Walsh and Commissioner of Taxation; Wilson and Commissioner of Taxation; Bridge and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2011/1834-1841; 2011/0268-0272; 2012/0726-0729)
Judgment date: 18 July 2012
Date published: 24 September 2012

Summary of decision:
Whether the superannuation contributions tax was constitutionally valid in its application to three taxpayers who held senior positions in the South Australian public service and who were members of Constitutionally Protected Superannuation Funds.

Overview of facts:
All three taxpayers held senior positions in the South Australian public service and were members of Constitutionally Protected Superannuation Funds (CPSFs) for surcharge purposes. For the periods in dispute, Mr Walsh held various positions primarily in the Government transport & planning and Department of Education portfolios; Mr Wilson was a Managing Solicitor/Barrister in the Attorney General's Department; and Mr Bridge mainly held managerial positions in the Department of Information Industries. | Mr Walsh and Mr Wilson primarily relied on the High Court decision in Clarke v Commissioner of Taxation [2009] HCA 33 and argued that the Superannuation Contributions Tax ( Members of Constitutionally Protected Superannuation Funds ) Imposition Act 1997 and the Superannuation Contributions Tax ( Members of Constitutionally Protected Superannuation Funds ) Assessment And Collection Act 1997 (the Surcharge Acts) were constitutionally invalid in their application to them because they were members of CPSFs and engaged at the "higher levels of government" during the relevant financial years. | Mr Bridge, by reference to a passage in Austin v The Commonwealth (2003) 215 CLR 185, argued that all persons subjected to the superannuation contributions surcharge who were employed by the State government should be regarded as employees in offices "at the higher levels of government". | Issues decided by the court/Tribunal | In these matters, the Administrative Appeals Tribunal (Tribunal) handed down mostly favourable decisions for the Commissioner. | The Tribual first determined it had jurisdiction to hear the matters. The Tribunal upheld the objection decisions except to the extent of the positions conceded by the ATO to be "at the higher levels of government" prior to the hearing. | On analysis of the authorities, [1] the Tribunal identified two important questions requiring consideration in determining whether the various positions were "at the higher levels of government": • The first was to consider the significance of each position to the constitutional functioning of the State. • The second was a "practical question", that is, evaluating 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 of the Surcharge Acts to each taxpayer in relation to each position they held. [2] | • The first was to consider the significance of each position to the constitutional functioning of the State. • The second was a "practical question", that is, evaluating 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 of the Surcharge Acts to each taxpayer in relation to each position they held. [2] | The Tribunal outlined the following in regards to the words 'at the higher levels of government': • it was an oversimplification to focus on the place of the person in a hierarchy, [3] • other senior people may have significant roles in ensuring the efficient functioning of government, and • the fact they may have specific responsibilities or projects that involve meeting with or advising the Minister does not mean they hold positions critical to the Constitutional functioning of government. [4] | • it was an oversimplification to focus on the place of the person in a hierarchy, [3] • other senior people may have significant roles in ensuring the efficient functioning of government, and • the fact they may have specific responsibilities or projects that involve meeting with or advising the Minister does not mean they hold positions critical to the Constitutional functioning of government. [4]

Issues decided:
In these matters, the Administrative Appeals Tribunal (Tribunal) handed down mostly favourable decisions for the Commissioner. The Tribual first determined it had jurisdiction to hear the matters. The Tribunal upheld the objection decisions except to the extent of the positions conceded by the ATO to be "at the higher levels of government" prior to the hearing. On analysis of the authorities, [1] the Tribunal identified two important questions requiring consideration in determining whether the various positions were "at the higher levels of government": • The first was to consider the significance of each position to the constitutional functioning of the State. • The second was a "practical question", that is, evaluating 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 of the Surcharge Acts to each taxpayer in relation to each position they held. [2] • The first was to consider the significance of each position to the constitutional functioning of the State. • The second was a "practical question", that is, evaluating 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 of the Surcharge Acts to each taxpayer in relation to each position they held. [2] The Tribunal outlined the following in regards to the words 'at the higher levels of government': • it was an oversimplification to focus on the place of the person in a hierarchy, [3] • other senior people may have significant roles in ensuring the efficient functioning of government, and • the fact they may have specific responsibilities or projects that involve meeting with or advising the Minister does not mean they hold positions critical to the Constitutional functioning of government. [4] • it was an oversimplification to focus on the place of the person in a hierarchy, [3] • other senior people may have significant roles in ensuring the efficient functioning of government, and • the fact they may have specific responsibilities or projects that involve meeting with or advising the Minister does not mean they hold positions critical to the Constitutional functioning of government. [4]

ATO view of decision:
The ATO view that not all members of CPSFs are at the "higher levels of government", but only a relatively restricted range of officials are at this level, is in line with the Tribunal's decisions. The determination of who falls within the class of persons at the "higher levels of government" is essentially functional, that is, it turns on an analysis of the relationship between the office held and the exercise of the state's constitutional , as opposed to governmental , power or functions.

Administrative treatment:
Implications for ATO Precedential documents (Public Rulings & Determinations etc) | N/A | Implications for Law Administration Practice Statements | N/A | We invite you to advise us if you feel this decision has consequences we have not identified, or if a precedential decision such as a Public Ruling or an ATO ID requires reconsideration or amendment. Please forward your comments to the contact officer by the due date. | [1] Noted under the 'Relevant Case Law' section | [2] Walsh v Commissioner of Taxation [2012] AATA 451 at 69-79 | [3] Ibid at paragraph 70 | [4] Ibid at paragraph 80

Legislative references: Administration of Acts Act 1910 (SA) (repealed by the Administrative Arrangements Act 1994 (SA)) Administrative Appeals Tribunal Act 1975 43 45 Commonwealth of Australia Constitution 1900 (Imp) 63 and 64 Vic, c 12 Constitution Act 1934 (SA) the Act Public Sector Management Act 1995 (SA) the Act Statutes Amendments (Commutation for Superannuation Surcharge) Act 1999 (SA) the Act Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Assessment and Collection Act 1997 the Act Superannuation Contributions Tax (Members of Constitutionally Protected Superannuation Funds) Imposition Act 1997 the Act
Case references: Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 [2009] HCA 33 72 ATR 868 Austin v Commonwealth (2003) 215 CLR 185 2003 ATC 4042 51 ATR 654 Re Australian Education Union; ex parte Victoria (1995) 184 CLR 188 Australian Capital Television Pty Ltd v Commonwealth (1992) 177 CLR 106 Egan v Willis (1998) 195 CLR 424 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 The Lord Mayor, Councillors and Citizens of the City of Melbourne v The Commonwealth & Anor (1947) 74 CLR 31 State of Victoria v Commonwealth of Australia (1971) 122 CLR 353 2 ATR 249 Queensland Electricity Commission v Commonwealth (1985) 159 CLR 192 State Chamber of Commerce and Industry v Commonwealth (1987) 163 CLR 329 19 ATR 10 87 ATC 4745 Sue v Hill (1999) 199 CLR 462 The Commonwealth v Tasmania (1983) 158 CLR 1
Subject references: Constitutional law Superannuation contributions surcharge Superannuation contributions tax