Uniform Tax Case 1942

Closer Look – Governing Australia: three levels of law-making [PDF 2.24Mb, 13 pages]

Before World War II both federal and state governments collected income tax. In 1942, in order to run the war effort, the federal government became the sole collector of income tax. It did this by passing laws which raised the federal tax rate and gave some of the proceeds back to the states on the condition they drop their income tax. States receive this money in the form of funding grants. Technically a state could still collect its own income tax but this would mean its people would be taxed twice and the state would forfeit its funding grants.

Four states—Western Australia, Victoria, South Australia and Queensland—challenged the legislation. The High Court ruled it was valid on the grounds that section 51 (ii) of the Constitution gives the federal Parliament power to make laws relating to taxation, even though in practice the legislation removed a state power. It also ruled that under section 96 of the Constitution, the federal government could attach conditions to funding grants, and therefore it was legal to only give compensation to states that stopped collecting income tax.

Intended as a wartime measure, the arrangement has remained in place ever since. As a result the states are now more dependent on the federal government for revenue.

Tasmanian Dam Case 1983

In 1978 the state-owned Tasmanian Hydro-Electric Commission announced plans to dam the Franklin River and flood a large wilderness area in south-west Tasmania. Four years later the area was declared a World Heritage site under the World Heritage Convention, to which the federal government is a signatory (which means that Australia has agreed to the convention).

The federal Parliament then passed laws to stop clearing and excavation within the newly listed Tasmanian Wilderness World Heritage area. The Tasmanian government challenged the legislation in the High Court, arguing the federal Parliament did not have the power to stop the construction of the dam.

In 1983 the High Court ruled that, under its external affairs power, the federal Parliament could make laws relating to international treaties which Australia had signed. The external affairs power, listed in section 51 (xxix) of the Constitution, allows the federal Parliament to enter into international treaties and agreements on behalf of Australia.

Although the federal Parliament has no law-making powers over Tasmania's rivers, dams or environment, the court decided the federal legislation was valid because it allowed the government to meet its commitments under an international treaty (the World Heritage Convention).

When the Constitution was written treaties mainly related to peace and trade but today they also deal with matters that are defined as state responsibilities, for example human rights, environmental protection and discrimination. As a result of the High Court ruling, the federal government can now make laws in these areas in order to honour treaty agreements.