The Secretary to the Treasury has forwarded the following memorandum asking for advice:

I am forwarding herewith a copy of the Prevention and Relief of Unemployment Act 1930, also a copy of the Unemployment Relief (Tax) Act 1930, recently passed by the New South Wales Parliament and shall be glad if you will kindly advise me as to whether the employees of the Commonwealth Government will be subject to the tax.

The State Commissioner of Taxation asks if arrangements could be made for the deduction of this tax from the fortnightly pay of Commonwealth officials in the same manner as the deduction will be made by State Departments and private employers. If, in your opinion, the Commonwealth employee will be subject to the tax, perhaps you will also advise me as to whether the suggestion of the Commissioner of Taxation can be legally adopted by
the Commonwealth.

The Acts in question do not impose, and could not legally impose any obligation on the Commonwealth for the collection of the Unemployment Relief Tax.

Section 14 of the Act defines ‘employer’ for the purposes of Part III, as including the Crown in right of the State of New South Wales, thus impliedly excluding the Crown in right of the Commonwealth.

Section 16 of the Act imposes, inter alia, a tax on:

1. The net assessable income of every person; and
2. …
3. the income from employment derived by every person.

The definition of ‘income’ contained in the Act is general, but the definition of ‘net assessable income’ excludes income which, if it were derived after the thirtieth day of June, 1930, would be income from employment. The definition of ‘income from employment’ excludes all assessable income received from any employer in any case in which he is not bound to collect tax from the employee.

By reason of the definition of ‘employer’ in section 14, section 23, which contains the machinery for deductions by employers, does not bind the Commonwealth to collect the tax.

Therefore, by reason of the exception contained in the definition of ‘income from employment’, the incomes of officers of the Commonwealth are not income from employment within the meaning of the Act. Commonwealth officers are, therefore, not liable to pay Unemployment Relief Tax on the income derived from their employment by the Commonwealth, i.e., the income referred to in paragraph (c) of section 16 of the Act.

As to Unemployment Relief Tax under paragraph (a) of section 16, in my opinion, officers of the Commonwealth are liable to pay tax in pursuance of this paragraph, not fortnightly, but on assessment made after the close of the year. That paragraph provides for payment of Unemployment Relief Tax upon the net assessable income of every person. ‘Net assessable income’ is defined in section 14 as meaning gross income after excluding all income which is exempt from tax and after making the prescribed deductions, but as not including any income which, if it were derived after 30 June, 1930, would be income from employment as defined in the Act. In view of the wording of the exception, mentioned above, from the definition of ‘income from employment’, the salaries of Commonwealth Officers are included in the definition of ‘net assessable income’–which is assessed at the end of the year–and, therefore, as pointed out above, Commonwealth officers are liable to pay, not fortnightly, but on assessment made after the close of the year, the unemployment relief tax under paragraph (a) of section 16.

[Vol. 24, p. 634]