This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Contact Officer & Copyright Details
Date Introduced:5 March
Commencement: On Royal
The Commonwealth Places (Mirror Taxes) Bill
1998 (the Mirror Taxes Bill) is part of a package of four
Commonwealth Bills dealing with the consequences of the High
Court's decision in Allders International Pty Limited v
Commissioner of State Revenue (Victoria)
(Allders).(1) The package of legislation is designed to
overcome constitutional obstacles, so that certain State taxes will
continue to apply to Commonwealth places located within the States
and past State revenues are protected.
The four State taxes named in the Bill are stamp
duty, payroll tax, debits tax and financial institutions duty.(2)
Other State taxes may be added by regulation.(3)
The purpose of the Mirror Taxes Bill is to
ensure that Commonwealth places within a State are not immune to
State taxing laws of general application. It does so by endowing
the relevant State tax law with the character of a Commonwealth law
to the extent that it applies in a Commonwealth place within that
There are some similarities and some differences
to the recent package of Commonwealth legislation which received
Royal Assent in September 1997(4) and dealt with a pair of High
Court decisions which threatened substantial State revenues, in
that case relating to the levying of excises.(5)
Both the 1998 and the 1997 legislative packages
stem from the Inter-jurisdictional Taxation Agreement (IJTA)
settled between the Commonwealth, States and Territories in 1997.
Amongst other things, the IJTA sought to protect State and
Territory revenues from the effects of recent constitutional
decisions by the High Court.
The 1998 package designed to deal with the
Allders decision contains the following main features:
- the use of 'mirror' legislation which, from 6 October 1997 and
to the extent necessary, turns certain State taxes into
Commonwealth law, allowing State Governments to subject
'Commonwealth places' to the same tax treatment as the rest of the
- capacity for both the States and the Commonwealth to adjust the
relevant State tax laws as necessary from time to time;
- scope to add, by regulation, further categories of tax beyond
the four referred to in the package of Bills;
- continued State administration of the relevant taxes, thereby
minimising Commonwealth involvement;
- the protection of past State tax revenues by the use of a 100%
windfall tax to apply to any refunds sought as a result of the
- disregard for the usual limitations applying to Commonwealth
tax legislation - notably uniformity across the States, separating
appropriation from assessment, and only 'one tax per law' - on the
basis that they do not apply to the Parliament's power over
- a validation provision which seeks to head off constitutional
and other questions created by overlapping Commonwealth/State
- consequential amendments designed to ensure that taxpayers as
far as possible are confronted with the same tax regime as operated
before the Allders decision.
The High Court decision in Allders
The Allders case concerned a duty free
store located at Tullamarine Airport. The airport was vested in the
Federal Airports Corporation (FAC), making it a 'Commonwealth
place' for the purposes of section 52(i) of the Constitution. The
FAC leased part of the airport to Allders, to operate a duty free
store. The Victorian tax authorities sought to levy stamp duty on
the lease instrument.
Section 52(i) of the Constitution gives the
Commonwealth exclusive legislative power with respect to, amongst
other things, 'places acquired by the Commonwealth for public
purposes'. The question for the High Court was whether the
exclusive nature of that power meant State jurisdiction was
completely ousted within such 'federal enclaves' or whether laws of
general application, such as the Stamps Act 1958 (Vic),
could operate because they did not single out Commonwealth places
within the State as their target.
On 14 November 1996, the High Court by a 5-2
majority adhered to a wide view of section 52(i). It held that even
laws of general application, such as Victoria's stamp duty
legislation, could not operate inside a Commonwealth place. The
Commonwealth could have legislated on the same subject matter -
taxation - and this mere legislative potential was sufficient to
oust State jurisdiction, given the exclusive nature of the
The High Court made an additional finding in
Allders on the basis of a four-judge majority, which is
significant to the package of tax bills now before the Parliament.
It held that the power over Commonwealth places in section 52(i) is
plenary. In other words it is not constrained by the limitation
which applies to the Commonwealth's power over taxation contained
in section 51(ii). This limitation decrees that tax laws are 'not
to discriminate between States or parts of States'.
The 'mirror tax' regime adopted in this package
of Bills involves the Commonwealth essentially taking State taxing
laws as it finds them. Inevitably different rates and methods of
administration apply across the various jurisdictions. Under the
Mirror Taxes Bill, these variations will find expression in
Commonwealth law. This lack of uniformity would call into question
the validity of the package if it was authorised under section
51(ii). The majority finding in Allders apparently permits
the Commonwealth to implement the mirror tax regime in reliance on
section 52(i), even though it may offend the prohibition on
discrimination in the tax power.
A question presumably remains whether mirror
taxes levied under section 52(i) of the Constitution can similarly
avoid the requirements of section 55 of the Constitution. That
latter provision requires the separation of laws imposing taxation
from laws dealing with machinery for its collection. It also
requires such laws to deal with only one subject of taxation. The
Explanatory Memorandum says that, on the basis of advice to the
Government, section 55 has no application in this instance.(6)
The Commonwealth's response to Allders
On 6 October 1997, the Treasurer announced that
the Commonwealth would apply taxes which mirror State taxes to
businesses located at Commonwealth places.(7) The announcement
applied to stamp duty, payroll tax, financial institutions duty and
debits tax on businesses operating in or on Commonwealth places.(8)
The Treasurer indicated that the regime would be extended to other
State taxes on Commonwealth places if they too are brought into
In the same announcement, the Treasurer
announced that a 100% windfall tax would apply to all refunds
payable due to the invalidity flowing from Allders. This
was designed to deter applications for refunds and protect past
The Treasurer stated that the tax package
relating to Commonwealth places was the second of three elements
referred to in the IJTA, the others being a response to the tobacco
excise cases of Ha and Hammond, and an
examination of reciprocal taxation of government commercial
The package of legislation dealing with the
excise taxes also employed a mirror tax regime in order to
neutralise the effect of a High Court decision on State and
Territory revenues. However it levied a uniform rate of tax across
the federation, due to the constitutional prohibition on
discrimination between the States.
In the 1998 package of Bills, by relying on
section 52(i), the Commonwealth has decided to embrace differential
rates of State taxation within Commonwealth law and skirt the
constitutional prohibition against discrimination which limits the
Clause 4 reflects the fact that
the Commonwealth is refraining from use of the taxation power for
reasons set out above, and instead relies for constitutional
validity primarily on section 52(i) of the Constitution. Other
sections of the Constitution are relied on for subsidiary aspects
of the legislation.
Clause 6 is the lynchpin of the
Bill. It applies State taxing laws to Commonwealth places as
Commonwealth laws. This general principle is subject to
constitutional and other limitations, two of which are of
particular significance. The first is that such 'applied laws' have
effect subject to any modification by the Commonwealth or by State
Treasurers under clause 8. Secondly, applied laws
only take effect if appropriate administrative arrangements between
the Commonwealth and the State are in place, in accordance with
Modifications to applied laws under
clause 8 are subject to procedural and substantive
Although applied laws are generally taken to
apply for however far into the past and the future as the
corresponding State law has or does, clause 7
limits the retrospective reach of this principle. Only liabilities
which would have arisen on or after 6 October 1997 will be caught
by the mirror tax regime. The windfall tax regime set out elsewhere
in the package of four Bills is designed to deal with liabilities
arising before that date.
Applied laws are laws of the Commonwealth and
thus involve federal jurisdiction. State courts will have
jurisdiction to deal with matters arising under applied laws, as a
result of clause 10. Certain restrictions on
appeals from State courts may or do apply. Clauses
11-17 are designed to minimise disruption to court
proceedings or similar anomalies arising from the overlap of
Commonwealth/State jurisdiction under the Bill.
Clause 18 is described in the
Explanatory Memorandum as "a provision to overcome uncertainty".(9)
Uncertainty may arise for a number of reasons including doubt over
the identification of 'Commonwealth places' and the fact that tax
authorities will often deal with businesses whose activities
overlap between State and Commonwealth places within the same
State. This clause validates action purportedly done under the
authority of a State taxing law which corresponds to a Commonwealth
mirror taxing law.
Clause 20 is designed to avoid
the inappropriate application of other Commonwealth legislation,
while permitting it to apply where appropriate. Primarily it is
intended to allow companion State legislation such as Evidence Acts
and Acts Interpretation Acts to continue to support State taxing
laws which have become 'applied laws'.
Exemptions from Commonwealth taxes and charges
could inadvertently apply to State taxes, once they assume the
character of Commonwealth laws under the mirror tax regime.
Clause 21 prevents this occurring except where it
is expressly provided for.
As Commonwealth laws, mirror taxes will cause
revenue to flow to the Commonwealth Consolidated Revenue Fund
(CRF). The Commonwealth has, however, agreed to protect State
revenues under the IJTA. Subclause 23(2) therefore
requires the Commonwealth to forward revenue from an applied law to
the relevant State. In the meantime the Commonwealth may have paid
refunds due to taxpayers under the applied law. The amount
reimbursed to the States by the Commonwealth will be reduced to
take account of any such refunds paid.
Subclause 23(4) makes an
appropriation from the CRF for reimbursement to the States and
refunds to taxpayers.
The State taxing laws to which the Bill applies
are set out in Schedule 1. Other laws may be added by regulation.
As the Explanatory Memorandum points out,(10) inclusion in the
Schedule "will give such laws retrospective effect" because they
will be treated as if they had always been listed in the
- (1996) 186 CLR 630.
- Schedule 1.
- Definition of 'State taxing law', paragraph (b).
- See Bills Digest Nos. 23-31 1997-98 regarding the package of 9
Bills introduced into the House of Representatives on 28 August
- Ngo Ngo Ha v State of New South Wales; Walter Hammond &
Associates Pty Ltd v State of New South Wales (1997) 146 ALR
- Explanatory Memorandum, 8.
- Treasurer, Press Release, No.109, 6 October 1997.
- In 1995-96, payroll tax constituted 23.3%, stamp duties 13.7%
and financial institutions taxes 6.3% of total State and Territory
Taxation revenue: see Australian Bureau of Statistics figures
quoted in 'Federalism Up in Smoke? The High Court Decision on State
Tobacco Tax', Current Issues Brief, No.1, 1997-98 at p.5.
Although the proportion of these taxes which relate to Commonwealth
places is no doubt quite small, these figures show that the named
taxes are clearly amongst the major revenue-earning taxes of the
States and Territories.
- Explanatory Memorandum, 17.
- Explanatory Memorandum, 20.
11 March 1998
Bills Digest Service
Information and Research Services
This paper has been prepared for general distribution to
Senators and Members of the Australian Parliament. While great care
is taken to ensure that the paper is accurate and balanced, the
paper is written using information publicly available at the time
of production. The views expressed are those of the author and
should not be attributed to the Information and Research Services
(IRS). Advice on legislation or legal policy issues contained in
this paper is provided for use in parliamentary debate and for
related parliamentary purposes. This paper is not professional
legal opinion. Readers are reminded that the paper is not an
official parliamentary or Australian government document.
IRS staff are available to discuss the paper's contents with
Senators and Members
and their staff but not with members of the public.
© Commonwealth of Australia 1997
Except to the extent of the uses permitted under the
Copyright Act 1968, no part of this publication may be
reproduced or transmitted in any form or by any means, including
information storage and retrieval systems, without the prior
written consent of the Parliamentary Library, other than by Members
of the Australian Parliament in the course of their official
Published by the Department of the Parliamentary Library,
Back to top