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

On 12 January last you advised me that, in your opinion, the Commonwealth has no power to levy income tax on the salaries of officers employed by the various States.⁽¹⁾

Will you be so good as to inform me whether this advice extends to the case of retired public servants in receipt of a pension from the State Government or receiving an allowance from a superannuation fund controlled by the Government.

The grounds on which the opinion relating to the taxation of State officers was based do not appear to exist in the case of retired State officers enjoying pensions. The grounds for the exemption of State officials may be stated in the words used by Griffith C. J. in delivering the judgment of the Court in Deakin v. Webb 1 C.L.R.585, which dealt with State taxation of Commonwealth officials. In that case at p. 616 he says:

State taxation of federal salaries is open then to two objections: (1) It in effect diminishes the recompense allotted by the Commonwealth to its officers, and so interferes with its agencies; and (2) It interferes with the freedom of action of the Commonwealth in the transfer of its officers from State to State, except at the risk of doing them an injustice by reducing their effective remuneration-an injustice only to be remedied by the appropriation of federal revenues for that purpose.

Neither of these grounds is applicable in the case of retired servants who are no longer the agencies of either the State or the Commonwealth.

In my opinion, a retired State officer is not exempt from Commonwealth incometax.

[Vol. 15, p. 265]

(1) Opinion No. 680; the opinion is Dated 12 January 1916.