The Commissioner of Taxation has forwarded the following memorandum for advice:

It has been claimed that officers of the State Public Service are exempt from income tax levied under the Income Tax Assessment Act 1915, by section 114 Constitution Act and the High Court decision D'Emden v. Pedder 1 C.L.R.91.

Will you kindly advise me whether such a claim is tenable.

In the case of Baxter v. Commissioners of Taxation (N.S.W.) 4 C.L.R. 1087 at p. 1100 the Chief Justice, in delivering the majority judgment , said:

In the case of Deakin v. Webb the Court again affirmed that rule, [i.e. the rule adopted in D'Emden v. Pedder] and, adopting the reasoning of the Supreme Court of the United States in the cases of Dobbins v. Commissioners of Erie County, and The Collector v. Day, applied it to the case of a State income tax upon the emoluments of Federal Ministers and members of Parliament. In The Federated Amalgamated Government Railway and Tramway Service Association v. New South Wales Railway Traffic Employees Association, the Court applied the same principle to an attempted interference by the Commonwealth with the exercise by a State of its sovereign powers.

The Court in Baxter v. Commissioners of Taxation applied the rule in D'Emden v. Pedder to the case of a Federal officer, holding him exempt from State income tax.

In view of the decisions in the above cases, in my opinion, the Commonwealth has no power to levy an income tax on the salaries of State officers.

[Vol. 14, p. 214]