Bills Digest No. 151   1997-98 Commonwealth Places (Mirror Taxes) Bill 1998

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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 Bill.


Passage History
Main Provisions
Contact Officer & Copyright Details

Passage History

Date Introduced:5 March 1998

House:House of Representatives


Commencement: On Royal Assent


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 State.

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 State;
  • 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 Allders decision;
  • 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 'Commonwealth places';
  • a validation provision which seeks to head off constitutional and other questions created by overlapping Commonwealth/State jurisdictions;
  • 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 power.

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 constitutional question.

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 State revenues.

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 enterprises.

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 tax power.

Main Provisions

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 clause 9.

Modifications to applied laws under clause 8 are subject to procedural and substantive limitations.

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 Schedule.


  1. (1996) 186 CLR 630.

  2. Schedule 1.

  3. Definition of 'State taxing law', paragraph (b).

  4. See Bills Digest Nos. 23-31 1997-98 regarding the package of 9 Bills introduced into the House of Representatives on 28 August 1997.

  5. Ngo Ngo Ha v State of New South Wales; Walter Hammond & Associates Pty Ltd v State of New South Wales (1997) 146 ALR 355.

  6. Explanatory Memorandum, 8.

  7. Treasurer, Press Release, No.109, 6 October 1997.

  8. 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.

  9. Explanatory Memorandum, 17.

  10. Explanatory Memorandum, 20.

Contact Officer and Copyright Details

Sean Brennan
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.

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ISSN 1328-8091
© Commonwealth of Australia 1997

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Published by the Department of the Parliamentary Library, 1997.

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