I must confess that this one had passed me by until I heard an interview on the ABC yesterday with Professor George Williams, constitutional lawyer of the University of New South Wales (can’t find it on the net.) It seems that Bryan Pape, Barrister, Senior Law Lecturer at the University of New England and one-time official of the National Party, has brought a High Court case to prevent the bonus payment directly to individual tax payers as part of the $42 billion stimulus package. He says that this action is a bridge too far and the Commonwealth has no power under the Constitution to make such a payment.
Firstly, don’t worry about the payment, say both Pape and Williams. Pape reckons it should be done through the PAYG tax system. Williams says it could be done through the states.
Either way the payments would be slowed, perhaps considerably, which, it might be argued, defeats their purpose to a large extent. But whether Pape wins this specific point or not, there could still be implications for the long-established trend towards the centralisation of power in Australia’s governance.
Williams says that the lack of a head of power for much of what the Commonwealth Government Government does is standard fare in university courses on constitutional law. The founding fathers in 1901 intended us to be governed by the states, with limited and specified powers allocated to the Commonwealth. Williams view is that this was in a sense an accident waiting to happen. It is overdue, he says, that we revisit the allocation of powers and construct a constitution appropriate to a modern state acting within a globalised world.
Pape is decentralist in principle and wants us to return to the concept of governance as set out in 1901. He says that as early as 1927 an opinion was given in a royal commission that the Commonwealth lacked the power for much of what it did. He says his interest is not political. The National Party never gave him any more encouragement than any other party. The stimulus payments simply presented themselves as a suitable vehicle for litigation.
Williams says that the High Court has considered the issue twice before, in 1945 and again in 1975. Both times they squibbed it. Williams says he would bet his stimulus payment that Pape will lose the specific case, narrowly conceived, on the stimulus payments. But there could be constraints established in principle nevertheless that would limit many activities of the Commonwealth, such as direct payments to the arts, sport, local government, roads etc.
If so we would have to operate in new ways with much greater state involvement, or face the people with constitutional amendments that in the past they have been disinclined to pass.
SA, WA and NSW have joined in the case in some manner. I’m not sure of the specifics. Williams reckons they won’t want to deny the people their money in this case, but wouldn’t mind seeing the Commonwealth’s wings clipped.
Williams says he’s never seen so many Commonwealth officials hanging around a High Court case. The judgment is due tomorrow. Williams says the the Court has responded to the urgency of the case, but he worries that such haste does not always make for good law, given the implications.
There is some background here and Fran Kelly interviewed Pape and Williams this morning.
Update: Ken Parish did a post last month when the news of the challenge first came out. It’s well worth reading the whole comments thread.
Good on him. Governments should be reminded from time to time that they operate within a framework of laws and cannot just do whatever they like. If the end result is that the Fed get their wings clipped, all the better.
The States are an anachronism and should be disbanded. The sooner we move to two tiered government the better – Federal and regional.
It’s no accident.
I’d be very interested to know whether Rudd and Swan read advice from their departments and from the Attorney General’s Department on this matter.
It is inconceivable that Rudd and Swan would have received some rather pointed advice on this matter.
I would be happier with the idea of the States assuming (or, perhaps, reassuming) greater powers if State governments and bureaucracies did not repeatedly show themselves up as, to put it kindly, havens for the corrupt and the mediocre.
There are plenty of “one off” Federal handouts – disaster relief, the December 2008 “stimulus”, overseas aid, grant schemes, etc.
Which are constitutional?
Is this a bit like the quorum in the Reps? The inquorate House operates quite legally until someone has the poor taste to point out that only 4 Members are present? “Ring the bells!” So the Commonwealth proceeds on its merry way until Her Maj’s Opposition kicks up a fuss, or a case reaches the High Court…..?
I feel constrained. I wish to pass on observations I’ve heard from people in Armidale about this National party dodo but fear he may be unduly litigous. So I won’t.But given that everyone I know hereabouts is a leftie I’m sure you can imagine what I might say if I felt free to do so.
Secondly, the Commonwealth has responsibility overall for social security and has had since 1944. They were given these powers by the people through referendum because the states botched it up so badly during the Great Depression.
Thetrendy idea that our courts are “activist”, in the sense of constraining parliament, is a nonsense. Our right wing shock jocks just say this because America’s do and it presents itself as a good business model. I’d bet a few bob that the payment will be allowed through.
sh*t, Paul
You weren’t going to call him a bl**dy Fas*ist, were you??
hasta la vista
Here’s George Williams opinion piece in the SMH on the matter: http://www.smh.com.au/opinion/challenge-to-bonuses-has-its-merits-20090319-938u.html?page=-1
People should take off their ideological blinkers – this is solely about the constitution. Williams appears to simply want clarification, which seems very reasonable. If the High Court decides in favour of his arguments however, that’s very big news.
I’ve read Pape’s research (which amounts to a paper to the conservative Sammy Griffith Society).
He argues the Commonwealth should be limited to spending money in areas where it has clear legislative power (eg defence). Even though the Constitution says the Commwealth can appropriate money for any Commonwealth purpose, and also has an executive power.
Taken to its extreme, that would mean no funding for universities (or at least the states would have to act as middle-men for that money).
Pape’s arguments would have made sense to a conservative, perhaps most federalists, in 1900. But by 1920, Sir Robert Garran was arguing that the Commonwealth both needed and had the power to spend money on whatever purposes that Parliament thought were of national significance. Pape’s views can find no support amongst Liberal or Labor governments at either level in living memory.
Pape seems to trace his views back to a conservative dislike for Whitlam’s nation building programmes, especially his plan to give money direct to local authorities.
The Court in the past washed its hands of these matters. Usually by saying citizens couldn’t challenge government spending unless it related directly to them (hence Pape choosing the Tax Bonus – he can argue ‘I don’t want it’.) And also the Court has said it’s a matter for political decision, ie it is for the Parliament to decide what the purposes of its expenditures are.
The Court has however drawn one clear line, limiting the Federal expenditure. Eg Federal Parliament can give money to the states with strings attached, and directly to non-state bodies. But it can’t erect a system of duties and obligations on private citizens unless it has clear power (eg over immigration).
I confess a little sympathy for Pape’s approach. Eg it seems made to me mad that Brendan Nelson could tie school funding to schools flying the flag, and get away with it on the premise that he wasn’t creating a mandatory duty, rather schools could take the money with strings, or leave it.
I doubt Pape will win. The logic of his claim is that the Commonwealth can tax us for any reason in any manner: including lowering rates temporarily as a fiscal stimulus. But it’s power to spend that money is tied behind its back, including, if Pape wins, limiting its ability to make a targeted fiscal stimulus.
But George Williams may know more about the mischievous mysterons on the High Court – Heydon, Kiefel, Hayne and Gummow might well line up for Pape.
Sorry to dribble on. I’m a lawhead.
” (hence Pape choosing the Tax Bonus – he can argue ‘I don’t want it’.)”
I was reading something a week or two ago where Pape was saying he would have liked to have made this Constitutional challenge against earlier government payments but was unable to because he had no standing as he was not a recipient. Hence his choice of the stimulus payment as the vehicle – he is entitled to receive it therefore has standing to challenge the payment.
I think it’s good people like him are there to keep the government in check. Good on him.
Notice this never happened to Howard. I guess Howard was more of a details man, otherwise this issue would have popped up before.
wilful @ 9, thanks for the link to the Williams opinion piece. I think Williams stacks up as on the centralist side of this argument, but wants the constitution and the practice to align.
Graeme @ 10, go for it. We need all the legal comment we can get (within reason!) I was becoming quite aghast at the previous Government’s move to fund schools and hospitals directly. An example of the former was the payments directly to parents whose kids needed extra tutoring in literacy. They tendered for coordinators, but the coordinators were severely hampered by having no legal access to students’ records, and no power to coordinate the tutoring with whatever the school or the system might be doing.
I seem to remember debates in the past between George Williams and Prof Greg Craven on this issue. If you google Craven you’ll come up with some relevant stuff including this Senate lecture from 2005 (pdf). I haven’t read it all but craven seems to be saying that the Howard Government in pursuing centralism was moving against its liberal-conservative philosophical roots (if that isn’t a contradiction in terms.)
“Notice this never happened to Howard. I guess Howard was more of a details man, otherwise this issue would have popped up before.”
No, I doubt that. These kind of stunts emanate from within the born to rule parties. The only bucks that they are happy distributing are to their own kind.
If this Pape scoundrel should succeed, and attract thereby a loyal following, will they henceforth be known as “the Pape-ists”?
I merely enquire.
Henry Rex
As I understand it the States came to an agreement with the Commonwealth Government during WW2 to institute a unified income tax system under Commonwealth control. From memory I can’t recall if this was part of the many proposed constitutional amendments in the 1944 powers referendum or not. Anybody interested in the detail might like to look up income tax in Sir Paul Hasluck’s official history of the WW2 Home Front. Its sure to be in it as there wasn’t any issue involved with the home front he didn’t touch on, even if only in a single sentence. It might give some clarification as to the justification of Pape’s legal challenge. Or it might not. (I no longer have a copy and I’m miles from the UNE library, otherwise I’d look it up myself.)
Ken Parish had a post on this a few weeks ago.
JC,
My impression from your link is this guy won’t win.
I would have thought that “standing” could be found from the fact that we will all pay for any handouts anyway. It is not as if the government is creating the wealth that it is redistributing.
Paul — it’s unlikely. Since the Engineers case the High Court has basically never seen an opportunity to expand Commonwealth power it didn’t like.
Jacques @ 17, thanks for linking to Ken Parish’s post. It’s worth reading through the comments.
There must be many part-time workers who pay less than $900 in tax. I think Ken Parish’s comment is entirely reasonable:
So is it a gift?
It seems the Commonwealth intended to defend the action on grounds of:
From Rob Corr at Parish’s place.
Given the gravity of the GFC, the claimed intention would surely be to manage the economy in time of dire peril rather than to spray gifts to all and sundry. Also the Commonwealth obviously took the matter very seriously and no doubt threw considerable legal talent into the fray while Pape conducted his own case. So he’ll probably lose. But Williams still thinks there may be awkward principles established that constrain the Commonwealth in other matters.
I don’t see that the handout necessarily has to have anything directly to do with tax. The Govt ecides o give a handout.
1. It gives one to new mothers (baby bonus): they prove they’ve given birth.
2. It gives one to families eligible for a family tax benefit; the contact details are alteady known since these families have already been receiving said benefit.
3. It gives one to taxpayers with a range of taxable incomes. The data and contact details are held by the ATO. Tax cuts are (routinely) “paid” by the ATO; one intent might be stimulatory.
So what? If it decided to give a handout to those currently receiving unemployment benefits, their contact details would be held by that Dept. If it wanted to give a bonus to all members of AFL clubs, the clubs would have their membership lists to work from.
I can’t see that the ATO is an improper postal mechanism in this instance.
“It’s not as if the government is creating the wealth that it is redistributing”
What are you talking about Andrew? Creating the wealth is EXACTLY what the fed is doing. Where do you think they get it from? Taxation?
Ambi, Pape can’t object in all those cases because he has no standing. That is, he’s not a new mum or an AFL club etc.
That doesn’t mean that the Commonwealth had a head of power to make all those grants. In fact it may not have. This is why Prof Williams sees the case as having broad implications.
That’s how I understand it.
Sorry to say so Mark, Kim, Robert at al. but this site is becoming a huge yawn.
Fair enough Brian
I’m not claiming the Commonwealth has a head of power. (But by Jiminy it has a head of steam!)
What I was alluding to is that the ATO is being used as a postal service, this hardly has anything to do with the ATO’s primary role as a tax collector. (Except that with a taxable-income means test, they are able to most swiftly allocate the gifts). It’s a mnor point.
I await the High Court’s pronouncement.
picks up the spam in a blog where a wedding has been,
lives in a dream: waits at the keyboard, wearing a face that
suggests lonely sighs, lonely tears
All the lonely people, where do they blog and hope?
All the lonely people, when smear is out they mope.
“Sorry to say so Mark, Kim, Robert at al. but this site is becoming a huge yawn.”
Well fuck off then and let others admire your gaping caries.
And while you’re at it greenslime, at least work out the proper scansion for whatever yer trying to quote, ie:
“All the lonely trolls
Where do they all come from?
From sad ‘n’ seedy holes?
Oh so desperate to belong.
We’ll know tomorrow when the High court hands down its decision.
My small bureaucratic brain assumed that the Commonwealth Gov’t had picked the ATO as the mechanism for distribution of this payment / gift/other because there would be few other gov’t agencies that have as extensive records of the populace; and are set up to distribute funds. Centrelink wouldn’t cover anywhere near as many people, and only the ABS, Immigration (think Citizenship & perm residents) & Medicare come to mind as federal agencies that would have the details for the majority of Australians.
Basing it on tax also gave a useful way to draw some line around the payment, wide as it is. It still sh*ts me that because my partner has not earned enough to pay tax, she won’t get anything, and that after years of being taxed on her less than 15k income, my mother didn’t have to pay tax last year, and so won’t get a payment. IOW, some of the poorest & dependents are going to miss out again (nb I’m not crying poor for my family, there will be many much worse off, like oh, the unemployed).
myriad,
I’m going to miss out on this one, too. But I hope I’ll get something in the budget. I do decry the unemployed missing out again. OTOH, farmers get something out of this, as do others who missed out on the first stimulus package, despite the unfair anomalies you’ve pointed out. Everybody has to get a chance to do their bit of spending to help keep (get?) Australia out of recession.
Just in…..Pape has failed. Hooray!
Sorry to hear you miss out Paul, hope you get something in the budget too. I can understand (if completely disagree with) the political logic of not being seen to give cash handouts to the ‘dole bludgers’, but I simply can’t understand why, for eg, disability carers weren’t given a bigger bonus than everyone else (remember in Stimulus 1 how they got less than the single pensioners – FFS, why?!).
I’m sure someone will tell me it’s all about capacity to spend and stimulate, but gee maybe all the rest of us would be so cheered up by the sight of some of the most marginalised in our society getting a fair go for once that we’d go join them in a splurge.
Anyhoo, back on topic. The challenge predictably failed, and the morass that is our federation and division of powers is still as entangled and impenetrable as ever. I do like the idea of a federal govt with regional govts – while being a cynical servant of the people I know it wouldn’t stop duplication etc., I do think that a regional model is a much more elegant and relevant service delivery and representation model, and would also help much more clearly define the limits of the central government’s powers.
Pape has failed.
Did the High Court puff black smoke out a chimney to signify the failure?
“I do decry the unemployed missing out again.”
I don’t get why the unemployed are missing out. Doesn’t everyone who lodged a Tax Return get the payment?
d
I heard that it was not a unanimous decision, sadly. The reasons for the decision are to announced later. And presumably the opinion of the dissenting judges/judge will be of the greatest interest to legal eagles looking for some bucks from some mug punter.
Yep, I heard it while I was shaving. So far this from the ABC:
But it may be the last. While Swan says that more stimulus spending is an option, Malcolm says no.
Meanwhile:
I’m not sure about “normal” but this is good news. In my experience when CEOs say that conditions are going to be thus and so in the future it means that that’s what they are now, because in fact our fearless business leaders can’t see beyond their noses.
‘Malcolm says no.’
This is the pathetic thing about Turnbull’s leadership, it is based on shaking his fists at everything from the sideline. And that he comes out so early with the negative stance simply advertises to the world that this is a pure political position, not dependent on whatever the needs of the country are.
It was probably a bad time for Pape to make such a challenge if he were truly concerned with getting a decision in his favour. The pressure to allow this payment would have been enormous and where a judge may have ben hovering the pressure would have pushed him to the government’s side.
Now wouldn’t it be a delight if the third, possible, stimulus package was in fact fully directed at the unemployed. It would sure mean that the money would hit the economy quickly.
Darryl, you only get the payment if you paid some tax. So in my partner’s instance for an eg, she earns less than the tax free threshold, so even though she’s lodged a tax return for 07-08, won’t be eligible for the bonus.
What I infer from this is that if you’re unemployed and receive Centrelink, and didn’t have to pay any tax, you won’t receive the payment.
There is a ‘are you eligible’ calculator on the ATO website people can use to find out if they will get the payment.
Darryl,
myriad’s right.
A person needs to have
i) lodged a return last year [for the handout, extension of this to June 30, 2009]
and
ii) paid net income tax
So if your taxable income was below “the threshold”, bad luck! Sad, but that’s the way they’re doing it. (I wonder if they hope for a few percent more lodgements of income tax returns out of this?]
“Darryl, you only get the payment if you paid some tax. ”
Yes, I understand that and I readily confess I’m not up on the ins and outs of centrelink and tax these days. But if you were single, with no dependants, on Newstart for the entire year, and it was your only source of income, you would have a taxable income of just under $12k, have had PAYG tax taken out of your payment and be required to lodge a tax return, which I would have thought would qualify you for the payment.
Happy to be corrected, though. (well, not entirely happy, because I would have preferred the unemployed to get something, and I think it’s quite scandalous if they are getting nothing.)
If I am wrong, I wonder how many others are labouring under the same mistaken understanding as I am?
d
I agree, Darryl.
I think it’s unfair not to send a payment to the unemployed (it would be via a different post box, but that doesn’t matter). Some poor are undeserving. Is this the REAL sting in the soi-disant “working families”?
Well, Turnbull can froth and rant (and go down even further in the polls) all he likes. The Greens and Independents will support, undoubtedly with a few add-ons for the environment/social justice etc from the Greens, while the Independents will get a few add-ons for whatever they’re obsessing about at that particular moment.
Can you imagine a double dissolution on the theme: The Libs won’t give you your bucket of money? Bet there’ll be something for everyone in the next stimulus package. (And Malcolm, just in case you forgot, John Kerr isn’t the GG any more.)
Darryl, the best advice I can give is to try the ATO calculator, it’s really pretty good.
FWIW my understanding is if you receive enough Centrelink allowances that you cross the tax-free threshold & thus do pay some tax (the net. bit), yes you will get the $900.
“Darryl, the best advice I can give is to try the ATO calculator, it’s really pretty good.”
Is good, but I don’t have an unemployed person’s tax assessment notice for the relevant details in section G, so back to speculation. :^)
Back at centrelink I see that “If your only income during the financial year is your taxable pension or allowance, there are tax offsets to ensure that you do not have to pay tax.”
Which is pretty crap, in the context of eligibility criteria for the stimulus package.
Now I’m wondering how many unemployed people have no taxable income except centrelink payments for an entire year…
d
Lost. Should never have had standing. Life goes on.
myriad, that’s not quite how I understand it from their advertising, but I may have been reading it wrongly. You definitely have to have lodged a return for the last financial year, but actual payment of tax isn’t mentioned, maybe on the assumption that tax has been deducted under payg. Taxable income less than $80,000 attracts the full payment, with reduced payments for taxable incomes over $80,000.
However, I’m not sure whether the means test is applied to individual incomes in the case of dual income households.
Hi Jane,
if you do the calculator on the ATO website, you’ll find that unless you’ve paid tax you won’t get a refund, at least from what I found from running my mother and partner through the system. Both lodged tax returns, and neither had to pay tax, and both get told by the calculator that they won’t get the payment.
Tortured though they’ll be, I’ll be poring over the judgments.
(Unless, as in the WorkChoices Advertising case they squib the real issues of power by finding the narrowest legal leg to stand on. The Court of late has been truly ‘c’ conservative, siding with government whenever it can.)
I expect the denizen of the Court, Heydon, is in dissent.
It will be interesting to see where the three new girls line up. I suspect from the transcripts that Crennan and Bell will have sided with the government, along with the new Chief, French. l
Thanx, myriad. I’ve only read the ads in the papers and they just tell you that you must have lodged a tax return and give the information on the means test. And I thought that payg would be considered as having paid tax.
A lot of people are going to have their hopes dashed, it would seem.
But what happens if people, who would otherwise be below the cut-off, just add a little extra income to their tax returns to get them over the edge?
A capital gain might be the most promising option. You bought some stuff a while back. Last year you sold that stuff and made a capital gain on it. No, you don’t have records — the transaction was purely cash-in-hand — but as a conscientious taxpayer you felt you had to report the income.
And — how ’bout that! — it just gets you over the limit so you pay $20 tax. (And receive $900 in return.)
I can’t see how you’d go wrong with this. The entire ATO regulatory system is designed to prevent and catch tax minimisation — not maximisation.
Furthermore, the ATO is apparently shedding staff at the moment, and their efforts will be focused on Wickenby style multi-million dollar cheats — not some shmuck declaring a small capital gain who hasn’t kept proper records.
If anyone out there tries out my suggestion and receives the $900 when they otherwise wouldn’t have — you owe me a beer!
Or alternatively, you did some gardening work for your family and your mates in the last financial year. They paid you cash. That’s still income, you know. Has to be declared.
Whatever it takes to get you over the point of paying $1 tax. Be creative, folks!
Paulus, I think strictly speaking if you do gardening like that you have to charge GST. So if you don’t do much you get an ABN and a GST exemption. Then you’re kosher for sure. But I’m not a tax accountant.
Paulus @52, I think they’d require receipts, particularly in regards to capital gain. If you couldn’t supply supporting documentation, they’d be all over you. Re the gardening idea, if you gross less than $20,000, you don’t need an ABN, but you can’t claim GST and you do have to charge it and you may have to register a business name.
Jane, I actually do mowing and gardening. Set it up through my accountant. On the basis that I do less than $50,000 pa I have an ABN and a GST exemption. So I don’t charge it, don’t claim it on anything I buy and don’t have to worry about all the record-keeping horse manure.
An ABN is necessary if you do any work for anyone like a school or some-one who is within the GST system, I think.
Cheers, Brian.
Just to clear up everyone’s understanding of the reason unemployed people do not qualify for the Tax Bonus, as was discussed earlier on on this thread.
The beneficiary tax offset is available to taxpayers who receive certain Centrelink benefits and Commonwealth education allowances.
You pay no tax for the year if you:
* receive the full amount of any of the qualifying benefits and allowances for the full year, and
* have no other taxable income.
Sourced directly from http://www.ato.gov.au
Therefore, if you have no tax bill, you do not recieve the Tax Bonus, as you need the minimum of one dollar in a tax liability on your 08 return, in order to be eligible.
The four conditions are..
Australian resident for tax purposes on your 08 return
under 100k in income
$1 minimum tax liability
lodged on or before 30 june 2009.
This includes all the common types.. eg Newstart, anything listed on question 5 in the return. (check taxpack 2008 or ato.gov.au for more info.)
Also, as an aside, I would like to point out that if, for any part of the year, you recieved even a dollar of Single Parent Pension, you qualify for a 500 dollar Pension Tax Offset. This, combined with the Low Income Tax Offset, will generally rule out part-year single parents from needing to pay tax.
Unfortunately, it is also resulting in a huge number of people not being able to recieve the Tax portion of the Stimulus Package. Luckily, seeing as they get such a high proportion of money given back to them every year by way of tax free incomes, it seems they aren’t as terribly bad off as people may assume.
also, Jane, re your comment
‘Re the gardening idea, if you gross less than $20,000, you don’t need an ABN, but you can’t claim GST and you do have to charge it and you may have to register a business name.’
Yes you do need to declare all income earned on an ABN, from the first dollar, and if you are invoicing people and it is not a hobby, you need an ABN. You can also register for GST voluntarily if you choose.
and Brian.. Re ‘Jane, I actually do mowing and gardening. Set it up through my accountant. On the basis that I do less than $50,000 pa I have an ABN and a GST exemption.’
The GST threshold is 75,000 now. You still need to be using your ABN to invoice people (otherwise they need to withhold 46.5% from your payment, by law) and you still need to be declaring it on your tax return.
If you’re aware of this already, sorry.. I just don’t like people to be ill informed, especially by accountants you pay good money to.
)
Thanks, Katrina, I knew the threshold had gone up but couldn’t remember by how much. And yes, witholding tax, of course.