Pape v Commissioner of Taxation
Encyclopedia
Pape v Commissioner of Taxation is an Australian court case concerning the constitutional validity
of the Tax Bonus for Working Australians Act (No 2) 2009 (Cth) which seeks to give one-off payments of up to $900 to Australian taxpayers. The decision of the High Court of Australia
was announced on 3 April 2009, with reasons to follow later.
The plaintiff in the case, Bryan Pape
, was a law lecturer and barrister who represented himself before the Court. He challenged the legislation on the ground that the payments, said to be a tax bonus, were actually a gift and were not supported by the taxation power in the Constitution
. The Commonwealth argued that the legislation was supported by all or any combination of the appropriations "power" under s 81 of the Constitution, the taxation power (s 51(ii)), the external affairs power (s 51(xxix)), the trade or commerce power (s 51(i)) and the implied nationhood power.
The Court by a margin of 4-3, Justice French
presiding, found that the Act was a valid law of the Commonwealth supported by a head of legislative power under the Constitution.
passed two Acts: the Tax Bonus for Working Australians Act (No 2) 2009 and the Tax Bonus for Working Australians (Consequential Amendments) Act (No 2) 2009. The two Acts formed part of the Rudd Government's
economic stimulus package in response to the 2008-09 global financial crisis. The principal operation of the Acts was to pay "tax bonuses" of between $250 and $900 to Australians whose taxable incomes were no more than $100,000 in the 2007-08 financial year. The Acts required the Australian Taxation Office
(ATO) to pay the tax bonuses as soon as practicable after the Acts commenced.
and a former officer of the conservative National Party of Australia
.
The Acts entitled the payment of a tax bonus of $250 to Pape. On 26 February 2009, Pape issued a writ in the High Court for declarations that the tax bonus Acts were unconstitutional, and that the payments of the tax bonus were unlawful.
At a hearing on 13 March 2009 before Justice Gummow
, a special case was stated for the Full Court. Hearings were held from 30 March to 1 April.
To enable the ATO to pay the tax bonus to Australians, the High Court delivered its decision and orders at 10:15am on 3 April 2009, just two days after the hearing. The High Court did not issue reasons until 7 July 2009.
The parties agreed to submit four questions to the High Court for determination, by
way of a special case:
interest to argue the broader issue that the Bonus Act was invalid in its application to other persons. No member of the Court accepted this submission. A finding by the Court that the payment of the bonus to Mr Pape was unlawful because the Bonus Act was invalid would be binding in any subsequent disputes concerning the validity of the Bonus Act. Accordingly, if the tax bonus was invalid in respect of Pape, the entire $7.7 billion tax bonus package would be invalid.
Pape's standing as a plaintiff was novel in that his financial interests (to a $250 tax bonus) would be adversely affected if he succeeded in the case.
The answer to Question 1 of the special case was therefore "yes".
Section 83 relevantly provides:
The Commonwealth argued that section 81 is a grant of legislative power to the Commonwealth to make laws to appropriate money. The Commonwealth also argued that the requirement that an appropriation be "for the purposes of the Commonwealth" meant the purposes determined by the Parliament; in other words, that the Parliament's power to make laws appropriating money was unlimited.
The Court unanimously rejected the contention of the Commonwealth that section 81 of the Constitution provided a power for the Commonwealth to appropriate and spend money.French CJ, after surveying the history of section 81 and previous High Court judgments held:
The Court held that the expenditure of money by the Commonwealth was required to be undertaken either (a) by legislation under the Commonwealth's legislative powers; or (b) under the Commonwealth's executive powers. Sections 81 and 83 cannot, on their own, support the spending of money by the Commonwealth.
The answer to Question 2 of the special case was therefore "yes".
The Court held that sections 81 and 83 do not themselves authorise any expenditure; rather they
require that the spending of government funds be authorised by Parliament.
The answer to Question 3 of the special case was therefore "yes"
Australian constitutional law
Australian constitutional law is the area of the law of Australia relating to the interpretation and application of the Constitution of Australia. Several major doctrines of Australian constitutional law have developed....
of the Tax Bonus for Working Australians Act (No 2) 2009 (Cth) which seeks to give one-off payments of up to $900 to Australian taxpayers. The decision of the High Court of Australia
High Court of Australia
The High Court of Australia is the supreme court in the Australian court hierarchy and the final court of appeal in Australia. It has both original and appellate jurisdiction, has the power of judicial review over laws passed by the Parliament of Australia and the parliaments of the States, and...
was announced on 3 April 2009, with reasons to follow later.
The plaintiff in the case, Bryan Pape
Bryan Pape
Bryan Pape was a senior lecturer at the University of New England, New South Wales, Australia and a former office holder and member of the National Party of Australia,...
, was a law lecturer and barrister who represented himself before the Court. He challenged the legislation on the ground that the payments, said to be a tax bonus, were actually a gift and were not supported by the taxation power in the Constitution
Constitution of Australia
The Constitution of Australia is the supreme law under which the Australian Commonwealth Government operates. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia...
. The Commonwealth argued that the legislation was supported by all or any combination of the appropriations "power" under s 81 of the Constitution, the taxation power (s 51(ii)), the external affairs power (s 51(xxix)), the trade or commerce power (s 51(i)) and the implied nationhood power.
The Court by a margin of 4-3, Justice French
Robert French
Robert Shenton French, AC is Chief Justice of the High Court of Australia, the highest court in the Australian court hierarchy....
presiding, found that the Act was a valid law of the Commonwealth supported by a head of legislative power under the Constitution.
The economic stimulus package
On 18 February 2009, the Parliament of AustraliaParliament of Australia
The Parliament of Australia, also known as the Commonwealth Parliament or Federal Parliament, is the legislative branch of the government of Australia. It is bicameral, largely modelled in the Westminster tradition, but with some influences from the United States Congress...
passed two Acts: the Tax Bonus for Working Australians Act (No 2) 2009 and the Tax Bonus for Working Australians (Consequential Amendments) Act (No 2) 2009. The two Acts formed part of the Rudd Government's
Rudd Government
The Rudd Government refers to the federal Executive Government of Australia of the Australian Labor Party from 2007 to 2010, led by Kevin Rudd as Prime Minister. The Rudd Government commenced on 3 December 2007, when Rudd was sworn in along with his ministry...
economic stimulus package in response to the 2008-09 global financial crisis. The principal operation of the Acts was to pay "tax bonuses" of between $250 and $900 to Australians whose taxable incomes were no more than $100,000 in the 2007-08 financial year. The Acts required the Australian Taxation Office
Australian Taxation Office
The Australian Taxation Office is an Australian Government statutory agency and the principal revenue collection body for the Australian Government. The ATO has responsibility for administering the Australian federal taxation system and superannuation legislation...
(ATO) to pay the tax bonuses as soon as practicable after the Acts commenced.
The plaintiff
Bryan Reginald Pape was a lecturer in Law at the University of New EnglandUniversity of New England (Australia)
The University of New England is an Australian public university with approximately 18,000 higher education students. Its original and main campus is located in the city of Armidale in northern New South Wales....
and a former officer of the conservative National Party of Australia
National Party of Australia
The National Party of Australia is an Australian political party.Traditionally representing graziers, farmers and rural voters generally, it began as the The Country Party, but adopted the name The National Country Party in 1975, changed to The National Party of Australia in 1982. The party is...
.
The Acts entitled the payment of a tax bonus of $250 to Pape. On 26 February 2009, Pape issued a writ in the High Court for declarations that the tax bonus Acts were unconstitutional, and that the payments of the tax bonus were unlawful.
Litigation
The respondents to the writ were the Commonwealth of Australia and the Commissioner of Taxation. The Attorneys-General for New South Wales, South Australia and Western Australia intervened. Pape represented himself.At a hearing on 13 March 2009 before Justice Gummow
William Gummow
William Montague Charles Gummow AC is a Justice of the High Court of Australia, the highest court in the Australian court hierarchy.-Biography:...
, a special case was stated for the Full Court. Hearings were held from 30 March to 1 April.
To enable the ATO to pay the tax bonus to Australians, the High Court delivered its decision and orders at 10:15am on 3 April 2009, just two days after the hearing. The High Court did not issue reasons until 7 July 2009.
The parties agreed to submit four questions to the High Court for determination, by
way of a special case:
- 1. Did Pape have standing to seek the relief claimed in his Writ of Summons and his Statement of Claim?
- 2. Was the tax bonus Act valid because it was supported by one or more expressed or implied heads of legislative power under the Constitution?
- 3. Would payment of the tax bonus to which Pape was entitled be supported by a valid appropriation under sections 81 and 83 of the Constitution?
- 4. Who should pay the costs of the special case?
Standing
A preliminary issue in the case concerned whether Pape had standing to seek the relief he claimed. The Commonwealth conceded that Pape had standing to contend that the payment to him under the Bonus Act was unlawful, but submitted that Pape did not have sufficient specialinterest to argue the broader issue that the Bonus Act was invalid in its application to other persons. No member of the Court accepted this submission. A finding by the Court that the payment of the bonus to Mr Pape was unlawful because the Bonus Act was invalid would be binding in any subsequent disputes concerning the validity of the Bonus Act. Accordingly, if the tax bonus was invalid in respect of Pape, the entire $7.7 billion tax bonus package would be invalid.
Pape's standing as a plaintiff was novel in that his financial interests (to a $250 tax bonus) would be adversely affected if he succeeded in the case.
The answer to Question 1 of the special case was therefore "yes".
"Appropriation power"
Section 81 of the Constitution provides:- All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution.
Section 83 relevantly provides:
- No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.
The Commonwealth argued that section 81 is a grant of legislative power to the Commonwealth to make laws to appropriate money. The Commonwealth also argued that the requirement that an appropriation be "for the purposes of the Commonwealth" meant the purposes determined by the Parliament; in other words, that the Parliament's power to make laws appropriating money was unlimited.
The Court unanimously rejected the contention of the Commonwealth that section 81 of the Constitution provided a power for the Commonwealth to appropriate and spend money.French CJ, after surveying the history of section 81 and previous High Court judgments held:
- "In my opinion, the history, the text and the logic underlying the operation of ss 81 and 83 are inconsistent with their characterisation as the source of a "spending" or "appropriations" power, notwithstanding their description as such in some of the judgments of Justices of this Court"
The Court held that the expenditure of money by the Commonwealth was required to be undertaken either (a) by legislation under the Commonwealth's legislative powers; or (b) under the Commonwealth's executive powers. Sections 81 and 83 cannot, on their own, support the spending of money by the Commonwealth.
Executive power
The Court, by majority (4-3; Hayne, Heydon and Kiefel JJ dissenting), held that the Bonus Act was a valid law of the Commonwealth Parliament, supported by s 51(xxxix) of the Constitution as being incidental to the exercise by the Commonwealth Government of its executive power under s 61 of the Constitution.The answer to Question 2 of the special case was therefore "yes".
Taxation power
A majority of the Court, in obiter (4-2; Hayne and Kiefel JJ dissenting in part, French CJ not considering the question), concluded that the Bonus Act could not be supported by the taxation power.Existence of appropriation
Mr Pape argued that the money that was to be paid to taxpayers under the Bonus Act had not been appropriated from the Consolidated Revenue Fund by law, as required by s 83 of the Constitution. He also argued that, even if there had been an appropriation by law, it was not an appropriation "for the purposes of the Commonwealth". Section 81 of the Constitution states: "All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution." The Court held by majority that there was an appropriation by law. Section 16 of the Taxation Administration Act 1953 (Cth) appropriated the Consolidated Revenue Fund for the payment of certain amounts the Commissioner is required to pay under any "taxation law". Section 3 of the Bonus Act had the effect of making the Bonus Act a "taxation law". The Bonus Act increased the amount of money to be withdrawn from the Consolidated Revenue Fund under an existing appropriation. That was sufficient to meet the requirement of s 83.The Court held that sections 81 and 83 do not themselves authorise any expenditure; rather they
require that the spending of government funds be authorised by Parliament.
The answer to Question 3 of the special case was therefore "yes"