Opinion Number. 1425


Application to commonwealth of state laws whether Australian Commonwealth Shipping Board bound by Finance (Family Endowment Tax) Act 1927 (NSW): WHETHER TAX: INCONSIStENCY WITH COMMONWEALTH LAW

Key Legislation

Finance (Family Endowment Tax) Act 1927 (NSW) ss 1, 2: Family Endowment Act 1927 (NSW) ss 12, 14, 39: Commonwealth Conciliation and Arbitration Act 1904

The Secretary, Prime Minister

The Secretary to the Prime Minister’s Department has referred for advice a further memorandum from the Australian Commonwealth Shipping Board relative to the liability of the Board to contribute under the terms of the New South Wales Act known as the Finance (Family Endowment Tax) Act, 1927.

I have already advised on this matter in Opinion No. 171 of 1927 on the 3/9/1927(2) in which I intimate that it could be contended that a State Act which, in its essence, imposed an additional charge, in the nature of remuneration for labour, on the employer is inconsistent with a Federal Award completely regulating the industrial relations between employer and employee. I requested that, if the facts are such as to raise this question, the matter should be referred for further advice, reference being given to all awards under which the employees are employed.

The Secretary to the Board advises that, as far as the Dockyard is concerned, 90% of the employees work under Federal Awards, whilst 10% work under State Awards. On the other hand practically all the Line Staff are working under State Awards.

Before proceeding to consider any question of liability, it will be necessary to examine the nature of the Finance (Family Endowment Tax) Act (which by section 1 is to be ‘read and construed with the Family Endowment Act, 1927’), and also of the Family Endowment Act 1927.

The Finance (Family Endowment Tax) Act 1927 is entitled ‘An Act to impose a tax upon employers; to declare the rates of contributions to be made by employers to the Family Endowment Fund; and for purposes connected therewith’. Section 2 provides:

There shall be charged, levied, paid, and collected under the Family Endowment Act, 1927, in the year One thousand nine hundred and twenty-seven and in each succeeding year …from all employers for the use of His Majesty and for credit of the Family Endowment Fund contributions upon the total amount of wages paid by such employers to their employees during the periods prescribed by regulations made under the said Act, at the percentage following, that is to say–three per centum.

Section 39 of the Family Endowment Act, 1927, constitutes the fund, and sub-section (4) of the same section is as follows:

(4) Every employer shall contribute to the fund in each year … a contribution equal in amount to such a percentage of the total amount of the wages paid by him during the prescribed period to his employees as may be fixed by Act of Parliament. Where such amount includes any wages paid to an employee working under an award made under an Act of the Parliament of the Commonwealth of Australia, such amount shall be reduced by a sum equal to ten per centum of the wages so paid to such employee …

Section 12 of the same Act provides that, subject to that Act, there shall be paid to every mother in respect of each child an endowment for his maintenance, training, and advancement at the rate of five shillings per week.

The question is whether these provisions are valid so far as they levy a tax upon the wages of employees employed under a federal award.

The State enactments do not relate to a matter within the exclusive power of the Commonwealth Parliament, and it is not suggested that they contravene any express prohibition of the Constitution.

Therefore, in view of the Engineers’ case,(3) and Pirrie v. Mc.Farlane, 36 C.L.R. 170, the only ground on which their validity can be attacked is that they are inconsistent with an Act of the Federal Parliament, or with some instrument (such as an award) made under the authority of an Act of the Federal Parliament.

Substantially, the question is whether they are inconsistent with awards made under the Commonwealth Conciliation and Arbitration Act regulating wages and conditions of employment.

The State law does not purport to alter or directly affect any such award. But it clearly contemplates the levying of the tax on the wages of employees working under such an award. In the case of such wages, the tax is reduced by an amount (10%) which appears, on the face of the Act, to be arbitrary, but which is presumably intended to allow for the fact that the federal basic wage is based on the needs of a man, his wife, and three children, whereas the State basic wage contemplated by the Family Endowment Act is based on the needs of a man and wife only (section 14).

In Clyde Engineering Co. v. Cowburn, 37 C.L.R. 466, the High Court held that where an award has been made by the Commonwealth Court of Conciliation and Arbitration, the State Parliament cannot alter its terms, or confer or impose on the parties to the award rights or obligation inconsistent with its terms.

Mr. Justice Isaacs, in his judgment, went somewhat further, and said that a State law is inconsistent with a federal award, and therefore invalid, so far as its effect, if enforced, would be to destroy or vary the adjustment of industrial relations established by the award with respect to the matters formerly in dispute.

Now the effect of the State law, if enforced, would be to impose on employers an additional charge proportionate to the wages paid by them–including wages of his employees paid under a federal award; and to give to mothers, including the mothers of the children of such employees, an endowment of 5/- a week for each such child.

It can hardly be disputed that this varies, and may destroy, the adjustment of industrial relations established by the award, and so comes within the definition of inconsistency laid down by Mr. Justice Isaacs.

It is open to doubt, however, whether a majority of the Court would endorse that definition. It may be argued with great force that there is no interference with, or inconsistency with, the award; that the State law is nothing but a tax, on a subject which the State had a right to select for taxation, and an appropriation of revenue which the State had a right to make; and that the effect of the State legislation on the adjustment of industrial relations is indirect merely and does not affect its validity.

On the whole, I incline to the opinion that the Commonwealth Shipping Board is liable to the tax.

[Vol. 23, p. 403]

(1) This date is attributed. The opinion is undated in the Opinion Book, but its position in relation to adjacent opinions, suggests it was written sometime in late October 1927.

(2) Opinion [Vol. 23, p. 312] not published.

(3) Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129.