FEDERAL COURT OF AUSTRALIA

Keris Pty Ltd (Trustee) v Deputy Commissioner of Taxation [2017] FCAFC 164

ORDERS

THE COURT ORDERS THAT:

1.    The appeal is dismissed.

2.    The appellant pay the respondent’s costs of and incidental to the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Background

1    On 25 September 2014, an officer (delegate) of the respondent (the “Commissioner”) gave notice (a “Notice to Give Security”; the “Notice”) under s 255-105 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (the “Administration Act”) to the appellant (“Keris”, in its trustee capacity) requiring it to give security to the Commissioner in an amount of $350,000 “for the due payment of a tax-related liability”. The Notice required Keris “to give security to the Commissioner” “by means of a mortgage over its real estate assets” as:

[t]he Commissioner believes that the security should be provided because he anticipates that Keris Pty Ltd as trustee for the 1748 Bradley Street Trust will incur tax-related liabilities in excess of $373,000 and there is a risk that the company will not pay those liabilities.

[emphasis added]

2    The Notice also recites that the mortgage:

… is to secure an amount of $350,000 in respect of any tax-related liabilities incurred by the company as a result of the sale of real estate in which the company presently has an interest, and which are not paid by the due date.

[emphasis added]

3    The Notice required Keris:

… to give a signed mortgage over all real estate owned by [it] … by 4.00pm on 29 October 2014.

4    The Notice also recites that:

t)    Auditors from the Australian Taxation Office have estimated that the sale of the subdivided properties owned by [Keris, in its trustee capacity] will cause [Keris, in its trustee capacity] to incur GST liabilities of approximately $373,886, after taking into account development costs.

[emphasis added]

5    The reference, “to incur GST liabilities” in the quoted passage at [4] of these reasons should be understood as a reference to liabilities relating to “GST”, that is, “tax that is payable under a *GST law and imposed as goods and services tax” by one or more of the Commonwealth Acts recited in the definition of “GST” in s 195-1 of A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the “GST Act”), and the term “*GST law” has the meaning ascribed to it in s 195-1 of that Act. A term bearing an asterisk has the meaning given by s 195-1 of the GST Act.

6    The Notice was given in reliance upon the exercise of a power conferred by s 255-100 of Schedule 1 to the Administration Act and is said by the Commissioner to satisfy the requirements of s 255-105 of Schedule 1.

7    Although, obviously enough, it will be necessary to examine the text of s 255-100 and related provisions of the Administration Act and the context of those provisions within the relevant Part and Divisions of that Act and the purpose to be served by s 255-100, it is enough for present purposes to note that s 255-100 confers a discretionary power upon the Commissioner to require a person to “give security” for the “due payment” of “an existing or future *tax-related liability” of that person if the Commissioner has “reason to believe” that the person is “establishing or carrying on” an enterprise in Australia and intends to carry on that enterprise for a limited time only, or, the Commissioner “reasonably believes” that the requirement to give such security is “otherwise appropriate having regard to all relevant circumstances”.

8    In September 2014, the appellant was the owner of a large tract of land which, as part of its business, it proposed to subdivide into 28 lots and then sell each of the subdivided lots: Primary Judge (“PJ”), Siopis J at [1]; Keris Pty Ltd (Trustee) v Deputy Commissioner of Taxation [2015] FCA 1381. This is the subdivision the subject of the analysis by the auditors described at [4] of these reasons.

9    On 25 September 2014, Ms Tina Michelle Bazzo was the sole shareholder of Keris and had, since 1 May 2014, been a director of Keris: PJ, [3].

10    In response to the appellant’s request for reasons for the decision to issue the Notice, the Commissioner, by a letter dated 12 December 2014, provided the following Statement of Reasons:

I refer to your letter dated 21 October 2013, requesting that I provide you with reasons pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (“the ADJR Act”) in relation to my decision to issue a Notice to Give Security (“the Security Bond Demand”) to your client under Subdivision 255-D in Schedule 1 to the Taxation Administration Act 1953 (“TAA 1953”), requiring your client, Keris Pty Ltd as trustee for 1748 Bradley Street Trust, to provide $350,000 of security in the form of a mortgage over its real estate assets.

The Security Bond Demand requires your client to give security in relation to an amount of at least $373,000 of tax-related liabilities which it is expected to incur as a result of the sale of trust assets.

I set out my reasons for my decision to issue the Security Bond Demand, below.

A.    Finding on material questions of fact in relation to the decision

(i)    Tina Bazzo is the sole shareholder of Keris Pty Ltd and has been its director since 1 May 2014.

(ii)    Keris Pty Ltd is the trustee of the 1748 Bradley Street Trust.

(iii)    On 10 July 2013, Keris Pty Ltd purchased property (“the Land”) located at 1748 Bradley Street, Southern River for an amount of approximately $950,000 from Westend Asset Pty Ltd.

(iv)    The director of Westend Asset Pty Ltd was Tina Bazzo’s mother, Josephine Lynette Bazzo.

(v)    Westend Asset Pty Ltd went into court appointed liquidation on 28 October 2013 in respect of portions of a tax liability totalling $4,580,356.

(vi)    At the time at which the Security Bond Demand was issued, ATO auditors had observed that a document detailing the sale of the Land from Westend Assets Pty Ltd to Keris Pty Ltd bore annotations added by staff of the Western Australian Office of State Revenue which indicated to them that the Land had been purchased by Keris Pty Ltd in its capacity as trustee of the 1748 Bradley Street Trust.

(vii)    At the time at which the Security Bond Demand was issued, ATO auditors formed an opinion that a “subject to dealing” marking on the title indicated that the Land was being subdivided, with new titles expected to issue on 30 September 2014.

(viii)    At the time at which the Security Bond Demand was issued, Keris Pty Ltd had not registered for an ABN or for GST, either in its own right or in its capacity as trustee of the 1748 Bradley Street Trust.

(ix)    Since 17 January 2002, Tina Bazzo has been a director of Gucce Holdings Pty Ltd, a company which owed in excess of $62 million in unpaid tax liabilities as at the time at which the Security Bond Demand was issued. ATO auditors concluded that Gucce Holdings Pty Ltd had engaged in a “sham” arrangement so as to inappropriately receive a claim to input tax credits.

(x)    Gucce Holdings Pty Ltd contest the efficacy of a Notice issued pursuant to section 260-5 of Schedule 1 to the Taxation Administration Act 1953 (a “garnishee” notice) by asserting that lease payments made by the recipient of the notice were trust assets, rather than assets of Gucce Holdings Pty Ltd in its non-trustee capacity. In support of the company’s contention, Tina Bazzo gave Amon Barton, an officer in the Australian Taxation Office, a copy of a lease agreement which purported to show that the lessor was a trust, rather than Gucce Holdings Pty Ltd in a non-trustee capacity. The lease document appeared to have been doctored to give that appearance, given that it was otherwise identical (including to the extent of handwritten notations) to the copy of the lease provided by the lessee, which showed that Gucce Holdings Pty Ltd was the lessor.

(xi)    While she was director of another company – Paramount View Pty Ltd – Tina Bazzo failed to cause that company to pay tax liabilities in excess of $588,000, almost all of which is irrecoverable-at-law as a result of the company entering an insolvency administration.

(xii)    In the Administration of Paramount View Pty Ltd, Gucce Holdings Pty Ltd proved for a debt of approximately $7 million and claimed that it had a fixed and floating charge over the assets of Paramount View Pty Ltd.

(xiii)    In a May 2013 report to creditors, the administrator of Paramount View Pty Ltd observed that Tina Bazzo’s granting of the fixed and floating charge (at a time when she was director of both companies and should have known that Paramount View Pty Ltd was insolvent) was a breach of her director’s duties. The administrator also opined that there were grounds for an insolvent trading action against Tina Bazzo arising from her directorship of Paramount View Pty Ltd.

(xiv)    Until 2 September 2011, Tina Bazzo was a director of Gundaroo Investments Pty Ltd during which time the company incurred more than $3 million of unpaid tax liabilities.

(xv)    At the time at which the Security Bond Demand was issued, Tina Bazzo was a director of 220 St George’s Terrace Pty Ltd, a company which had an unpaid tax liability of in excess of $98,000 arising from its role a trustee of the 220 St George’s Trust.

(xvi)    Between 15 January 2007 and 19 November 2012, Tina Bazzo was the director of Parliament Place Pty Ltd, a company which, under her directorship, incurred tax liabilities exceeding $1.1 million, almost half of which will be irrecoverable-at-law as a result of the company entering into an insolvency administration and subsequent Deed of Company Arrangement.

(xvii)    At the time the Security Bond Demand was issued, Tina Bazzo was the director of six companies which had outstanding tax returns: Byford River Pty Ltd; 70 Thomas Street Pty Ltd; Flynn Drive Holdings Pty Ltd; Gucce Holdings Pty Ltd; Moonspark Nominees Pty Ltd and Silverleaf Enterprises Pty Ltd.

(xviii)    On 23 September 2014, Amon Barton spoke with a representative of the mortgagee who has mortgages on the real estate owned by Keris Pty Ltd as trustee for the 1748 Bradley Street Trust. The mortgagee did not express any opposition to the prospect of Keris Pty Ltd granting a subordinate mortgage to the Commissioner over the real estate.

B.    Evidence or other material on which these findings were based:

a.    The 31 May 2013 Report to Creditors compiled by the Administrator of Paramount View Pty Ltd;

b.    Information available on the database maintained by ASIC in respect of Tina Bazzo’s directorships and shareholdings and the directorships and shareholdings of other companies;

c.    A Transfer of Land document dated 10 July 2013, in respect of the transfer of title in Lot 1748 on Plan 3315 from Westend Asset Pty Ltd to Keris Pty Ltd;

d.    Information held on ATO systems in relation to lodgement obligations and outstanding tax liabilities of Keris Pty Ltd, Gundaroo Investments Pty Ltd, 220 St George’s Terrace Pty Ltd; Gucce Holdings Pty Ltd, Parliament Place Pty Ltd, 70 Thomas Street Pty Ltd, Byford River Pty Ltd, Flynn Drive Holdings Pty Ltd, Moonspark Nominees Pty Ltd, Silverleaf Enterprises Pty Ltd and Paramount View Pty Ltd;

e.    A garnishee notice issued on 3 April 2013 under section 260-5 of the TAA 1953 in respect of tax liabilities owed by Gucce Holdings Pty Ltd.

f.    The copy of a lease dated 30 September 2009 purportedly between Gucce Holdings Pty Ltd as trustee for the Gucce trust (as Landlord) and Super Cheap Auto Pty Ltd (as Tenant) which was furnished by Gucce Holdings Pty Ltd pursuant to a 353-10 of the TAA 1953 Notice;

g.    The copy of a lease dated 30 September 2009 purportedly between Gucce Holding Pty Ltd (as Landlord) and Super Cheap Auto Pty Ltd (as Tenant) which was furnished by Super Cheap Auto Pty Ltd;

h.    A written submission prepared by Amon Barton of ATO Strategic Recovery which recommended the issue of a Notice under s 255-105 of Schedule 1 to the TAA 1953 to Keris Pty Ltd as trustee for the 1748 Bradley Street Trust;

i.    Subdivision 255-D in Schedule 1 of the TAA 1953;

j.    Law Administration Practice Statement 2011/14.

C.    Reasons for decision

In making my decision to issue the Security Bond Demand, I was guided by Law Administration Practice Statement 2011/14 and had particular regard to paragraphs 94 to 123.

The written submission prepared by Amon Barton said that auditors working in the Indirect Taxes section of the ATO had estimated that the sale of 28 lots owned by Keris Pty Ltd as trustee for the 1748 Bradley Street Trust would cause it to incur a GST liability of $373,886.

I believed that there was a significant risk that Keris Pty Ltd as trustee for the 1748 Bradley Street Trust would not pay that tax liability having had regard to the circumstances and the material set out in sections A and B above.

Based on my belief that there was a significant risk that Keris Pty Ltd would fail to pay the tax liabilities of Keris Pty Ltd as trustee for the 1748 Bradley Street Trust, I concluded that it was appropriate that I should issue a Security Bond Demand to require the provision of $350,000 of security to mitigate the risk that the anticipated $373,000 of tax-related liabilities would not be paid.

I recognised that if I were to acquire the security in the form of a cash deposit, it might constitute an unreasonable burden on the company’s cash resources. Accordingly, I concluded that the appropriate form of security I should seek would be a mortgage over the company’s real estate assets.

I allowed a clear 34 days for compliance with the Security Bond Demand, knowing from my previous experience with securities that that would be ample time to provide the mortgage.

11    In the principal proceeding, the appellant sought to set the Notice aside under s 39B of the Judiciary Act 1903 (Cth) and also relied upon the provisions of the Administrative Decisions (Judicial Review) Act 1977 (Cth), on two grounds. Put simply, those grounds were these.

12    First, that upon a proper construction of s 255-100, the power conferred upon the Commissioner was not engaged. That was said to follow because the section is said to draw a distinction between, on the one hand, the subject matter of the exercise of the power (“an existing or future tax-related liability of yours”) and, on the other hand, the factors informing the exercise of the power (the Commissioner’s “reason to believe” particular matters or whether the Commissioner “reasonably believes” other relevant matters). Having regard to that contended distinction, the appellant contended, before the Primary Judge, that until an assessment issues and notice of it is given to the appellant, or, alternatively, facts exist (said to be “taxable facts”) at the time of the exercise of the power (that is, relevant events giving rise to a liability to tax) which “trigger[s] a liability in the taxpayer to pay tax in the future albeit that the amount of that liability [is] not ascertainable” (PJ, [11]), the power is not enlivened or engaged. On appeal, the appellant put this notion differently and said that, as to a “future *tax-related liability”, the power is not engaged until facts exist (said to be taxable facts) at the time of the exercise of the power which render the amount of the future tax-related liability objectively quantifiable and certain (even assuming the subsistence of the factors). On that footing, the power to require the giving of security was not enlivened (or engaged) and its exercise was simply beyond power: hence, the claim under s 39B of the Judiciary Act, although the basis for the construction of that limb of s 255-100(1) changed on appeal to that proffered before the Primary Judge.

13    Second, if, upon the construction attributed to the section by the Commissioner, the power to require the giving of the security was enlivened or engaged, s 255-100(1) is not a valid law of the Commonwealth because, as a question of characterisation, it falls outside the scope of a law with respect to taxation upon which it is said to rest, conferred upon the Commonwealth Parliament by s 51(ii) of the Constitution. As to the construction question, the appellant contended before the Primary Judge that its preferred construction was supported by the proper application of s 15A of the Acts Interpretation Act 1901 (Cth) because its preferred construction of s 255-100 renders the section consistent with the Constitution as a law with respect to taxation.

14    Section 15A is in these terms:

15A    Construction of Acts to be subject to Constitution

Every Act shall be read and construed subject to the Constitution, and so as not to exceed the legislative power of the Commonwealth, to the intent that where any enactment thereof would, but for this section, have been construed as being in excess of that power, it shall nevertheless be a valid enactment to the extent to which it is not in excess of that power.

15    Although the Originating Application was amended a number of times, the final form of the relief sought and the grounds relied upon before the Primary Judge were those contained in the Second Further Amended Originating Application filed on 16 March 2015.

The statutory provisions

16    Before turning to the reasoning of the Primary Judge, it is necessary to note some aspects of the statutory provisions at the date relevant to these proceedings, 25 September 2014. Sections 255-100, 255-105 and 255-110 of Schedule 1 fall within Subdivision 255-D of Division 255 of Part 4-15 of Schedule 1 to the Administration Act. Unless otherwise mentioned, all further references are to provisions contained within Schedule 1 to the Administration Act.

17    Part 4-15 addresses the topic of “Collection and Recovery of Tax-Related Liabilities and Other Amounts”. Division 255 addresses the topic of “General rules about collection and recovery” and Subdivision 255-D addresses the topic of “Security Deposits”. The relevant sections comprising Subdivision 255-D are in these terms:

SECTION 255-100     COMMISSIONER MAY REQUIRE SECURITY DEPOSIT

255-100(1)    The Commissioner may require you to give security for the due payment of an existing or future *tax-related liability of yours if:

(a)    the Commissioner has reason to believe that:

(i)    you are establishing or *carrying on an *enterprise in Australia and

(ii)    you intend to carry on that enterprise for a limited time only; or

(b)    the Commissioner reasonably believes that the requirement is otherwise appropriate, having regard to all relevant circumstances.

Note:    A requirement to give security under this section is not a tax-related liability. As such, the collection and recovery provisions in this Part do not apply to it.

255-100(2)    The Commissioner may require you to give security:

(a)    by way of a bond or deposit (including by way of payments in instalments); or

(b)    by any other means that the Commissioner reasonably believes is appropriate.

255-100(3)    The Commissioner may require you to give security under this section:

(a)    at any time the Commissioner reasonably believes is appropriate; and

(b)    as often as the Commissioner reasonably believes is appropriate.

Example:

The Commissioner may require additional security if he or she reasonably believes that the original security requirement underestimated the amount of the likely tax-related liability.

SECTION 255-105     NOTICE OF REQUIREMENT TO GIVE SECURITY

Commissioner must give notice of requirement to give security

255-105(1)    If the Commissioner requires you to give security under section 255-100, he or she must give you written notice of the requirement.

Content of notice

255-105(2)    The notice must:

(a)    state that you are required to give the security to the Commissioner; and

(b)    explain why the Commissioner requires the security; and

(c)    set out the amount of the security; and

(d)    describe the means by which you are required to give the security under subsection 255-100(2); and

(e)    specify the time by which you are required to give the security; and

(f)    explain how you may have the Commissioner’s decision to require you to give the security reviewed.

…

SECTION 255-110    OFFENCE

255-110    You commit an offence if:

(a)    the Commissioner requires you to give security under section 255-100; and

(b)    you fail to give that security as required.

Penalty: 100 penalty units.

18    The term “tax-related liability” is defined by s 995-1 of the Income Tax Assessment Act 1997 (Cth) (the “1997 Act”) to have the meaning given by s 255-1 in Schedule 1 to the Administration Act. Section 255-1 is in these terms:

255-1(1)    A tax-related liability is a pecuniary liability to the Commonwealth arising directly under a *taxation law (including a liability the amount of which is not yet due and payable).

Note 1: See section 250-10 for an index of tax-related liabilities.

19    As can be seen from the language of the section, s 255-1(1) contemplates that a tax-related liability includes a liability arising directly under a taxation law, the amount of which is not yet due and payable. The term “taxation law” is a defined term and by s 995-1 of the 1997 Act the term means:

(a)    an Act of which the Commissioner has the general administration (including a part of an Act to the extent to which the Commissioner has the general administration of the Act); or

(b)    legislative instruments made under such an Act (including such a part of an Act); or

(c)    the Tax Agent Services Act 2009 or regulations made under that Act.

20    The first limb of that definition includes the Income Tax Assessment Act 1936 (Cth) (the “1936 Act”), the 1997 Act, the GST Act and the Administration Act, among many other Acts.

21    Section 255-100(1) uses the phrase “establishing or *carrying on an *enterprise”. The phrase “carrying on” in connection with “an enterprise” includes doing anything in the course of commencement or termination of the enterprise (s 995-1 of the 1997 Act) and the term “enterprise” has the meaning given to it by s 9-20 of the GST Act.

22    Section 250-10(1) sets out a table containing an index of each tax-related liability under the 1936 Act. The table identifies the “key provision for the liability” which specifies when the “liability” becomes “due and payable”. Section 250-10(2) sets out a table containing an index of each tax-related liability under Acts other than the 1936 Act, which also specifies when the liability becomes due and payable. For example, Item 5 contemplates an assessed net amount under ss 33-3, 33-5 and 35-5(2) of the GST Act and Item 10 contemplates an amount of assessed GST on importations under s 33-15 of the GST Act. Fifteen items in the table at s 250-10(2) specify tax-related liabilities under the 1997 Act. The note to the section refers to Subdivision 255-B which contains s 255-10(1). It provides that the Commissioner may defer the time at which an amount of a “*tax-related liability” is, or would become, due and payable by the taxpayer “whether or not the liability has arisen”. If the Commissioner exercises his or her discretion in that regard, that time is varied accordingly.

23    Subdivision 250-A contains a guide to Part 4-15 of Schedule 1 and s 250-5 sets out “some important concepts about tax-related liabilities”. Section 250-5(1) provides that a “tax-related liability may arise for an entity before it becomes due and payable by that entity”. For example, under Part 2-5 of Schedule 1, an entity’s liability to pay a withheld amount may arise before the amount is due and payable. For some tax-related liabilities, an assessment needs to be made before the amount of the relevant liability becomes due and payable: s 250-5(2). For example, under the 1997 Act, an amount of income tax needs to be assessed before it becomes due and payable: s 250-5(2), (the Example). Section 250-5(3) recognises that “an amount of a tax-related liability may become payable by an entity (for example, when the amount has been assessed) before it is due and payable by that entity”.

24    Section 250-25 provides that the object of Part 4-15 “is to ensure that unpaid amounts of *tax-related liabilities and other related amounts are collected or recovered in a timely manner”. Section 15AA of the Interpretation Act is in these terms:

15AA    Interpretation best achieving Act’s purpose or object

In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.

25    Prima facie, in construing the text taken together with the definitions, s 255-100(1) seems to confer a discretion upon the Commissioner to require the addressee (“you”) to give security for the due payment of an existing tax-related liability of the addressee (that is, an existing pecuniary liability to the Commonwealth arising directly under a taxation law even though the amount of that liability is not yet due and payable to the Commissioner), or a future tax-related liability of the addressee (that is, a pecuniary liability to the Commonwealth arising directly, in the future, under a taxation law), if the Commissioner holds the relevant reason to believe described at s 255-100(1)(a)(i) and (ii) or, alternatively, the Commissioner reasonably believes that the requirement is otherwise appropriate, having regard to all relevant circumstances.

26    As to an existing tax-related liability, so understood, s 255-100(1), taking into account the definition in s 255-1(1), seems to contemplate a pecuniary liability the amount of which is known or quantified although not necessarily yet due and payable to the Commissioner.

27    A future tax-related liability seems to contemplate a pecuniary liability directly arising under a taxation law, in the future, where the amount of the pecuniary liability is unknown or unquantified at the time of the exercise of the discretionary power because the section, when speaking of “a future *tax-related liability of yours” is forward-looking to events giving rise to a tax-related liability which have not yet occurred.

28    That apparent forward-looking aspect of the section, by reference to the phrase “future *tax-related liability of yours”, to events (giving rise to a tax-related liability) which have not yet occurred, is consistent with the further discretionary power conferred upon the Commissioner by s 255-100(3) to require “you” to give security “at any time” the Commissioner “reasonably believes is appropriate” and as “often” as the Commissioner reasonably believes is appropriate, “under the section”. It also seems to be consistent with the notion contained in the example at s 255-100(3) that the Commissioner may require additional security if he or she “reasonably believes” that the original security required to be given “underestimated” the “likely” tax-related liability (that is, the earlier forward-looking estimate proved to be an underestimate of the likely future tax-related liability). As to the utility of examples in aiding statutory construction, see s 15AD of the Interpretation Act.

29    It should also be recalled that s 255-100(1) confers a discretionary power upon the Commissioner to require the addressee to give security for something, that is, the “due payment” of an existing or future tax-related liability of the addressee, rather than security for the existing or future tax-related liability itself. The section contemplates an ultimate obligation of “due payment” arising out of an existing or future tax-related liability and confers power upon the Commissioner to require the addressee to give security for that obligation of “due payment”.

30    The appellant contested such a construction of s 255-100 before the Primary Judge and did so, on appeal. The appellant contends that its construction of the section to the effect that the discretion conferred on the Commissioner is not engaged (for the reasons identified at [12] of these reasons) is the preferred construction. The appellant also says that the Primary Judge, in construing the section, failed to have regard to the role s 255-110 is said to play in aiding the proper construction of the section. It will, of course, be necessary to turn to the content of the appellant’s contentions but before doing so, it is necessary to examine the observations of the Primary Judge now under challenge by the appellant.

The reasoning and conclusions of the Primary Judge

The construction question

31    In order to put those observations in context, it is necessary to note (apart from the matters noted at [12] of these reasons) that the Commissioner contended before the Primary Judge that the Commissioner’s power to issue the Notice was enlivened by or upon the existence of one of the circumstances set out at s 255-100(1)(a) or (1)(b) and contended that there was nothing in the nature of a statutory “condition precedent” to the engagement of the discretionary power in the terms contended for by the appellant. The Commissioner contended that the word “future” in the phrase “future *tax-related liability of yours” meant an “expected” or “anticipated” tax-related liability being one which is not presently existing but would be expected to arise in the future.

32    The Primary Judge accepted that the power conferred upon the Commissioner to require a taxpayer to give security is enlivened in one or other of the circumstances set out in s 255-100(1)(a) or (1)(b) (the considerations we have earlier described as the “factors”): PJ, [24]. At [25], the Primary Judge accepted the Commissioner’s contention as to the meaning of the word “future” in the phrase “future *tax-related liability of yours”.

33    The Primary Judge held that s 255-100(1)(a) contemplates that the power to issue a Notice to provide security is enlivened once the Commissioner has reason to believe the addressee is “establishing” or “carrying on” an enterprise in Australia and intends to carry on that enterprise for a limited time only: PJ, [26].

34    At [27], the Primary Judge held that the juxtaposition of the words “establishing” and “carrying on” in s 255-100(1)(a) demonstrates that Parliament intended that the power to issue a notice be enlivened in circumstances arising (even) before the addressee has commenced carrying on the proposed enterprise and is no further advanced in that endeavour than engaging in the process of establishing the enterprise. At [27], the Primary Judge also said this:

Because the concept of “establishing” an enterprise embraces preliminary activities that do not have the trading connotations associated with “carrying on” a business, it is apparent that the power to issue a notice may be enlivened well before … the sale of one or more of the subdivided lots.

35    The Primary Judge held that the construction contended for by the appellant was inconsistent with the Parliament’s use of the words “establishing … an enterprise” in s 255-100(1)(a), which, the Primary Judge said, “provide for the enlivening of the power to issue a notice in circumstances where the Commissioner has reason to believe that the person or entity is doing no more than ‘establishing’ an enterprise of the nominated nature”: PJ, [28].

36    At [29], the Primary Judge said this:

… the construction of the words “future tax-related liability” advanced by the Commissioner can be accommodated within the ambit of the words of s 255-100(1)(a), with the consequence that s 255-100 can be read harmoniously.

37    Further, the Primary Judge held that when “the terms of s 255-100” are considered “in context”, the “purpose” of the section is to facilitate the recovery of tax where there is a risk arising from the nature of the business being undertaken or proposed to be undertaken, or by reason of other circumstances, that the liability to pay tax will not be met: PJ, [30]. The Primary Judge held that the construction he attributed to s 255-100 (being that advanced by the Commissioner) is “consistent with, and promotes, the statutory purpose of that provision and should, on that basis also, be preferred …”: PJ, [32].

38    Thus, the Primary Judge said this at [33]:

It follows that I do not accept the applicant’s contention that the power in the Commissioner to issue the notice to provide security was not enlivened because the applicant had by the date of the notice not yet subdivided the land into the lots which it intended to sell as part of the applicant’s business.

39    As to the words, “for the due payment of an existing or future *tax-related liability of yours”, the Primary Judge held that the words “due payment” in that phrase “refer to the purpose of the taking of the security, namely, to secure the payment of the monies which are or may in the future become due and payable by way of tax”.

The constitutional question

40    As to the constitutional question, the Primary Judge identified three propositions contended for by the appellant. First, s 255-100 does not provide for the “imposition of a tax”. Second, s 255-100 is not to be regarded as a “collection provision” in any way analogous to the provisional tax regime upheld in Commissioner of Taxation v Clyne (1958) 100 CLR 246 (“Clyne”) or the wool sales advance payment scheme upheld in Moore v The Commonwealth (1951) 82 CLR 547 (“Moore”), and thus, s 255-100 falls outside the scope of the taxation power in s 51(ii) of the Constitution. Third, the provision was said to be beyond power because it was arbitrary in its operation.

41    At [45], in reliance upon a discussion of the authorities at [42]-[44], the Primary Judge held that s 255-100 is to be characterised as having “the object of securing the payment of tax” and thus “there is a sufficient connection between that characterisation and the constitutional text providing for the power to make laws with respect to taxation”. Thus, s 255-100 is a law with respect to taxation. The Primary Judge did not find it necessary to call in aid the incidental power in s 51(xxxix) of the Constitution. As to the provisional tax arrangements discussed in Clyne and the wool sales advance payment scheme discussed in Moore, the point of departure, for the Primary Judge, between those schemes and s 255-100 is that those schemes were the subject of detailed provisions as to their operation whereas s 255-100 is not in the nature of a detailed scheme but rather, is “a general law institution” for the giving of security for “the performance of a future obligation”, and:

… that circumstance in itself, imposes constraints upon the terms upon which the Commissioner may require the taxpayer to provide the security. The section empowers the Commissioner to require a person or entity to provide the security, but the section leaves a degree of flexibility as to the terms upon which the security is to be given. As is stated in the explanatory memorandum [discussed by the Primary Judge at [31] of the reasons], this flexibility is there to accommodate the nature of the security required and the nature of the liabilities in respect of which the security is sought.

42    The Primary Judge held that the circumstance that the statute does not set out, in detail, the nature and terms of the security which the Commissioner may require, does not undermine the characterisation of s 255-100 as a law with respect to “taxation” for the purposes of s 51(ii) of the Constitution.

The appeal

43    The appellant contests these conclusions. Keris did so by Notice of Appeal filed on 17 December 2015. However, that Notice of Appeal was the subject of an order for leave to amend. The Amended Notice of Appeal filed on 25 July 2016 takes an odd form in the sense that it recites a summary of the Grounds of Appeal and then sets out the grounds.

Grounds of Appeal

44    The Grounds of Appeal are put this way:

Summary

1A    The Respondent surmised that the Appellant would enter into various taxable transactions and estimated that its future liability to GST, if it did so, might be assessed by him in the amount of $373,886. He considered that amount to be a “future *tax related liability” within s 255-100 in schedule 1 TAA (“the Provision”) and demanded that the Appellant provide a mortgage over all its real property to secure its due payment (“the Notice”).

1B    The learned trial judge erred in dismissing the application to set aside the Notice. His Honour erred in his construction of the Provision, in particular that the amount of $373,886 was a “future tax-related liability” and that the power to require security could be enlivened before a taxable event had occurred (Ground 5), and erred in finding that on his construction the power was within s 51 of the Constitution (Ground 2A). Further and alternatively, on a proper construction of the Provision the Notice in requiring a mortgage over specific property of the Appellant was otherwise prohibited by the Constitution (Ground 4).

Constitutional invalidity

2A    His Honour should have found the Commissioner’s construction of “future *tax related liability”, the Provision which allows him to guess at a taxpayer’s future intentions and hypothetical transactions, is beyond the legislative power of the Commonwealth. His Honour should have found that this construction, which gives rise to a liability to provide a certain amount of cash or other property to the Commissioner to pay or secure an arbitrary and judicially incontestable amount, is prohibited by s 51(xxxi) [the “just terms” provision] of the Constitution rather than being properly incidental to the taxing power under s 51(ii) of the Constitution.

4    Further and in the alternative to Ground 2A, his Honour erred in failing to find that the Notice demanding the granting of a proprietary interest being a mortgage over all land owned by the Appellant was an unconstitutional exercise of power because the demand for the grant of mortgage over specific property with Criminal Consequences is the acquisition of property except on just terms and properly referable to the power in s 51(xxxi) of the Constitution.

5    The primary judge in concluding at [50] of the reasons below (PJ) that the Notice was not in excess of the power granted by the Provision to the Respondent[,] erred having regard to the correct statutory interpretation of the Provision:

a.    His Honour erred in rejecting at PJ [23] the appellant’s argument as to its proper construction (set out at PJ [8] – [19]) and accepting at PJ [24] and [25] the respondent[’s] contentions as to its proper construction (set out at PJ [20] and [21]). His Honour erred in finding that a “future tax related liability” was “a prospective tax-related liability” (PJ [25]) or “[money] which … may in the future become due and payable by way of tax” (at PJ [36]). His Honour erred in finding at PJ [27], [28] and [33] that the power to require security for a future tax related liability was enlivened before a taxable event had occurred. His Honour should have accepted the appellant’s submission (PJ [19]) that a taxable event was necessary to enliven the power. His Honour erred in eliding (PJ [25]) with the word “future” with “expected” or “anticipated”. The error is that the word used by Parliament, in juxtaposition with “existing”, does not, in contrast to those other words necessarily import a subjective notion of evaluation, being that of the Commissioner. His Honour should have found the expression to mean “an amount of [money] which … will in the future become due and payable by way of tax, that the authorities referred to [34] assisted with the construction, and that the amount of $373,886 was not a future tax related liability[”]. His Honour should have found that the Provision did not allow the Commissioner to surmise as to the intentions of the taxpayer and others or to predict their actions to estimate what may in the future become due and payable by way of tax.

b.    His Honour erred in his consideration of the words “establishing or carrying on an enterprise in Australia” as used in s 255-100(1)(a)(i).

c.    His Honour failed to have regard to the juxtaposition of “existing” with “future” and the definition of “*tax-related liability” insofar as that definition interacted with the assessment process for GST.

d.    His Honour erred in his application of s.15A Acts Interpretation Act 1901, having regard to the matters set out at Grounds 2A and 4 above.

e.    His Honour should have found that the expression “future *tax-related liability” allowed the Commissioner only to determine what “*tax-related liability” would arise as at the time of his determination, being the “tax-related liability” that is created if the Commissioner assesses the taxpayer to GST at that time. That is, his Honour should have found that the word “future” referred to the assessment process that the Commissioner must undertake to create an existing “*tax-related liability” for GST and that the expression is concerned with unassessed taxable facts or events that have happened, not expected or anticipated taxable facts or events which had not happened and might never happen.

[original emphasis]

45    The original Notice of Appeal contained five grounds. When the Notice of Appeal was amended, Grounds 1A and 1B were introduced. Ground 1 was amended to bring about Ground 2A. Grounds 2, 3 and 4 were essentially deleted to bring into existence the new Ground 4 as framed above. That is why no Grounds 2 and 3 are recited in the Grounds of Appeal above. Ground 5 was substantially amended.

46    As to the amended grounds, Grounds 1A is in the nature of a contextual statement. Ground 1B asserts, in short-form, Grounds 5, 2A and 4 (in that order). Ground 2A asserts that if the Commissioner’s construction of s 255-100 is correct, then s 255-100(1) is not a law with respect to taxation and nor (as a new matter) is it a law properly incidental to the s 51(ii) power to make laws with respect to taxation. Ground 2A also collects up Ground 4 which asserts that the demand for a mortgage over all of the appellant’s land is an acquisition of property (proprietary interest) on other than “just terms” for the purposes of s 51(xxxi) of the Constitution. As to Ground 5, the appellant challenges a range of findings of the Primary Judge as to the construction of s 255-100. Apart from challenging the contentions of the appellant, the Commissioner contends that the Primary Judge did not make the findings attributed to him.

The essential contentions of the appellant

47    The appellant says that in issuing the Notice, the Commissioner “speculated”, subjectively, that the appellant would, as a result of its project for the subdivision of the Bradley Street site into 28 lots (with new titles said to issue on 30 September 2014), sell those lots at prices between $252,000 and $350,000 each, causing Keris to incur, according to the ATO auditors, “GST liabilities of approximately $373,886 after taking into account development costs”. The appellant describes this formulation as an exercise by the Commissioner of “looking into the taxpayer’s mind” so as to “speculate about its business affairs and predict what its future tax might be”. The appellant says that the Commissioner’s “subjective speculation” about future events is not a “future *tax-related liability of yours” within s 255-100 because it does not represent “an application of the tax laws to taxable facts that had occurred but had not been assessed”: appellant’s submissions filed 7 July 2016 (“AS 7/7”), paras 1-3, 5 and 7.

48    The appellant says that the phrase “future *tax-related liability” does not enable the Commissioner to “stand in the shoes” of the taxpayer and “guess” about business decisions the taxpayer might choose to make in the future. Nor does it enable the Commissioner to make “predictions” as to future tax liabilities based upon a hypothesis as to sales of lots (which might or might not be sold), at particular prices. That becomes especially so, it is said, when the tax-related liability concerns GST which would be influenced by whether the taxpayer elects to apply the margin scheme, or by the identity of the purchaser.

49    Rather, the appellant contends that s 255-100(1) in using the phrase “future *tax-related liability” selects a jurisdictional fact upon which the power to require security operates, that is, there must be “a specifically ascertainable correct amount” determined by applying the tax laws to taxable facts which have occurred but have not yet been the subject of an assessment: AS 7/7, para 7. Thus, the Court “should find that a ‘future *tax-related liability’ means the ‘*tax-related liability’ that would be created if taxable facts were assessed at the time of the issue of the demand for a security deposit”: AS 7/7, para 9.

50    Although an “existing *tax-related liability” to income tax or GST is said to be one that arises where the Commissioner has assessed the taxable facts and notified the taxpayer of the assessment, a “future liability” is said to be “simply a liability that will come into existence” and, so, a “future *tax-related liability at a particular point in time [the time of the Commissioner’s issue of the requirement to give security] is that debt which would come into existence if the taxable facts were assessed and the tax liability notified to the taxpayer” [emphasis added]: AS 7/7, paras 20 and 21.

51    The appellant says that because the amount of $373,886 had “no relevant foundation in taxable facts” at the time of the exercise of the power, no “future *tax-related liability” subsisted so as to support the exercise of the power and the giving of the Notice: AS 7/7, para 9. Rather, the Commissioner must objectively consider the question of what are the taxable facts and determine what “*tax-related liability” would arise if he made an assessment, or an amended assessment, of those taxable facts. Only then, it is said, can the Commissioner consider the risk to the Revenue in collecting “that fixed amount” and whether it is “appropriate” to require the giving of security: AS 7/7, para 25.

52    This construction of s 255-100 as one operating or conditioned upon a jurisdictional fact (that is, as to a “future *tax-related liability of yours”, a specifically ascertainable correct amount based upon taxable facts which have occurred at the time of the exercise of the power if those taxable facts were then assessed and an assessment notified to the taxpayer), is said to be informed by the circumstance that criminal sanctions attach to non-compliance with the Commissioner’s requirement to give security: s 255-110. The appellant says that it is unlikely that the Parliament sought to attach criminal sanctions to non-compliance with a requirement to give security for the due payment of a “future *tax-related liability” in circumstances where that phrase would comprehend a circumstance where there is no objectively ascertainable specifically correct amount, calculated as the measure of the debt, by reference to taxable facts which have occurred at the time of the exercise of the power to require the giving of security: AS 7/7, para 27.

53    Thus, put simply, the appellant says that the exercise of the discretionary power to require security is constrained by a proper understanding of the limits of the subject matter of the power, that is, either an “existing *tax-related liability” or a “future *tax-related liability”, in the way the appellant describes, giving rise to an obligation of “due payment”.

54    The appellant also says that the Commissioner’s view of the likely amount of the taxpayer’s GST liability is simply “arbitrary” and thus no security can “reasonably be demanded” of the taxpayer: AS 7/7, para 30.

55    As to the constitutional questions, the appellant says, first, that the quantum of the security is selected arbitrarily with no regard to actual taxable events having occurred (as described earlier) and thus, the amount of the security, on the Commissioner’s construction of s 255-100 is rendered “incontestable” in the sense contemplated by the plurality at [9] in Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146.

56    Second, the exercise of the power to require the giving of security in the form of a mortgage of the taxpayer’s real property is an “extraction of property” other than on “just terms” for the purposes of s 51(xxxi) of the Constitution.

57    Third, even if the construction favoured by the Primary Judge and the Commissioner based on the text of the section is to be preferred, it must nevertheless give way to the construction propounded by the appellant because the appellant’s construction removes any “incontestable arbitrariness” and renders the section a true “measure for the collection of tax” as a recovery provision with respect to taxation and thus outside the operation of s 51(xxxi). The appellant says that because s 15A of the Interpretation Act requires s 255-100 to be “read and construed” in a way that does not exceed the legislative power of the Commonwealth, s 255-100 ought to be construed as the appellant contends so as to ensure that the provision does not exceed the power conferred by s 51(ii) (and s 51(xxxix)) of the Constitution.

58    Apart from these contentions, the appellant, by its reply submissions filed on 1 August 2016 (“ARS 1/8”) and its oral submissions, raised a number of further contentions in support of its construction and constitutional contentions.

59    As to questions of construction, the appellant says this. First, the construction adopted by the Primary Judge and supported by the Commissioner fails to have regard to the role Division 155 of Schedule 1 plays in the “assessing powers” of the Commissioner with the result that it is not correct to say, as the Commissioner contends, that the appellant’s construction (confined to a possible assessment of taxable facts which have occurred at the time of the exercise of the power), renders the section inutile or deprived of its proper operation: ARS 1/8, paras 4 and 31. Second, as a matter of construction “there must first be an amount” (“an ascertained amount”) of either an existing pecuniary tax liability or a future pecuniary tax liability: ARS 1/8, paras 9 and 12. Third, the Commissioner is seeking to re-agitate, in the context of a different provision, questions of construction rejected, in principle, by the High Court in Bluebottle UK Limited v Deputy Commissioner of Taxation (2007) 232 CLR 598 (“Bluebottle”) and Commissioner of Taxation v Australian Building Systems Pty Ltd (In Liquidation) (2015) 257 CLR 544 (“Australian Building Systems”). Fourth, it is no answer to the exercise of the power to say that the power must be exercised “reasonably”. Fifth, the appellant sums up its position in this way at ARS 1/8, paras 33 to 36:

33.    The true position, on the Appellant’s construction of s 255-100, is that Parliament conferred a very powerful collection power on the Respondent.

34.    He can form a definitive view of the amount of a taxpayer’s tax-related liabilities under a variety of direct tax laws at any point in time, having regard to the facts up to that point in time. If those liabilities arise without an assessment, then they are “existing”. If a special or amended assessment is required to be notified for the liabilities to be created, then they are “future”.

35.    He can immediately demand security for those tax-related liabilities without waiting for the conclusion of any tax period and without actually making the assessment (i.e. at stage 1).

36.    Should the demand be challenged, he can avail himself of the conclusive evidence provisions to foreclose a dispute about the correctness of those liabilities (by tendering an assessment, which he could choose to make at any time).

[bold emphasis added]

60    As to questions of the constitutionality of s 255-100, the appellant says this by its further oral and written submissions. First, the appellant reasserts the previous submissions generally and, in particular, the contended arbitrariness of the Commissioner’s decision-making concerning the taxpayer’s future transactions and the relationship between such a provision and a power to collect taxes. Second, the appellant says that the provision constitutes an acquisition of property on other than just terms. Third, the exercise of the power to require the giving of security does not satisfy the common law understanding of “security” because the mechanism renders the appellant’s “equity of redemption” illusory.

The essential contentions of the Commissioner

61    It is not necessary to set out the range of contentions put by the Commissioner. It is sufficient for present purposes to note that the Commissioner contests each of the propositions put by the appellant going to both the construction question and the contended lack of constitutionality in the provision. The Commissioner supports the construction adopted by the Primary Judge. In the course of addressing the appellant’s submissions, we will address the propositions put by the respondent.

Consideration

62    As earlier mentioned at [18] to [22] of these reasons, a “*tax-related liability” is a pecuniary liability to the Commonwealth arising directly under a taxation law, including a liability the amount of which is not yet due and payable.

63    As to the 1997 Act, for example, persons (and entities generally; “you”, which we will call the “addressee”; s 4-5) are obliged to lodge an income tax return as required by the 1936 Act: s 3-10(1), 1997 Act. The addressee must pay income tax for each financial year: s 4-10(1). Income tax is worked out by reference to a person’s taxable income for the income year (which will usually be the financial year; s 4-10(2)) according to the method described at s 4-10(3), 1997 Act, and a person’s taxable income is calculated according to the method at s 4-15, 1997 Act. The method described at s 4-10(3) uses the term “income tax liability” which means, for an income year, the amount assessed as being the amount of income tax that the entity (as to which see s 960-100 which includes a person, company, trust), owes for the financial year (applicable to the entity; s 4-10(2)), as mentioned in Step 4 of the Method Statement in s 4-10(3): s 995-1, 1997 Act. The income tax is only “due and payable” if the Commissioner makes an assessment of the income tax for the year: s 5-5(2), 1997 Act. However, if the Commissioner makes an assessment of the addressee’s income tax for the year, “the tax may be taken to have been “due and payable” at a time before the assessment was made”: s 5-5(3). This provision seems to be designed to ensure that the “General interest charge” on unpaid income tax (which is calculated from the time when the tax is due and payable, not from the time when the assessment is made (s 5-15)), begins to accrue from the same date for all entities: see the Note to s 5-5(3).

64    If the addressee is a “self-assessment entity” (that is, a company or the trustee of a relevant trust, among other things; s 995-1, 1997 Act; s 6(1), 1936 Act, a “full self-assessment taxpayer”), the income tax is “due and payable” on the first day of the sixth month after the end of the income year and thus, if the income year ends on 30 June, the income tax would be due and payable on 1 December: s 5-5(4).

65    If the addressee is not a self-assessment entity, the income tax is due and payable 21 days after the day (the return day) on or before which the addressee is required to lodge an income tax return with the Commissioner: s 5-5(5). If the addressee lodges a return on or before the return day and the Commissioner gives notice of assessment after the return day, the income tax is “due and payable” 21 days after the Commissioner gives notice of the assessment: s 5-5(6).

66    As to the requirements of the 1936 Act contemplated by s 3-10(1) of the 1997 Act, every person must, put simply, give the Commissioner a return in the approved form for the year of income, within the specified period: ss 161(1), 161A, 1936 Act. However, the Commissioner may defer the time for giving the return (s 388-55(1), Schedule 1, Administration Act) although such a deferral “does not defer the time for payment of any amount to the Commissioner”: s 388-55(2), Administration Act. The return must specify the matters in s 161AA, 1936 Act, including the amount of tax payable on taxable income (s 995-1, 1997 Act) or net income or that no tax is payable. A person must, if required by the Commissioner, whether before or after the year of income, give the Commissioner, within the time required and in the approved form, a return or further or fuller return or any information about the person’s taxable affairs: s 162, 1936 Act. Every person, whether a taxpayer or not, if required by the Commissioner, must furnish any return required by the Commissioner for the purposes of the Act, in the approved form and in the time required by the Commissioner: s 163, 1936 Act.

67    From the returns and any other information in the Commissioner’s possession, the Commissioner must make an assessment of the amount of the taxpayer’s taxable income (or that there is no taxable income); the amount of the tax payable (or that no tax is payable); and the total of the taxpayer’s tax offset refunds: s 166, 1936 Act. As to the scope of the defined term “assessment”, see s 6(1), 1936 Act.

68    However, if no return has been provided to the Commissioner, or he or she is not satisfied with a return or he or she has reason to believe a person who has not furnished a return has derived taxable income, the Commissioner may make an assessment of the amount upon which, in his or her judgement, income tax ought to be levied: s 167, 1936 Act.

69    In addition, the Commissioner may, at any time during any year (or after the expiration of the relevant year), make an assessment of the taxable income derived by the taxpayer (or that there is no taxable income); the tax payable (or that no tax is payable); and any tax offset refunds for that year (or any part of it): s 168, 1936 Act. Where any person is liable to pay tax, including a “nil liability” to tax, the Commissioner may make an assessment of the amount of the tax payable or that no tax is payable: s 169, 1936 Act.

70    As “soon as conveniently may be” after an assessment, the Commissioner shall serve notice of the assessment upon the person “liable to pay the tax”: s 174, 1936 Act.

71    As to the GST Act, the tax payable under a “GST law” is payable on “taxable supplies” and “taxable importations”.

72    However, entitlements arise to input tax credits on “creditable acquisitions” and “creditable importations” (s 7-1) and the scheme of the GST Act involves setting off, against each other, amounts of GST and amounts of input tax credits so as to produce a “net amount” for a tax period applying to the relevant entity: s 7-5, s 7-10. The amount “assessed” as being the net amount for a tax period is the amount that the entity “must pay” to the Commonwealth (or the Commonwealth must refund to the entity for the relevant period): s 7-15.

73    The notion of “taxable supplies” is given content by Subdivision 9-A. A person, “you”, makes a taxable supply if the supply is made (among other considerations) in the course or furtherance of an enterprise (s 9-20) the addressee (s 9-5) carries on (which includes anything in the course of commencement of an enterprise; s 195-1), and a “supply” includes a supply of goods or services or a grant of an interest in real property: s 9-10.

74    However, a supply is not a taxable supply to the extent it is “GST-free” (s 9-30; Division 38) or “input taxed” (s 9-30; Division 40). As to who is liable for GST on taxable supplies, “you must pay the GST payable on any taxable supply made by you”: s 9-40.

75    Taxable importations are addressed by Division 13 of Part 2-3. Creditable acquisitions and creditable importations are addressed by Division 11 of Part 2-2 and Division 15 of Part 2-3.

76    The “net amount” for an addressee’s applicable tax period is worked out according to the formula at s 17-5 although the term “net amount” also has the meaning given to it at s 195-1. However, the addressee may choose to work out the net amount in the way specified in an “approved form” (s 388-50, Schedule 1, Administration Act), if that form is used to notify the Commissioner of the net amount for the period.

77    As to the assessment of the net amount for an entity’s applicable tax period, the Commissioner may “at any time” make an assessment of an “assessable amount”: s 155-5(1). An assessable amount is defined to mean each of six things recited at s 155-5(2) of the Administration Act, including a “net amount” as defined by ss 17-5 and 195-1 of the GST Act. The Commissioner must give the addressee notice of an assessment of an assessable amount as soon as practicable after the assessment is made: s 155-10(1). Assuming the Commissioner has not already, under s 155-5(1), made an assessment, s 155-15(1) addresses the topic of “self-assessment” and provides that the Commissioner is “treated” as “having made” an assessment under s 155-5 of an assessable amount (of the addressee’s “net amount” for the relevant period) if the addressee has given the Commissioner a “GST return” for the relevant tax period. Section 155-15(1) addresses three other classes of deemed assessment by the Commissioner of an assessable amount. Each s 155-15(1) deemed assessment is treated as having been made on the day the document (for example, the GST return for the period) is given to “the recipient” which, apart from one example where the recipient is “Customs” (Item 3), is the Commissioner: s 155-15(2).

78    The amount, taken to be assessed, is the amount recited in the document given to the Commissioner (where the document is required to state the “assessable amount” - for example, the GST return), otherwise it is the amount “worked out” in accordance with the information in the document (s 155-15(4)) and the document itself is taken to be “notice” of the assessment by the Commissioner for the purposes of s 155-10 (the notice requirement mentioned earlier).

79    For the purpose of making an assessment of an assessable amount for a relevant period under s 155-5(1), the Commissioner may treat part of the period as being the whole period: s 155-25.

80    The scheme of the GST Act is to look to the net amount “for a tax period” and generally the tax periods applying to an addressee are each a period of three months ending on 31 March, 30 June, 30 September and 31 December in any year although an addressee may elect to have tax periods of “each individual month”: ss 27-5, 27-10. The Commissioner, however, may determine, by notice, that a particular period applies to the addressee: s 27-30.

81    As to the GST return, each addressee who is registered or required to be registered “must give” to the Commissioner a GST return for each tax period (s 31-5) whether or not the addressee’s net amount for the period is zero or whether or not the addressee is liable for GST on any taxable supplies attributable to the tax period. If quarterly tax periods apply, the addressee must give a GST return to the Commissioner as follows: for quarterly periods in which 1 September, 1 December, 1 March and 1 June fall, the GST return must be given to the Commissioner on or before, respectively, 28 October, 28 February, 28 April and 28 July: s 31-8 (that is, on or before the 28th day after the end of the relevant quarter).

82    For a tax period other than a quarterly tax period, the GST return must be given to the Commissioner on or before the 21st day of the month following the end of the tax period or within such further period as the Commissioner allows: s 31-10. For periods other than quarterly periods, if the tax period ends during the first seven days of a month, the addressee must give the GST return to the Commissioner on or before the 21st day of that month or within such further period as the Commissioner allows. The form and content of the GST return is determined by s 31-15.

83    As to payment of the “assessed net amount for a tax period”, if that amount is greater than zero and the tax period is a quarterly tax period, the addressee “must pay” the assessed net amount to the Commissioner for quarterly periods during which the following days fall, 1 September, 1 December, 1 March and 1 June, on or before, respectively, 28 October, 28 February, 28 April and 28 July: s 33-3. Thus, a GST return for each quarterly period might be lodged before (or on) the 28th day after the end of the relevant quarter and the assessed net amount falls due for payment on the 28th day after the end of the quarter which, in many cases, will be the day of lodgement of the GST return. Section 155-15 of the Administration Act, as earlier mentioned, has the effect of treating the Commissioner as having made an assessment of the net amount for the relevant quarter (s 155-15(1)) upon the day the addressee gives the Commissioner a GST return (s 155-15(2)) and so giving the document is treated, as a statutory construct, as notice of the assessment to the addressee: s 155-15(5).

84    If the relevant period is other than a quarterly tax period and the assessed net amount for the period is greater than zero, the addressee must pay the assessed net amount to the Commissioner on or before the 21st day of the month following the end of the tax period. However, if the tax period ends during the first seven days of a month, the addressee must pay the assessed net amount to the Commissioner on or before the 21st day of that month: s 33-5.

85    Amounts of assessed GST on taxable importations are to be paid by the importer to the Commonwealth either at the same time, at the same place and in the same manner, as Customs duty is payable on the goods in question (or would be payable if the goods were subject to Customs duty) or in the circumstances specified by the Regulations, within such further time specified in those Regulations and at the place and in the manner specified in the Regulations: s 33-15.

86    Chapter 4 of the GST Act contains special rules relating to payments of GST having regard to the topics identified in the various items in s 33-99.

87    Division 75 of the GST Act addresses the topic of the sale of freehold interests and enables the addressee to apply the “margin scheme”.

88    The margin scheme applies in working out the amount of GST on a taxable supply of real property made by an addressee in selling a freehold interest in land, selling a stratum unit or granting or selling a long term lease if the addressee and the recipient of the supply have agreed in writing that the margin scheme is to apply: s 75-5. Real property includes, among other things, any interest in or right over land: s 195-1. The agreement between the addressee and the recipient of the supply must be made on or before the making of the supply (s 75-5(1A)) although the margin scheme does not apply if the addressee acquired the entire freehold interest through a supply that was “ineligible for the margin scheme” as that phrase is defined in s 75-5(3): s 75-5(2). If a taxable supply of real property is under the margin scheme, the amount of GST on the supply, as determined by s 75-10, is 1/11th of the margin for the supply where the margin is the amount by which the consideration for the supply exceeds the consideration for the addressee’s acquisition of the interest. Particular rules apply according to the particular circumstances described in s 75-11. Section 75-15 applies if the addressee makes a taxable supply of real property that relates only to part of the land in which the addressee acquired an interest (that is to say, the taxable supply of subdivisional lots).

89    We have sought to illustrate by reference to the 1997 Act and its relationship with the 1936 Act (with respect to income tax) and the GST Act (as to GST), two examples of the way in which a pecuniary liability to the Commonwealth arises directly under a taxation law and the circumstances under which the amount of the pecuniary liability becomes “due and payable” to the Commissioner. Section 250-10(1) and s 250-10(2) of Schedule 1 to the Administration Act set out a summary, respectively, of each tax-related liability arising under the 1936 Act, and the range of legislation identified in the table at s 250-10(2) (including the 1997 Act and the GST Act). It is not necessary to analyse each of those summarised tax-related liabilities.

90    However, s 255-100(1) confers a discretionary power upon the Commissioner to require the addressee to give security for the due payment of a tax-related liability which the Parliament, by the use of the defined phrase “*tax-related liability”, must, as a matter of construction, be taken to have intended to be capable of exercise, in the relevant circumstances, in a way which engages each tax-related liability falling within the scope of the defined term subject to the role and effect of the qualifying descriptive language “existing” and “future”.

91    Section 255-100 contemplates two states. The first is an existing tax-related liability of yours and the second is a future tax-related liability of yours. An existing tax-related liability is that state in which, at the time of the exercise of the power, a presently existing pecuniary liability to the Commonwealth arises directly under a taxation law including a liability the amount of which is not yet due and payable to the Commonwealth (Commissioner). A presently existing pecuniary liability to the Commonwealth arises, although the amount of it may not be due and payable, once the Commissioner has made an assessment or is taken to have made an assessment and notice of it has been given to the addressee or notice is taken to have been given to the addressee.

92    A future tax-related liability is that state in which, at the time of the exercise of the power, a tax-related liability does not presently exist. The statutory term looks to future events and postulates the possibility (at the time of the exercise of the power by the Commissioner, standing in the present), of a pecuniary liability to the Commonwealth arising directly, in the future, under a taxation law.

93    There is nothing in the text of the term “future *tax-related liability of yours” which suggests that the discretionary power conferred on the Commissioner to require the addressee to give security for the due payment of a future tax-related liability is conditioned upon facts (taxable facts) having occurred at the time of the exercise of the power upon which the Commissioner could then act to make and notify an objectively correct quantification of the amount of the future tax-related liability.

94    The statutory factors upon which the exercise of the conferred power rests, suggest no such requirement. The Commissioner may exercise the power if he or she has reason to believe the addressee is “establishing” an enterprise or, having regard to the definition of “carrying on” an enterprise (in s 995-1 of the 1997 Act for the purposes of s 255-100(1)(a)(i)), he or she has reason to believe the addressee is doing “anything in the course of commencement of an enterprise” (s 9-20, GST Act); and the Commissioner has reason to believe the addressee intends to carry on the enterprise for a “limited time only”. These terms “establishing” and doing “anything in the course of commencement” of an enterprise are inconsistent with a discretionary power to require security for the due payment of a future tax-related liability construed in such a way as to limit the subject matter of the exercise of the power to those future tax-related liabilities where the Commissioner can presently isolate, at the time of the exercise of the power, existing taxable facts having occurred (such as an existing sale of any one or more of 28 subdivisional lots) which, if then assessed, would give rise to a presently objectively correct amount of a future tax-related liability.

95    We accept that the text of s 255-100(1)(a)(i) aids in understanding and construing the meaning of the phrase “future *tax-related liability”.

96    However, there is little to be gained, with respect, by seeking to construe the text of “future *tax-related liability of yours” in s 255-100(1) by adopting, in place of the word “future”, the words “expected” or “anticipated”. Neither of those words were selected by the Parliament for use in s 255-100(1). The word selected, as conveying Parliamentary intention, to describe one state of tax-related liability is the word “future” as contrasted with another state, “existing”. “Future” means, in the phrase, “due payment of [a] future *tax-related liability of yours”, just that, a pecuniary liability to the Commonwealth arising directly, in the future, under a taxation law thus conveying the notion of facts occurring, in the future, which give rise to a pecuniary liability to the Commonwealth arising directly under a taxation law.

97    Section 255-100(3) contains an example which illustrates the way in which the Commissioner might exercise a discretionary power to require an addressee to give security “as often as the Commissioner reasonably believes is appropriate”: s 255-100(3)(b). That illustration postulates an earlier requirement to give security based on an estimate which has proved to be an underestimate of the likely tax-related liability. In that sense, the notion of an estimate and an “underestimated amount” and a “likely tax-related liability” gives some statutory force to the notion that a future tax-related liability is an expected tax-related liability. The example set out in s 255-100(3)(b) is inconsistent with the appellant’s construction of “future *tax-related liability” based on present taxable facts having occurred giving rise to an objectively ascertainable correct amount but the word “future”, in the phrase, should not be pushed aside in favour of “expected” or “anticipated”.

98    We accept that the “subject matter” of the conferral of a discretionary power in s 255-100(1) is to be found in the introductory text of the section, that is, a power to require the addressee to give security for the due payment of either an “existing *tax-related liability” or a “future *tax-related liability”, and the criteria upon which the power, so conferred (as earlier described), is enabled for exercise, rests upon whether the Commissioner has “reason to believe” both matters in s 255-100(1)(a)(i) and (ii) or whether the Commissioner “reasonably believes” in terms of s 255-100(1)(b).

99    However, for the reasons indicated, the subject matter of the power, so far as it concerns a power to require security for the due payment of a “future *tax-related liability”, is not constrained by, or to be construed according to, the construction urged by the appellant.

100    It should be noted that s 255-100(1) uses the term “due payment” and because the power is conferred by reference to the defined term “*tax-related liability” (s 255-1(1); [18] of these reasons), the section also introduces reference to amounts which are not yet “due and payable”, rather than amounts not yet “due”. The section confers power upon the Commissioner to require the giving of security for the “due payment” of an existing pecuniary liability to the Commonwealth arising directly under a taxation law (including a liability which is not yet due and payable), or a future pecuniary liability to the Commissioner, so arising, including a liability the amount of which is not yet due and payable. The term “due”, prima facie, simply means “owing”: Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 (“Clyne”) at pp 9-10, Gibbs CJ. However, as Keane J observes in Australian Building Systems at [119], Mason J accepted (with whom Aickin J and Wilson J agreed and with whom Brennan J agreed (on this question at least, at p 24), that Isaacs J was correct in Mack v Commissioner of Stamp Duties (NSW) (1920) 28 CLR 373 at 382, when he said of the words “debts due”, absent anything in the context giving a different construction, those words include “all sums certain which any person is legally liable to pay, whether such sums had become actually payable or not”.

101    “Due payment” of an existing tax-related liability means payment, when due, of an existing tax-related liability being a sum certain which a person is legally liable to pay although the time for payment may not have fallen due. Section 255-1(1) makes plain that a tax-related liability includes a liability, the amount of which is not yet due and payable, that is, the date fixed for payment has not arisen. The “due payment” of a “future *tax-related liability” means, prima facie, the payment, when due, to the Commissioner (for the Commonwealth) of the amount of a pecuniary liability, in the future, arising directly under a taxation law and since the pecuniary liability so arising will not arise until sometime in the future, the time for payment (on a date fixed for payment), will not arise until sometime after the future tax-related liability has arisen.

102    Thus, no amount, so far as it relates to a “future *tax-related liability”, could be “yet due and payable” at the date of exercise of the power. Again, s 255-1(1) makes plain that the tax-related liability includes a liability the amount of which is not yet due and payable. Section 255-100 looks to future events and future tax amounts which become due for payment, in the future.

103    The appellant contends that the construction adopted in these reasons is inconsistent with the construction adopted by the High Court, at least as a matter of analogous principle, in Bluebottle and then in Australian Building Systems, in construing the phrase “tax which is or will become due”, in s 255(1)(b) (in Bluebottle) and s 254(1)(d) (in Australian Building Systems) of the 1936 Act. However, the text of s 255-100 of the Administration Act is fundamentally different to the text of either section. Also, the context of each section within the 1936 Act was fundamentally different to the context within which the power is conferred on the Commissioner in s 255-100 of the Administration Act. Sections 254 and 255 of the 1936 Act were directed to a number of objects including: imposing an obligation on the addressee of s 254 to be “answerable as taxpayer” and to be responsible “for payment of tax …”; imposing an obligation on the addressee of s 255 to “pay the tax due and payable by the non-resident”; and imposing a “retention obligation” on the addressee under s 254 and, in quite different terms, a retention obligation on the addressee in s 255, so as to protect the revenue in each case. Section 255-100, on the other hand, is a recovery and collection provision serving the object described in s 250-25 of the Administration Act of conferring the power on the Commissioner to ensure unpaid amounts of “*tax-related liabilities” and other related amounts are collected or recovered in a timely manner. Nevertheless, having regard to the appellant’s submissions, it is necessary to examine what these two cases actually decided.

104    Bluebottle (and we will repeat the citation here for convenience, (2007) 232 CLR 598) concerned a retention obligation imposed, pursuant to s 255(1)(b) of the 1936 Act, on a publicly listed company in relation to tax payable by overseas corporate shareholders on dividends the company had declared. That section provided, at the relevant date, put simply, that every person having control, receipt or disposal of money belonging to a non-resident who derives income or profits or capital gains from a source in Australia is:

… hereby authorised and required to retain from time to time out of any money which comes to the person on behalf of the non-resident, so much as is sufficient to pay the tax which is or will become due by the non-resident.

[emphasis added]

105    The Court held that the reference to “the tax which is or will become due by the non-resident” must be read as referring to an “ascertained sum” (Bluebottle, (2007) 232 CLR 598 at [78]) and if not read in that way, the section would impose a retention obligation of “undefined content” on the controller of a non-resident’s money: Bluebottle at [78]. It was “undefined” because all that could be retained by the person (controller) out of money coming to him or her on behalf of the non-resident was so much as is sufficient (and only that amount) to pay the tax that is or will become due by the non-resident: Bluebottle at [78]. If not read as a reference to an ascertained sum, the Commissioner might require the person to retain more than the statute authorised, that is, more than “is sufficient” to pay the tax that is or will become due.

106    Having regard to the precise formulation of the statutory obligation as one of only being “authorised and required” to retain so much “as is sufficient” to pay the tax which is or will become due, the Court observed at [79] that:

Until the tax payable by the non-resident has been assessed it is not possible to say more than that there may be tax due by the non-resident. It is not possible to say that tax is due or that tax will become due. The prediction that tax may be due (and any prediction of its likely amount) may be able to be made with more or less certainty by a person who is armed with a deal of information, but there is no reason to suppose that the controller of a non-resident’s money would ordinarily, let alone invariably, have that information and be in a position to make any useful prediction about the taxation affairs of the non-resident whose money the controller receives.

[original emphasis]

107    At [80], the Court said this:

Paragraph (b) of s 255(1) should be read as referring to an amount of tax that has been assessed. The phrase “tax which … will become due” is to be understood as referring to tax which, although assessed, is not yet due for payment.

[emphasis added]

108    At [81], the Court said this:

This construction of s 255(1)(b) gives proper weight to the language used in that paragraph (the tax which is or will become due by the non-resident) when compared with the different expression used in para (a) (the tax due and payable by the non-resident). As Gibbs CJ observed in Clyne v Deputy Commissioner of Taxation “[t]he word ‘due’ is ambiguous; it can mean owing, although not payable until some future date, or it can mean presently payable”. And as the decision in Clyne illustrates, it is necessary to consider expressions like “due”, and “due and payable”, when used in the 1936 Act, in the context of the Act as a whole. When “due” is used in the collocation found in s 255(1)(b), “the tax which is or will become due by the non-resident”, the requirement for specifying the amount of money that meets that description requires that the word “due” is read as meaning assessed as owing.

109    Keris says, as an adaptation of the construction attributed to the words “tax which is or will become due”, not that, the reference in s 255-100(1) of the Administration Act to “security for the due payment of [a] future *tax-related liability”, is to be understood (in the Bluebottle sense at [80]), as referring to a tax which, although assessed, is not yet due for payment, but rather, as a reference to a pecuniary liability to the Commonwealth where, although no assessment has been made and notified, taxable facts nevertheless exist (have occurred) at the time of the exercise of the power which would render the pecuniary liability an objectively ascertainably correct amount, should the Commissioner make an assessment on the basis of those foundation taxable facts.

110    The statutory obligation cast upon the addressee by an exercise of the Commissioner’s power under s 255-100(1) is not expressed in terms of an obligation to provide security “as is sufficient” to pay (and only that amount) the tax which “will become due” but is an obligation to provide security, so far as it relates to a “future *tax-related liability”, in a particular amount nominated by the Commissioner, and of a particular kind, for the due payment of a pecuniary liability to the Commonwealth in the future arising directly under a taxation law. The addressee under s 255-100(1) does not suffer from any information asymmetry of the kind suffered by the controller of the non-resident’s money called upon to discharge the “sufficiency obligation” in s 255(1)(b) of the 1936 Act as discussed in Bluebottle at [79]. The precise amount of the security to be given and the form it is to take are recited in the Notice. Thus, the parity of reasoning concerning s 255(1)(b) (apart from the profound textual and contextual differences with s 255-100) does not apply to the construction of s 255-100(1) of the Administration Act.

111    In Australian Building Systems (and again, we repeat the citation as a matter of convenience, (2015) 257 CLR 544), the High Court considered the construction to be attributed to s 254(1)(d) of the 1936 Act (as it was on 21 July 2011). Section 254(1)(a) rendered each agent or trustee answerable, as a taxpayer, for doing all things required by the 1936 Act concerning income, profits or capital gains derived by him or her in a representative capacity or derived by the principal (by reason of any agency), and rendered such person answerable for the payment of tax. Section 254(1)(d) provided that every agent and every trustee:

… is hereby authorised and required to retain from time to time out of any money which comes to him or her in his or her representative capacity so much as is sufficient to pay tax which is or will become due in respect of the income, profits or gains.

[emphasis added]

112    French CJ and Kiefel J held that the considerations which led the Court to the construction of s 255(1)(b) in Bluebottle were, having regard to their “textual setting”, equally applicable to the “retention requirement” in s 254(1)(d) and thus the proposition that content can be given to the obligation imposed by s 255(1)(b) only if an assessment has issued (Bluebottle at [79]), “is true also of the obligation imposed by s 254(1)(d)”: French CJ and Kiefel J at [26].

113    French CJ and Kiefel J considered that the High Court’s interpretation of a particular provision in an Act is a “powerful indicator” of the correct interpretation of a provision of the same Act serving similar purposes and using identical or substantially similar language, although a different construction might be required by considerations of the text, context and purpose of the other provision: Australian Building Systems at [27]. Their Honours considered that use of the word “sufficient” in s 254(1)(d) was to be given its ordinary meaning which was entirely consistent with the proposition that the retention obligation concerning “so much as is sufficient to pay tax … which is or will become due in respect of the income, profits or gains”, only arises upon the making of the assessment.

114    In Bluebottle, the particular information asymmetry rendered compliance with the retention obligation difficult to determine because the controller could not determine that which was “sufficient” so as to comply with the limits of the statutory obligation and in Australian Building Systems, the reference to “so much as is sufficient to pay” rendered the retention obligation, for French CJ and Kiefel J, one only arising upon an assessment giving content and precision to that tax “which is or will become due”. The differences between the “immediate” statutory contexts of the retention obligations in s 254 and s 255 did not, for their Honours, open a “logical pathway” to construing the retention obligation (so framed) as one comprehending a “future tax liability [which] may not be known with precision”: French CJ and Kiefel J at [39].

115    Gageler J in Australian Building Systems was “persuaded” to the view that the retention obligation in s 254, like the retention obligation in s 255, was limited to the retention of monies “after an assessment was made” (at [58]), notwithstanding the “significant difference” that an agent or trustee would not suffer from the information limitations confronting a controller of a non-resident’s money. Nevertheless, such a construction produced “certainty” as to the “total amount” authorised and required to be retained in performance of the obligation: Gageler J at [60]. For textual and contextual reasons and considerations of statutory purpose, Keane J concluded that the construction attributed to s 255(1)(b) in Bluebottle was not determinative of the construction to be attributed to the reference “so much as is sufficient to pay tax which is or will become due” in s 254(1)(d) (at [93], [104], [115] and [124]) and concluded that the phrase cast an obligation on the addressee to retain so much as is sufficient to pay the tax which “is owing as assessed” or which “will become owing as assessed”: [124].

116    Keris says, by parity of reasoning based on the reasoning in Bluebottle and that of French CJ and Kiefel J (Gageler J agreeing although for different reasons) in Australian Building Systems, that the obligation to give security under s 255-100 concerning the “due payment” of a “future *tax-related liability” should not be understood as comprehending a future tax liability which may not be known with precision at the time of exercise of the power. However, this contention fails to recognise: first, the fundamental differences in the text of s 254(1)(d) (and also s 255-1(b) as explained in Bluebottle), on the one hand, and the text of s 255-100(1), on the other hand; second, the role of the remaining subsections of s 255-100 in giving context to the terms of the conferral of the power; third, the context of s 255-100 within the Administration Act as discussed earlier; fourth, the conferral of the power in relation to each and every future pecuniary tax-related liability arising directly under a taxation law, as earlier described, and thus its broadly-based application; fifth, the object of the section.

117    Having regard to textual and contextual considerations concerning s 255-100 and the statutory purpose of the section, the reasoning in Bluebottle and Australian Building Systems does not support the construction contended for by the appellant.

118    Keris says that because the Parliament has ascribed criminal consequences to non-compliance with the obligation to give security, the words “due payment of an existing or future *tax-related liability”, framing the scope of the subject matter of the power, should be construed in the way contended for by the appellant so that, at the time of exercise of the power, there is an objectively ascertainably correct amount of the existing or future *tax-related liability. Otherwise, it is said, the citizen will be subject to criminal sanctions concerning obligations with respect to tax-related liabilities that may have no precision when the time for compliance with the requirement to give security arises. The citizen’s obligation, however, to which criminal sanctions attach for non-compliance, is an obligation to provide security in a precise amount and of a particular kind. The citizen is left in no doubt about the content of the obligation or whether the amount and kind of security bears a relationship with an “existing *tax-related liability” or a “future *tax-related liability”, and thus the citizen can plainly see and understand what must be done in order to comply with the obligation and what might arise through non-compliance.

The constitutional challenge in reliance upon s 51(xxxi)

119    Section 51(xxxi) of the Constitution confers a power upon the Parliament to enact laws with respect to the acquisition of property from any State or person on just terms for any purpose in respect of which the Parliament has power to enact laws. This “constitutional guarantee”, designed to protect citizens from being deprived of their property except on “just terms”, is regarded as a provision of a “fundamental character”: Minister for the Army v Dalziel (1944) 68 CLR 261 at 276, Latham CJ; 284-285, Rich J; Clunies-Ross v The Commonwealth (1984) 155 CLR 193 at 201-202, Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ.

120    Thus, the other legislative powers of the Commonwealth must be construed so that they do not authorise the making of a law which can “properly be characterised” as a law with respect to the acquisition of property for any relevant purpose otherwise than on just terms: Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 (“Mutual Pools”), Mason CJ at 169.

121    Therefore, s 51(xxxi), subject to any contrary intention provided by the express terms of the conferral of other specific powers, forbids the making of laws with respect to the acquisition of property for a relevant purpose on terms that are not just: Mutual Pools, Mason CJ at 169. A contrary intention might be seen in the “terms of the conferral” of another power or “by the very nature of the subject matter of a specific power or what is included within it”: Mutual Pools, Mason CJ at 169, 170. For example, a law with respect to bankruptcy and insolvency which provides for the sequestration of the property of a bankrupt and the vesting of property in the Official Receiver, is not capable of characterisation as a law with respect to the acquisition of property within s 51(xxxi): Attorney-General (Commonwealth) v Schmidt (1961) 105 CLR 361 at 372, Dixon CJ; Mutual Pools, Mason CJ, 170.

122    Because the purpose served by an exercise of the taxation power conferred by s 51(ii) is compulsorily to require money for public purposes, a law that relates to the “imposition of taxation” will rarely, if ever, as a matter of characterisation, “amount at the same time to a law with respect to the acquisition of property within the meaning of s 51(xxxi)”: Mutual Pools, Mason CJ at 170 and 171. Moreover, “taxation”, of its nature, presupposes the absence of the kind of “quid pro quo” involved in the “just terms” prescribed by s 51(xxxi): Mutual Pools, Mason CJ, 171; Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 509, Mason CJ, Brennan, Deane and Gaudron JJ. In Mutual Pools at 187 and 188, Deane and Gaudron JJ identify those laws involving the acquisition of property, without the provision of just terms, which have been held or indicated in the judgments of the High Court to be supported by the grant of legislative power other than s 51(xxxi): see footnotes 95 to 99. These acquisitions were regarded as “authorized by the exercise of specific powers otherwise than on the basis of just terms”: Mutual Pools, Mason CJ at 171.

123    See also Brennan J at 177 and 178 in Mutual Pools; Dawson and Toohey JJ at 197 and 198 as to the proposition that laws with respect to taxation “must be outside the ambit of s 51(xxxi)”, and the reasoning supporting that conclusion; and McHugh J at 220 in Mutual Pools.

124    As mentioned, Mason CJ at 171 in Mutual Pools regarded the taxation power as presupposing the absence of any kind of quid pro quo inherent in the notion of “just terms”. Section 51(xxxi) contemplates the compulsory taking of property and, correspondingly, the entitlement of the citizen to “just terms” in the taking, on which the acquisition is conditioned. Laws enacted for compulsorily acquiring money for public purposes (taxation) are self-evidently inconsistent with, or incongruous with, a corresponding entitlement in the citizen to just terms. Dawson and Toohey JJ at 198 in Mutual Pools also recognised that if the imposition of a tax were an acquisition of property requiring just terms, it would defeat “the very purpose” of the taxation power. Their Honours also said this at 198 in Mutual Pools:

If taxation lies outside the ambit of s 51(xxxi), it is crucial to distinguish between taxation and the acquisition of property. The distinction is between the acquisition of money or value, which is tax, and the acquisition of specific property, which is not.

Protection against misuse of the taxation power lies elsewhere and it is to be found in the requirements that a tax be neither a penalty nor arbitrary nor incontestable. Nevertheless, the ambit of the taxation power is reduced in some respects by s 51(xxxi). The taxation power standing by itself would carry with it the incidental power to legislate for the acquisition of property for taxation purposes – for example, to acquire a building for use as a taxation office. But s 51(xxxi), and not s 51(ii), is the source of the power to acquire property in those circumstances and just terms must be provided. (citations omitted)

[emphasis added]

125    The appellant says, based on these observations, that the exercise of the Commissioner’s power under s 255-100 cast an obligation on Keris to give a signed mortgage over all real estate owned by it which engaged an “acquisition of property” by the Commonwealth (Commissioner) which is “not a tax” authorised by s 51(ii) but finds its authority only in s 51(xxxi). That being so, it is said that the compulsory giving of the mortgage interest in all of the appellant’s real property, must be on just terms and whatever “just terms” might be, no terms have been given with the result that the power offends the prescription in s 51(xxxi).

126    The question of whether s 255-100 is or is not a valid law of the Commonwealth as the expression of a law with respect to taxation carrying with it the incidental power, or, alternatively, a law authorised only by s 51(xxxi), is to be determined as a question of whether s 255-100 is to be characterised as a law “with respect to the acquisition of property” within the meaning of s 51(xxxi): as to the question of “characterisation analysis” concerning s 51(xxxi) see the general attack on the otherwise well-established orthodoxy of the methodology in “On Just Terms”, Revisited, Lael K. Weis 2017, Vol 45, 223, Federal Law Review.

127    A law will not be a law “with respect to” the acquisition of property (even though the law has the effect of vesting a proprietary estate or interest in the Commonwealth) within s 51(xxxi) if the circumstances in which the acquisition is occurring “make the notion of fair compensation to [Keris] irrelevant or incongruous”: Mutual Pools, McHugh J at 219 and 220. In such circumstances, “s 51(xxxi) has no operation”: McHugh J, Mutual Pools at 220.

128    Thus, if the purpose of a law is to facilitate the collection of taxes, such a law is not within the scope of s 51(xxxi) even though “it incidentally or even directly” results in the Commonwealth acquiring the property of a person: Mutual Pools, McHugh J at 221.

129    That follows because such a law is not “a law for the acquisition of property for a purpose ‘in respect of which the Parliament has power to make laws’ but an exercise of the power itself” [emphasis added]: Mutual Pools, McHugh J at 221. That is, as a matter of characterisation, the law (in the example) is not one with respect to the subject matter of s 51(xxxi) but one with respect to the subject matter of the power in s 51(ii) and s 51(xxxix).

130    Section 255-100 is a law, the purpose of which is to ensure that unpaid amounts of “*tax-related liabilities” and “other related amounts” are “collected” or “recovered” in a “timely manner”: see [24] of these reasons. It confers a discretionary power on the Commissioner, in the terms discussed, for that purpose. It enables, according to its terms, the Commissioner to secure the timely collection or recovery of an unpaid “existing *tax-related liability” or a “future *tax-related liability”, as construed, by requiring the giving of security in respect of those liabilities. The notion of the Commissioner paying Keris compensation for the grant of the mortgage interest acquired as “security” for the due payment of an existing or future obligation is “incompatible” (to use the term adopted by McHugh J in Mutual Pools at 222) with the purpose for which the law was enacted and the power exercised.

131    Put another way, the circumstances in which the power is exercised and the requirement imposed, make the notion of fair compensation irrelevant or incongruous: Dawson and Toohey JJ, Mutual Pools at 198.

132    The appellant also says that s 255-100 is unconstitutional because it enables the Commissioner to arbitrarily select the amount of the security he or she requires the addressee of the section to give for the due payment of any existing or future tax-related liability and the nominated amount of the security is rendered “incontestable”. There are a number of things to note about this contention.

133    First, the conferral of the power and its exercise is concerned with requiring the addressee to give security for the due payment of an existing or future tax-related liability of the addressee. The power is not “at large”. It engages a relationship between the addressee, the addressee’s existing or future tax-related liabilities and the due payment of those liabilities. The subject matter of the power is concerned with those integers.

134    Second, the exercise of the power is conditioned upon the state of the Commissioner’s belief. As to the s 255-100(1)(a)(i) and (ii) factors, the Commissioner must have “reason to believe” as to those matters, and as to s 255-100(1)(b), the Commissioner must “reasonably believe” as to those matters.

135    Third, the subject matter integers and their relationship with the s 255-100(1)(a) and (b) factors make clear that the Commissioner cannot, as a matter of legality, act arbitrarily in the sense of requiring the addressee to give security in an amount or of a kind unrelated to the subject matter, or exercise the power in circumstances where the Commissioner has no reason to believe the relevant matters or does not reasonably believe the s 255-100(1)(b) matters.

136    Fourth, the provision, unlike the former s 255(1)(b) or s 254(1)(d) of the 1936 Act does not impose a tax on the addressee. The provision is a collection or recovery provision securing the object and purpose earlier described. It is a law with respect to taxation because it seeks to secure the collection and recovery, in a timely way, of the due payment of an existing or future tax-related liability of the addressee.

137    Thus, there is no acquisition of property within s 51(xxxi) by reason of the requirement to give, or the giving of, the mortgage interest to the Commissioner. For the reasons identified by McHugh J, because the provision is properly characterised as a law with respect to taxation, the challenged law falls outside the operation of s 51(xxxi) of the Constitution: Mutual Pools, McHugh J, 219, 220, 224; Suntory (Aust) Pty Ltd v Federal Commissioner of Taxation (2009) 177 FCR 140 at 149 [40].

138    There are two other matters relied upon by the appellant.

139    First, the appellant says that exercising the power so as to require Keris to give a mortgage over all real estate owned by it in relation to a “future *tax-related liability”, according to the construction of that phrase urged by the Commissioner, makes it impossible for the addressee to determine how and when and in what circumstances the “equity of redemption” might be exercised, especially if the tax liability is ultimately shown to be a “nil liability”. Such a security mechanism is also said to fall outside the proper construction to be attributed to s 255-100(2) which comprehends security in the form of a bond, deposit or other (monetary, it is said) means, the Commissioner “reasonably believes is appropriate”, and not just any form of security at large, especially one in respect of which the “equity of redemption” is indeterminate.

140    Second, Keris says that the wool sales scheme for the payment by a producer of a proportion of the sale value of wool sold in Australia (with certificates issuing by the Commissioner) and a related certificate scheme based on the “appraised value” of export sales, and their relationship with the income tax and provisional tax regime as discussed in Moore (see [40] of these reasons), contain a statutory mechanism establishing a clear relationship between the specific amount of the certificates issued by the Commissioner and the credit of those amounts against the producer’s income tax and provisional tax liability for the relevant years.

141    Keris says that because the scheme had that feature, it was properly regarded as a “collection provision” and thus a law with respect to taxation. It says that because s 255-100(1) is said not to engage a requirement to give security in respect of an objectively ascertainably correct amount of a future tax-related liability based on foundation taxable facts having occurred at the time of the exercise of the power (as the appellant contends it should, as a matter of construction), the provision cannot be regarded as a “collection provision” in any way analogous to the scheme in Moore and thus Moore offers no support for the constitutionality of s 255-100. The same point is made concerning the provisional tax scheme discussed in Clyne (see [40] of these reasons).

142    As to the mortgage contention, the notice under s 255-105(2) is required to set out the particular amount of the security and the particular security to be given (among other things) and, as discussed earlier, the construction to be attributed to s 255-100(1) having regard to the object of the provision, makes plain the relationship between the power to require the giving of security and the subject matter of the power, the due payment of an “existing or future *tax-related liability” (and the factors informing the exercise of the power). The security secures the due payment of the relevant liability. The security, consistent with the limits and object of the power, can do no more than that and once the due payment is made of the relevant liability, there is no longer anything to secure. The orthodox notion of the “equity of redemption” may be misplaced. The requirement to give security is a statutory creature. The form it takes is a matter of the “means” (other than a bond or deposit) which the Commissioner “reasonably believes appropriate” (s 255-100(2)(b)) and if the Commissioner reasonably believes security is to be given by means of a mortgage of real property, the statute itself determines the limits of the power to require such security for the “due payment” of the relevant liability with the result that once the due payment of the relevant liability has been made, there is no longer anything to secure within s 255-100. The role and purpose of the mortgage, at that point, is at an end for the purposes of s 255-100. Bringing the security to an end and obtaining a release and discharge of the mortgage once the statutory object of the requirement is served, might be regarded as analogous to exercising the equity of redemption but predominantly the features of the rights and interests of the Commissioner and the addressee of the section are a creature of the statute.

143    As to the second contention, the Provisional Tax Scheme (and the contributions required to be paid under it) described in Clyne was held to be “clearly within the power conferred by s 51(ii) of the Constitution to make laws with respect to taxation” (Dixon CJ, (1958) 100 CLR 246 at 260) and although the Scheme did not impose a “separate tax”, the obligation to make the contributions was a “liability ancillary to” the tax imposed under the relevant assessment legislation. Describing the provisional tax contributions paid in respect of a future tax liability as an “incident” of the imposition of income tax, did not take it outside the power conferred by s 51(ii) to make laws with respect to taxation: Dixon CJ, Clyne, at 260.

144    A similar position was adopted in Moore in relation to the wool scheme payments. Latham CJ, (1951) 82 CLR 547 at 561, characterised the object and operation of the laws providing for the payments as making a “compulsory exaction of money by law from a subject” and thus laws “with respect to taxation”. In terms which, in part at least, address the point made by the present appellant about the security obligation having no relationship with an objectively ascertainably correct amount of a future tax-related liability, Latham CJ said this at 563 in Moore:

The plaintiffs contend that the legislation cannot be described as a law with respect to taxation because the amount collected bears no relation to the income tax (if any) which may ultimately become payable. I can see no sound objection to legislation which provides that when people have money they shall be required to pay it to the revenue authorities for the purpose of making provision in advance against possible future taxation liability. Such a provision is directly incidental to obtaining payment of taxes.

[emphasis added]

145    In anticipation of what was to be said as Chief Justice in Clyne in 1958, Dixon J said at 569 in Moore: “Needless to say, I treat the power [in s 51(ii)] as covering what is incidental to the imposition and collection of taxation” and “[e]verything which is incidental to the main purpose of a power is contained within the grant itself”. The legislation in Moore was held to be valid on the ground that the relevant provision was one “ancillary to levying and collecting income tax and is an exercise of the power to make laws with respect to taxation, a subject of which it forms an incident”: Dixon J, Moore, 568.

146    The point of all this is simply that a law with respect to the giving of security for the due payment of an “existing or future *tax-related liability” operating as a collection and protection measure is a law “with respect to” taxation as an incident of or ancillary to the power to impose tax upon citizens, and the law is not rendered beyond or outside the power conferred by s 51(ii) because at the moment in time when the power is exercised by the Commissioner, there are no foundation facts upon which a present assessment could be made of the objectively ascertainably correct amount of the future tax-related liabilities.

147    Of course, once the relevant law falls within s 51(ii), as it does here, it necessarily falls outside s 51(xxxi).

148    The appeal must be dismissed with costs.

Associate:

Dated:    13 October 2017