought. His Honour's decision on each of the issues is summarised as follows: | Retrospectivity issue: The term 'commences' in subsection 12(2) of the LA 2003 is not limited to when an instrument formally commences but is synonymous with 'takes effect' and 'comes into operation'. [7] Accordingly, the Amending Instrument commenced on 30 March 2020, which was prior to its registration. [8] | Rights issue: The authorities [9] establish that the existence of a 'right' depends on the terms of the enactment giving rise to its creation. [10] Under section 6, no entitlement to a JobKeeper payment arises until all the requirements in that section are satisfied. Further, nothing in the text of the CERP Act or the JobKeeper Rules suggest that some criteria were of greater significance than others. [11] It followed that, for the purposes of subsection 12(2) of the LA 2003, the applicants had no rights of any relevant kind at the time the Amending Instrument commenced. | Ultra vires issue: Because of the way that the retrospectivity issue was decided, it was not necessary for the Court to decide on the ultra vires issue. [12] However, had it been necessary to decide, his Honour would have held that section 20 of the CERP Act authorised the making of rules with retrospective effect. [13] This intention could be inferred from the breadth of the subject matters that section 7 of the CERP Act permitted the JobKeeper Rules to deal with, the broad language of the rule-making power in section 20 and the need for the Treasurer of Australia to be able to adjust the JobKeeper scheme promptly in response to the COVID-19 pandemic. [14]

ATO view of decision:
Retrospectivity issue | We accept the Court's interpretation of the term 'commences' in subsection 12(2) of the LA 2003 and consider it to be consistent with the purpose of the section. The Commissioner will, in future, apply this view of the law in analogous circumstances. The Attorney-General's Department, which has responsibility for the LA 2003, also accepts this position. | Rights and ultra vires issues | The decision of the Federal Court on these issues is consistent with the way the Commissioner has interpreted and applied the JobKeeper Rules and the CERP Act.

Administrative treatment:
Not applicable.

Legislative references: Coronavirus Economic Response Package (Payments and Benefits) Act 2020 20 Coronavirus Economic Response Package (Payments and Benefits) Amendment Rules (No. 2) 2020 2 Coronavirus Economic Response Package (Payments and Benefits) Rules 2020 6 6(1)(b) 6(1)(f) 7 7(2) 7(2)(e) 101 Income Tax Assessment Act 1997 880-15 Legislation Act 2003 12(2) 12(2)(a)
Case references: Chief Adjudication Officer v Maguire [1999] 1 WLR 1778