In our first joint opinion we advised upon the validity of the draft (War Time Arrangements) Bill on the assumption that it might not be permissible to legislate directly and in terms to exclude the States from their right to impose a State Income Tax. That precise point was for the time being left in abeyance. For the purposes of our previous opinion we accepted that assumption but we were careful to state that we expressed no opinion one way or the other for or against the validity of such assumption. In the result we advised that on the assumption that the Commonwealth could not validly exclude the States from the field of taxation of incomes the War Time Arrangements Bill would not be valid because, regarded as part of a plan, its intention and effect would be held to make it practically impossible for the States to operate in that field.

It thereupon became necessary to examine further and to inquire and see whether the assumption upon which our opinion was based was in fact valid in law. Joint opinion has been obtained from eminent Melbourne Counsel who have advised that in time of war the exclusion of the States from the field of taxation of incomes is within the defence power of the Commonwealth. The crucial part of the Melbourne opinion is as follows:
‘Once concede the reality of the connection between the measures proposed and the defence of the Commonwealth in time of war we think the fact that the activity regulated is the taxing power of the State does not suffice to exclude it from the ambit of Commonwealth authority.’

After having now considered the matter for ourselves with the assistance afforded by the views as expressed by Melbourne Counsel we agree with their conclusion for the same reasons as are given by them which are based upon the opinions as expressed in the three leading cases they have mentioned, namely Farey v. Burvett, Pankhurst v. Kiernan, and Andrews v. Howell.⁽¹⁾

The result of the Judgments in Farey v. Burvett 21 C.L.R. 433 was summarized by Barton J. in Pankhurst v Kiernan 24 C.L.R. at p. 128 as follows:

Our view in Farey v. Burvett was that while a n Act or regulation might not be a measure for defence in time of peace it might be such a measure in time of war. In such a war as the present not merely armies, but whole nations are engaged in a supreme struggle, which so far as this Empire is concerned is a struggle for the preservation of liberty. It was a defence of the autonomous existence of every part of the Empire no matter where the fighting was actually carried on– …

It was impossible to say that in such a struggle every part of the Empire was not entitled, nay, called upon, to put forth the whole of the resources of its people in men, money or property for its self-preservation. If a measure were capable of contributing to the common defence it was for the Court to affirm that capability and to go no further. But whether it did so contribute was a question for the judgment of the legislature. If that body came to such a conclusion by passing an Act then the function of the Court in deciding whether it was constitutionally valid was to say whether the form of law had been given to something which was capable of assisting in defence. That was the division between the functions of the law maker and the law giver. The Court was to say whether in conceivable circumstances of war the particular measure might be necessary. But there its functions stopped. Farey v. Burvett is not limited to questions of food supply. It extends to all the resources of a people and all these resources may upon need in time of war be placed by Parliament at the disposal of the Government for purposes of defence if they are capable of subserving those purposes.

In Farey v. Burvett Isaacs J. had said⁽²⁾–

If the measure questioned may conceivably in such circumstances even incidentally aid the effectuation of the power of defence, the Court must hold its hand.

This passage was reiterated by Barton J. in Pankhurst v. Kiernan as cited above and was again cited and relied upon by Rich J. in Andrews v. Howell.⁽³⁾

From Farey v. Burvett we extract the following further propositions–

1. The power to make laws with respect to defence is a paramount power and if it comes into conflict with any reserved rights of the State the latter must give way. Per Griffith C.J. 21 C.L.R. p. 441. So also per Barton J. 21 C.L.R. 450. If an activity belongs solely to a State in time of peace it does not follow that it is not a means of defence for Commonwealth hands in time of war.

So also per Isaacs J. at p. 451. The remedy for such evils is not in the State powers. Again per Isaacs J. at p. 453. The defence power is complete in itself and there can be no implied reservation of any State power to abridge the express grant of a power to the Commonwealth.

So too per Higgins J. at p. 458–‘For the purpose of bringing the whole force of the nation to bear the policy of the States may have to be temporarily suspended .… the temporary suspension of the policy of a State may possibly help to prevent the total and permanent paralysis of the State’s policy and functions and of the State itself under foreign invasion and domination.’

2. It is not material that the same powers could not be exerted by the Commonwealth in times of peace. Per Griffith C.J. 21 C.L.R. at p. 440. Per Barton J. at p. 550. Per Isaacs J. at p. 453.
3. It is no answer to the Act to say that no particular method was necessary because the end might be attained by other means. Parliament must possess the choice of means. Per Barton J. 21 C.L.R. p. 445. Per Griffith C.J. 21 C.L.R. p. 442. Per Higgins J. 21 C.L.R. p. 460.

We think that we ought to examine the constitutional objections to the Commonwealth’s plan as voiced by the Premiers at the Prime Minister’s conference.

1. It was urged that the States were being deprived of a great constitutional right.

This is answered by the opinions in Farey v. Burvett that the rights reserved to the States may have to give way if they conflict with the exclusive defence power.

2. It was urged by some of the Premiers that there were other ways of accomplishing the same end. This is answered by the propositions in Farey v. Burvett that the Federal Parliament is to have the choice of means. It is to be noted that in the National Security Act it is enacted that regulations may be passed which are necessary or convenient. In the previous War Precautions Act 1914–1916 the phraseology was that the Governor-General might make orders which were necessary or expedient.
3. It was objected by McKell on behalf of N.S.W that to take away the right to tax was to destroy the right to govern. This is answered by the observation of Higgins J. in Farey v. Burvett 21 C.L.R. at p. 458 cited above where he points out that the suspension during the war of the State’s policy may help to prevent the total and permanent paralysis of the State’s policy and functions and of the State itself. It should be noted however that Starke J. the dissenting Judge in Andrews v. Howell disassociated himself from the view that in war time the Commonwealth had complete power to legislate in respect of the economic and social condition of Australia, and he insisted upon the continuance even in war time of the dual system of Government based upon a separation of powers, but we think that what he really meant was that the regulations or statutes should not transcend the Constitution or any limitations imposed on the defence power by the Constitution such as the express guarantees in the American Constitution. Within these limits we think he agreed substantially with tests proposed in the judgment of Rich J.

In referring to American cases he was referring mainly to guarantees for personal rights and liberties. See 255 U.S. at p. 88.⁽⁴⁾

4. It is perhaps necessary also to advert to some arguments of a technical legal character arising out of the observations of Dixon and Evatt J.J. in West’s case 56 C.L.R. 682, 683, 686 and 687. In these observations which were only obiter it was suggested or asserted that notwithstanding the Engineers’ case there was still implied in the Constitution a prohibition alike against Commonwealth and States of any action on the part of either which might destroy the normal activities of the other. We do not think that these observations were addressed to or had in mind the operation in war time of the Commonwealth exclusive power of defence suspending or superseding temporarily the activities of the States under their reserved powers in the interests of the self-preservation alike of the Commonwealth and the States.

Similarly the statement of Sir Robert Garran adopted by Evatt J. that the Commonwealth’s taxation power gave the Commonwealth no control over the taxation of a State was we think not addressed to the operation of the Commonwealth taxation power in time of war. Indeed Griffith C.J. in Farey v. Burvett 21 C.L.R. at p. 441 stated that ‘the defence power includes any law which may tend to the conservation or development of the resources of the Commonwealth and the control of finance and trade may be the most potent weapon.’

5. We have already adverted to the passage in the Melbourne opinion which we said was the crux of the case and that passage we again repeat ‘Once concede the reality of the connection between the Measures proposed and the defence of the Commonwealth in time of war .… the fact that the activity regulated is the taxing power of the State does not suffice to exclude it from the ambit of Commonwealth authority.’ Accepting this as the test and coming away from generalities to the actual facts of this case can it be conceded upon such facts that the necessary real connection is established between the text of the measures proposed and the defence of the Commonwealth. This matter has given us some concern but we feel that we are able to answer it satisfactorily. Upon the face of the Acts it appears at first sight strange that the Commonwealth should proceed to collect £134,000,000 under an Income Tax Act of which £34,000,000 is in a sense not required by the Commonwealth either for its own internal peace order and good government or for purposes of expenditure on war matters but is collected only to be handed back to the States for the domestic purposes of the States. We think that it can reasonably be said that a measure such as this can conceivably aid in the defence of the Commonwealth and of the States and in the more effectual prosecution of the war. We think it can be said that the objects to be achieved may include the getting in a largely increased revenue to the Commonwealth by securing to the Commonwealth the exclusive right to tax the largely increased incomes enjoyed by members of the public through the large expenditure of Commonwealth loan and other monies for war purposes. We think also that the plan proposed by eliminating States taxes with their varying rates makes it possible for the Commonwealth without undue hardship to take up the slack as it is called and to collect from taxpayers in the lower taxed States as much revenue as is now being collected in combined State and Federal taxes from taxpayers in the higher taxed States thus equalising the burden upon taxpayers of the same grade of income and also largely augmenting the Commonwealth yield. We think it can be suggested that this uniform tax will enable the Commonwealth to strengthen the morale of the people by eliminating the chaos and discontent of the duplicated taxes exceeding 20/- in the £1 and the discontent of taxpayers feeling themselves aggrieved by the inequality of their burdens.

We think also that this system by enabling the Commonwealth to, as it were, peg the State’s revenue from income tax will prevent the States from encroaching too deeply into the available field of expanding incomes and will leave available more private money for Commonwealth taxation and also investment in Commonwealth loans. In addition and as incidental to the measures proposed the curtailment of staff and economy of expenditure may be expected to release a number of highly qualified personnel for other much needed work and to contribute substantially to savings in the expenditure of public monies. There may be other matters which the taxation authorities can suggest. If these matters and possibly other matters of this description will yield the Commonwealth augmented revenues and will release personnel and save expenditure and if the exclusion of the States from the field of taxation of incomes is one of the ways of achieving this result then we think the granting of financial assistance to the States to relieve them of the consequential disabilities is a necessary and consequential liability of the Commonwealth in order to make the plan practically workable and to save the State from collapse and the collection of this apparently surplus £34,000,000 is a proper and necessary liability of the Commonwealth for its own defence and for that of the States. We think some advantage may be derived by passing the War Time Arrangements Act before the Income Tax Act and thus establishing a liability or conditional liability which the Commonwealth has to satisfy namely £34,000,000.

It was said and it may be said again that there are other ways of giving the Commonwealth much more money as for example by reducing everybody’s income to a maximum of £1,000 per year. But that is irrelevant because the Commonwealth has the choice of its own means.

6. In our original opinion we adverted to the necessity to make some detail adjustments to the clauses of the War-Time Arrangements Act so as to make it clear that the whole Bill and each clause was intended to be a war measure operating only during the war and for a specified period after the war.

In particular we suggest that the Bill should be prepared with a preamble with appropriate recitals as follows–

‘Whereas with a view to the public safety and defence of the Commonwealth and of the several States and for the more effectual prosecution of the war in which His Majesty is engaged it is necessary or convenient to enact this Act to provide for the matters as hereinafter set out Now therefore etc.’.

The proper recital of the measure as a war measure may be an important matter because it was on the matter of an insufficient recital that Higgins J. dissented in Pankhurst v. Kiernan 24 C.L.R.. We notice that Melbourne Counsel propose to prepare a schedule embodying the modifications which they suggest to the War Time Arrangements Bill. We think this is a good idea and we suggest to the Solicitor-General that he consider their suggestions in conjunction with our proposed preamble as above and with our other suggestions as contained in our original opinion.

7. We will add just a few words about proposed new clause 26 to the Assessment Act. As we understand the matter, if the scheme for only one uniform Act is achieved then for the period of the war this proposed new clause will be nugatory for there will then be no possibility during war time of any competition between a Federal Act and any State Act.

For the purposes of our previous opinion we considered clause 26 was only important because its very drastic nature helped to show that in the general plan there was no real intention to allow any State Act any real operation.

Addendum to No. 6.

In considering clauses 13 and 16 of the proposed War Time Arrangements Bill we notice that though the States are presumably to be incapacitated from collecting (even arrears), the Commonwealth will only agree to collect such arrears upon terms that such arrears when collected are to be compulsorily impounded for Commonwealth Loans. The States may of course have commitments which these arrears were intended to discharge, and the proposal to refuse to collect them and to allow them to remain uncollectable except upon terms that they are to be compulsorily impounded seems to be rather harsh and arbitrary, and the inclusion of this proposed condition may prejudicially affect the minds of the Members of the Court. We suggest that the Commonwealth should consider whether this condition can without any material detriment be omitted.

[Vol. 34, p. 430]

(1) (1941) 65 CLR 255.

(2) (1916) 21 CLR 433 at 455.

(3) (1941) 65 CLR 255 at 263.

(4) United States v. W Cohen Grocery Co 255 US 81.