Clark v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (SAD 110 of 2007)
Judgment date: 3 April 2008
Date published: 2 September 2008

Summary of decision:
Whether a South Australian magistrate was 'a judge of a court of a State' for the purposes of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997.

Overview of facts:
The case concerned the application of the superannuation contributions tax (surcharge) to a stipendiary magistrate of South Australia who was a member of a Constitutionally Protected Fund (CPF). | It was argued for the taxpayer that, as a Magistrate of the Youth Court of South Australia, he was 'a judge of a court of a State' for the purposes of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997 (the Act). The relevance of this was that the surcharge did not apply to judges who were members of CPFs and who were appointed to their position before the commencement of the Act on 7 December 1997. The taxpayer had been appointed to the magistracy before the Act commenced. | The taxpayer also argued that the surcharge legislation was constitutionally invalid in its application to him, either on the basis of the principles stated in the High Court's decision in Austin v The Commonwealth (2003) 215 CLR 185 or because of section 114 of the Constitution. | Finally, the taxpayer argued that, as a matter of statutory construction, the surcharge did not apply to him because there were no "surchargeable contributions" within the meaning of the Act. | Issues decided by the court | The reference in section 7 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997 to "a judge of a court of a State" should be taken to include the taxpayer in his capacity as a magistrate of South Australia. | It followed that, as the taxpayer was appointed to the magistracy before the date the Act commenced, the Act did not apply to him and he was therefore not liable to pay surcharge under the Act. | In view of this conclusion, the Court found it unnecessary to decide the other questions that were referred to it, including the question relating to constitutional validity. However, an identically constituted Full Court considered, and rejected, arguments that in some respects were similar to this taxpayer's constitutional arguments in the related case of Ralph Clarke v Federal Commissioner of Taxation [2008] FCAFC 106. | In that case the Full Court also rejected the argument that there were relevantly no "surchargeable contributions", within the meaning of the surcharge legislation, in relation to the CPFs in question in that case.

Issues decided:
The reference in section 7 of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997 to "a judge of a court of a State" should be taken to include the taxpayer in his capacity as a magistrate of South Australia. It followed that, as the taxpayer was appointed to the magistracy before the date the Act commenced, the Act did not apply to him and he was therefore not liable to pay surcharge under the Act. In view of this conclusion, the Court found it unnecessary to decide the other questions that were referred to it, including the question relating to constitutional validity. However, an identically constituted Full Court considered, and rejected, arguments that in some respects were similar to this taxpayer's constitutional arguments in the related case of Ralph Clarke v Federal Commissioner of Taxation [2008] FCAFC 106. In that case the Full Court also rejected the argument that there were relevantly no "surchargeable contributions", within the meaning of the surcharge legislation, in relation to the CPFs in question in that case.

ATO view of decision:
The Tax Office did not seek special leave to appeal to the High Court of Australia. The Tax Office accepts that the Federal Court's decision is authoritative. | For the purposes of the following discussion a "magistrate" is a judicial officer who presides over a court of the lowest tier. The term does not extend to various other officials, such as justices of the peace, who might be regarded as "magistrates" in some other sense of the term. | The decision in Clark v Commissioner of Taxation affects only: • magistrates of any Australian States who were members of CPFs, by virtue of their magistracy, as at 7 December 1997 (being the commencement date of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997 ); and • magistrates of the Australian Capital Territory and the Northern Territory who were members of non-CPFs, by virtue of their magistracy, as at 5 June 1997 (being the commencement date of the Superannuation Contributions Tax (Assessment And Collection) Act 1997 ). | • magistrates of any Australian States who were members of CPFs, by virtue of their magistracy, as at 7 December 1997 (being the commencement date of the Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment And Collection Act 1997 ); and • magistrates of the Australian Capital Territory and the Northern Territory who were members of non-CPFs, by virtue of their magistracy, as at 5 June 1997 (being the commencement date of the Superannuation Contributions Tax (Assessment And Collection) Act 1997 ). | State magistrates who were not members of CPFs and State magistrates who were appointed after 7 December 1997 are not affected by the decision and so remain liable to pay surcharge as before. | The Tax Office understands that in practice, with a small number of possible exceptions, only South Australia and Western Australia have magistrates who are members of CPFs. On this basis, the Tax Office considers that the Court's decision affects magistrates of those two States who were appointed on or before 7 December 1997, and not (in general) magistrates of New South Wales, Victoria, Queensland or Tasmania. | For those magistrates who are covered by the decision, only the contributions referable to their membership of a CPF because they were a magistrate are affected by the decision. Surcharge continues to be payable in the normal way on contributions referable, for example, to any other employment a person may have had at any time. | As the Court did not decide the constitutional question raised by this case, the Tax Office will continue to administer the surcharge legislation on the basis that it is constitutionally valid in its application to magistrates. | The Tax Office does not accept the argument that there were no "surchargeable contributions" (as that term was defined) in relation to the taxpayer's membership of the relevant CPFs and regards this argument as having been relevantly rejected by the Full Federal Court in the Ralph Clarke case.

Administrative treatment:
The Tax Office is taking steps to identify those taxpayers who may be affected by the decision (ie. all relevant magistrates mentioned above under the heading Tax Office view of Decision ) with a view to amending the relevant assessments in favour of the members concerned and refunding any surcharge that was incorrectly paid to the Tax Office. | Individuals who consider that they may belong to the class of taxpayer affected by the decision may contact the Tax Office directly. Correspondence may be sent to: PO Box 3100 PENRITH NSW 2740 Attention Sue Burton, Interpretative Assistance, Superannuation. | Implications on current Public Rulings & Determinations | None

Legislative references: Superannuation Contribution Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 7 Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 4 Superannuation Contributions Tax (Assessment And Collection) Act 1997 34A Superannuation Contributions Tax Imposition Act 1997 4
Case references: Austin v Commonwealth of Australia 215 CLR 185 [2003] HCA 3 (2003) 2003 ATC 4042 (2003) 195 ALR 321 51 ATR 654 Frederick v State of South Australia (2006) 94 SASR 545 [2006] SASC 165 (2006) 152 IR 182 Re Bryant; ex parte Guarino (2001) 178 ALR 57 [2001] HCA 5 (2001) 75 ALJR 478 The Queen v Moss; ex parte Mancini (1982) 29 SASR 385
Subject references: superannuation contributions surcharge superannuation contributions tax