Pape v Commissioner of Taxation Kathryn Graham Senior General Counsel kathryn.graham@ags.gov.au

Pape v Commissioner of Taxation Tax Bonus for Working Australians Act (No. 2) 2009 (the Tax Bonus Act). Pape challenges validity of Tax Bonus Act, and of payment to be made to him

The result 4:3 in favour of validity of the Tax Bonus Act French CJ, Gummow, Crennan and Bell JJ held the Act was valid Hayne and Kiefel JJ held that the Act could be read down so as to be valid for most but not all payments (in reliance on the taxation power) Heydon J held that the Act was entirely invalid

Key issues in the case does the Commonwealth have a ‘spending power’ or ‘appropriations power’ under s 81 (and 83)? the scope of the executive power (s 61) the tax power (s 51(ii)) standing of the plaintiff reading down of legislation

Sections 81 and 83 81 Consolidated Revenue Fund All revenues or moneys raised or received by the Executive Government of the Commonwealth shall form one Consolidated Revenue Fund, to be appropriated for the purposes of the Commonwealth in the manner and subject to the charges and liabilities imposed by this Constitution. 83 Money to be appropriated by law No money shall be drawn from the Treasury of the Commonwealth except under appropriation made by law.

Section 81- an appropriations ‘power’? Pharmaceutical Benefits Case: Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 AAP Case: Victoria v The Commonwealth and Hayden (1975) 134 CLR 338).

Pape: Section 81 does not confer a ‘spending power’ Section 81 regulates the use of money received by the Commonwealth, and provides for the appropriation of money: it is not a substantive power to spend An appropriation merely permits the Executive to spend the substantive power to spend Commonwealth money, which involves an exercise of the executive power of the Commonwealth, will need to be found elsewhere in legislation or elsewhere in the Constitution: including the executive power

What about ‘the purposes of the Commonwealth’? Do these words limit the purposes for which Parliament may appropriate money? Gummow, Crennan and Bell JJ: No - words essentially mean ‘public purposes’ French CJ: Yes – purposes otherwise authorised by the Constitution or by statutes made under the Constitution. Hayne and Kiefel JJ: uncommitted. But in any case, unlikely to be in issue in real cases: real issue concerns validity of spending not of appropriation.

Crucial issue: validity of expenditure Validity of appropriations is not really the issue – they merely permit the executive to spend The inquiry to be made is about whether the executive has the power, found somewhere other than s 81, to spend the money appropriated

Pape: spending this money was within the executive power French CJ, and Gummow, Crennan and Bell JJ: spending money for the purposes of making these payments was supported by the executive power (legislation enacted under s 51(xxxix). Hayne and Kiefel JJ: executive power can support the expenditure of money by the Commonwealth. However, executive power to spend would not support the expenditure in this case.

Scope of the executive power : mirrors legislative power…

Scope of executive power… Majority: the executive power extends to executive action appropriate to the position of the Commonwealth as a national government. ‘the enterprises and activities peculiarly adapted to the government of a nation and which cannot otherwise be carried on for the benefit of the nation’ (Mason J, AAP Case) Facts in Pape: The executive power extends to spending money for the purpose of avoiding or mitigating the effects of the global financial and economic crisis confronting Australia, where the expenditure is on a scale and within a time-frame peculiarly within the capacity of the national government.

How far might the executive power extend? Gummow, Crennan and Bell JJ Provided there is an appropriation: ‘there appears no good reason to treat the executive power recognised in s 61 of the Constitution as being, in matters of the raising and expenditure of public moneys, any less than that of the executive of the United Kingdom at the time of the inauguration of the Commonwealth’ Only one constraint operates on the executive government when its spending power is considered: ‘some constraint having its source in the position of the Executive Governments of the States’

French CJ executive power is not limited to statutory powers and the prerogative’, and ‘has to be capable of serving the proper purposes of a national government’. However, : ‘the exigencies of “national government” cannot be invoked to set aside the distribution of the powers between Commonwealth and States and between the three branches of government for which this Constitution provides, nor to abrogate constitutional prohibitions…. there are broadly defined limits to the power that which must be respected and applied case by case.’ no general power to manage the national economy

French CJ ‘The constitutional support for expenditure for national purposes, by reference to the executive power, may arguably extend to a range of subject areas reflecting the established practice of the national government over many years, which may well have [wrongly] relied upon ss 81 and 83 as a source of substantive spending power.’

Implications… No ‘spending power’ under ss 81 and 83 Power to spend must be found elsewhere in the Constitution, in legislation (made under a head of power), or the executive power

Scope of the executive power to spend covers: matters within the legislative power of the Commonwealth spending related to the role and position of the Commonwealth as the national government (including spending to deal with national crises) possibly, all spending supported by an appropriation, provided it does not impermissibly interfere with the executive government of the States