Opinion Number. 1492

Subject

Unemployment Relief Tax liability of commonwealth officers to pay state Unemployment Relief Tax: possibility of deductions from salary on weekly or fortnightly basis

Key Legislation

PREVENTION AND RELIEF OF UNEMPLOYMENT ACT 1930 (NSW) ss 16, 21, 22, 23: UNEMPLOYMENT RELIEF (TAX) ACT 1930 (NSW): UNEMPLOYMENT RELIEF (TAX) AMENDMENT ACT 1930 (NSW) s 2: INCOME TAX MANAGEMENT ACT 1928 (NSW)

Date
Client
The Secretary, Prime Minister

The Secretary, Prime Minister’s Department, has forwarded the following memorandum for advice:

Recently in Sydney Messrs. N.W. Bourke and A.J. Macpherson of the New South Wales branch of the Amalgamated Postal Workers’ Union of Australia waited upon the Acting Minister and placed before him the position of Commonwealth officers insofar as they were affected by the operation of the Unemployment Tax in New South Wales. The tax is now at the rate of 1/- in the £ per week, and, except in relation to officers of the Commonwealth, is collected from individuals weekly. Such a practice cannot be imposed with full legal authority so far as Commonwealth officers are concerned, and the amounts are accordingly assessed and collected annually in the form of special Income Taxation.

It was stated that officers generally, and particularly officers in receipt of low rates of salary, would be seriously inconvenienced if the material sums assessed as Unemployment Tax on the basis indicated were required to be paid in a lump sum annually. For this reason Messrs. Bourke and McPherson, as representing the great bulk of Commonwealth officers in New South Wales, desired that arrangements be made which would have the effect of bringing Commonwealth officers into line with tax-payers generally by deductions from their salaries on a weekly or fortnightly basis.

Under instructions from the Acting Minister, Mr. Bourke was advised to place the position before the local Branches of other service organisations whose members would be affected in the same way as members of the Postal Workers’ Union. It is understood that this has now been done, and it is probable in the near future all service organisations in New South Wales will, on behalf of their members, approach the Government supporting the views which have already been represented by the Postal Workers’ Union on behalf of the great bulk of Commonwealth Employees throughout New South Wales.

In the meantime the Acting Minister desires that the matter as already represented, be taken up with the Department of the Treasury, and if necessary, with the Attorney-General’s Department. Preliminary enquiries which have been made point to it being possible to effect fortnightly deductions from the salaries of officers wherever such an arrangement is concurred in by those concerned. Such an arrangement would be acceptable to members of the Postal Workers’ Union in New South Wales, and the Acting Minister would be glad if, in anticipation of all service organisations supporting the Postal Workers’ Union, such a scheme could be elaborated to be put into operation as early as practicable.

The effect of the Prevention and Relief of Unemployment Act 1930 and the Unemployment Relief (Tax) Act 1930 of New South Wales in relation to the Commonwealth and the Commonwealth public servants was considered in Opinion No. 58 of 1930, dated 27 June 1930.(1)1

In that Opinion the Solicitor-General advised that the State Acts do not impose any obligation on the Commonwealth to collect Unemployment Relief Tax and expressed the following opinion in regard to the liability of Commonwealth Officers to pay tax:

Commonwealth Officers are, therefore, not liable to pay Unemployment Relief Tax on the income derived from their employment by the Commonwealth, i.e., the incomes 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.

The relevant portion of section 16 of the Prevention and Relief of Unemployment Act 1930 reads as follows:

16. Subject to the provisions of this part of this Act, unemployment relief tax at such rates as may be fixed by any Act shall be paid to the Commissioner in respect of—

  1. the net assessable income of every person other than a company, during the income year ending upon the thirtieth day of June, One thousand nine hundred and thirty (or such other period accepted by the Commissioner under the provisions of the Principal Act in lieu thereof);
  2. (not relevant);
  3. the income from employment derived by every person other than a company during the income year commencing on the first day of July, one thousand nine hundred and thirty.

The rate of tax is fixed by section 2 of the Unemployment Relief (Tax) Amendment Act 1930, which reads as follows:

2. In lieu of the Unemployment Relief Tax imposed by the Unemployment Relief (Tax) Act 1930, there shall be charged, levied, collected and paid for the use of His Majesty and for the credit of the Unemployment Relief Fund under the provisions of the Prevention and Relief of Unemployment Act 1930, as amended by the Prevention and Relief of Unemployment (Amendment) Act 1930, and the regulations made thereunder, and subject to the exemptions in that Act as so amended contained, Unemployment Relief Tax at the rates following, namely:

  1. seven and one-half pence in the pound of the net assessable income derived by any person other than a company during the income year ending upon the thirtieth day of June, one thousand nine hundred and thirty (or such other period accepted by the Commissioner under the provisions of the Income Tax Management Act 1928, as amended by subsequent Acts, in lieu thereof);
  2. (not relevant);
  3. threepence in the pound of the income from employment derived by every person other than a company during the income year commencing on the first day of July, one thousand nine hundred and thirty, if such income is derived prior to the first day of January, one thousand nine hundred and thirty-one, and one shilling in the pound of such income if derived on or after the first day of January, one thousand nine hundred and thirty-one.

Section 21 of the Prevention and Relief of Unemployment Act provides that returns made in pursuance of the Income Tax (Management) Act 1928 shall be deemed to be also made under and for the purposes of the Prevention and Relief of Unemployment Act and that the regulations may prescribe separate forms of return in respect of incomes liable for unemployment relief tax but in respect of which no return is required under the Income Tax (Management) Act. Section 22 provides that the provisions of the Income Tax (Management) Act relating to Returns and Assessments, Objections and Appeals and Collection and Recovery of Tax shall apply to unemployment relief tax as if it were income tax.

Section 23 makes provision for the collection of unemployment relief tax by the employer in the case of tax payable upon income from employment.

Section 23 applies only to tax payable upon income from employment, and therefore has no application to the Commonwealth or to Commonwealth Public Servants (see Opinion No. 88 of 1930).(2)

The effect of the State legislation may be stated as follows:

  1. it imposes a tax of 712d. in the £1 on the net assessable income derived during the year ending upon 30 June 1930, which tax is to be collected in the same manner as income tax. This tax is payable by Commonwealth Public Servants in New South Wales.
  2. it imposes a tax of 3d. in the £1 on income from employment derived during the period between 1 July 1930, and 31 December 1930, and 1/- in the £1 on ‘income from employment’ derived during the period between 1 January 1931 and 30 June 1931. This tax is to be collected by the employer as provided by section 3 of the Prevention and Relief of Unemployment Act, but is not payable by Commonwealth Public Servants in New South Wales.

The tax payable by Commonwealth Public Servants is at the rate of 712d. in the £1 on the net assessable income, and is in respect of the year ending upon 30 June 1930. It becomes due on the date fixed by the Commissioner in the notice of assessment issued by him under the Income Tax (Management) Act. Such notices of assessment may have been issued already or may be issued in the near future.

In view of the necessity of calculating the net assessable income in each case in order to ascertain the amount of tax payable, and in view also of the fact that the tax may be already due or may become due at any time upon issue of the notice of assessment, I do not think it would be possible to formulate any satisfactory scheme on the lines suggested in the memorandum.

I am inclined to think, however, that the officers of the Union may be under the impression that Commonwealth Public Servants in New South Wales are liable to the tax of 1/- in the £1 on income from employment, and desire that this amount should be deducted from salary to meet the tax. There would appear to be no legal objection to this course, provided, of course, that the officer in each case agreed to the deduction. In view, however, of the opinion expressed in Opinion No. 88 of 1930—that Commonwealth public servants are not liable to pay income tax under paragraph (c) of section 16 of the Prevention and Relief of Unemployment Act—it is not necessary for me to consider the question.

[Vol. 25, p. 148]

(1) Opinion No. 1468.

(2) Opinion No. 1463 and No. 1464.