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RESEARCH PAPER

No.51994 Senate powerin relation to money bills: an historical perspective ISSN 1321·1579

Copyright Commonwealth of Australia 1994

Except to the extent of the U8elI permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means including information atorage and retrievallyStem, without the prior written consent of the Department of the Parliamentary Library, other than by Membel'll of the Australian Parliament in the course of their official duties.

Published by the Department of the Parliamentary Library, 1994 Anne Twomey Law and Public Administration Group 28 June 1994

Parliamentary Research Service

Research Paper Number 5 1994 Senate powerin relation to money bills: an historical perspective

Telephone: 06 2772432 Fa~llnile:062772407 Thi. paper baa been prep&red for general dinributian to Members of the A1wtra.l.ian Parliament. Readers outlide the Parliament are reminded that tbW wDOt an AuAraIian Govenunent 00c:t1ment, but a paper prepared by the author and publiabed by the Parliamentary Re.earc.h Service to cxmtribute to oonmderation of the iuuM by Senaton and Members. The vie_ II!J:preued in thW Paper are thc.e of the author and do not nec::euarily l"I!fleet thc.e of the Parliamentary Re.earc:h Service and are not to be attributed to the Department of the Parliamentary Library. CONTENTS

:Executive Summary...... 1

Introduction ...... •.....•...... 3

Constitutional Provisions ...... 4

Rationale for the distinctions ...... 4 Tradition ...... 4 'Unrepresentative swill' or an 'aristocracy of ability and worth'? 5 The people's House must have control of the people's purse 6 Responsible Government ...... 7 Federation ...... •...... 9

The Political Compromise ...... 10 Power to amend or power to 'request' amendments? 10 Tacking 13 Tacking and the balance of power between the Houses ...... 14 'Proposed Laws': Do the courts have jurisdiction? 15 Section 53: A matter of procedure 16 Section 54: Beyond definition ...... 16 Section 55: A lawyer's picnic? ...... •.. .. 17

Contemporary problems in tbe interpretation of sa. 53-55 ...... ••... 19 Laws 'imposing' taxation 20 The twilight zone ...... 20 Laws 'imposing taxation', 'dealing with the imposition of taxation' and 'relating to taxation' ...... 21 Practical consequences of the distinction 22 Amending Acts and invalidity 25 Paragraph 1 of section 55 25 Paragraph 2 of section 55 ...... •...... 27

Conclusion ...... 28

Appendix A Appendix B

1993 and 1994 List of PRS Publications

Senate power in relation to money bills 1

Executive Summary

In order to understand the current debate about the role and powers of the Senate, especially in relation to money bills, it is important to appreciate the conflicting principles which gave rise to the compromise negotiated at the Constitutional Conventions of the 1890s.

The Westminster system of responsible government, which Australia substantially adopted, placed greater responsibility for financial matters in the hands of the House of Commons. The rationale was that the House of Lords was not an elected body, and the people's House must have control of the peoples' purse.

On the other hand, the Australian system of government was also to be a federation, with an elected upper house which was to represent the interests of the States. It was argued that in order to preserve the rights of the States in the federation, the Senate ought to have equal power with the House of Representatives in relation to money bills.

Many delegates to the Constitutional Conventions asked how a government responsible to the lower house could effectively govern if the upper house could control the money which is essential to the operation of government? It was argued that such a system would result in internecine conflict between the houses. Others argued that by giving the two houses equal powers there would be less likelihood of conflict because they would be more prepared to accommodate the views of each other.

A political compromise was eventually reached, in which the Senate's power to introduce or amend money bills was restricted, although it was granted the power to 'request' the House of Representatives to amend money bills. In view of these restrictions on Senate power, the House of Representatives was prohibited from 'tacking other matters onto appropriations bills or laws imposing taxation, or from including more than one subject of taxation in a law. This was designed to prevent the House of Representatives from exploiting the Senate's lack of power to amend money bills. The details of this compromise are enshrined in sections 53-55 of the Constitution.

One issue that provoked a great deal of debate at the Constitutional Conventions was whether these rules should be a matter for the internal application of the two Houses, or whether they should be enforceable by the High Court. The drastic consequences of a tax or appropriations Act being held invalid was a matter of great concern 2 Senate power in relation to money bills

for the delegates. On the other hand, some delegates feared that the Senate could be manipulated, by reason of political pressure, to pass a money bill to which it would not otherwise agree,

The eventual compromise was that s. 53 (which deals with the Senate's power to introduce and amend money bills), and s. 54 (which deals with the tacking of extraneous matters onto appropriations bills) are internal matters for the Parliament alone to determine, while s. 55 (which deals with the tacking of other matters onto tax bills, and the passing of omnibus tax bills) may give rise to matters that can be adjudicated by the High Court.

A second issue that arose recently in the Taxation (Deficit Reduction) Bill 1993 is the meaning of the expression 'a law imposing taxation'. The central issue is whether a law that raises a rate of tax, where the tax itself is already imposed by an existing law, is a 'law imposing taxation' or a 'law dealing with taxation'. This question has not yet been settled by the High Court. The answer has ramifications for the extent of Senate power to originate and amend money bills, as well as the constitutional validity of such laws if they would otherwise breach s. 55 of the Constitution.

A third issue that has caused problems in recent cases is how to deal with the consequences of a breach of s. 55 of the Constitution. The delegates of the Constitutional Conventions were concerned that tax laws would be held to be completely invalid if they breached s. 55. Accordingly, they drafted s. 55 in such a way that if there is a breach, the tax provision is held valid, and the other non-tax matters in the law are to be of no effect. This solution has caused problems of its own where a law imposing taxation amends important non-tax legislation, such as the Migration Act. Should the whole of the Migration Ac~ except the tax provision, be declared invalid? In a number of recent cases, the High Court has confronted this problem, and attempted to resolve it in a manner that will not render important pieces of legislation ineffective.

Many of the current debates concerning the powers of the Senate have their roots in Constitutional Convention debates of the 1890s. An understanding of the conflicting principles involved, and the nature of the political compromise reached by the delegates to the Constitutional Conventions, i3 of great assistance in assessing the value of the arguments of today and the way in which the High Court may apply the Constitution to deal with future controversies in relation to money bills. Senate power in relation to money bills 3

Introduction

During the past year, there has been considerable discussion about the role of the Senate and its powers in relation to money bills. Much of this criticism has concentrated on the structure of the Senate, which provides for an equal number of representatives from each of the original States. It has been argued by the Prime Minister, Mr Keating, that the Senate is no longer a States House and that it therefore is no longer justified to exercise powers granted to it in order to protect the States. In responding to a question on proposals to alter the voting system in the Senate, the Prime Minister observed:

[I]n the Senate a person's vote in a small state is not the equal of a person's vote in a big state. It is unrepresentative and, because it operates as a party house and now a spoiling chamber, it is in fact usurping the responsibilities of the executive drawn from the representative chamber, the House of Representatives. l

In recent times proposals have been floated to change the voting system for the election of the Senate,2 and to remove the Senate's power to reject money bills.s

This paper places these criticisms of the Senate, and proposals for reform, in their historical context. It considers the conflicting principles which were discussed during the Constitutional Conventions of the 1890s, and the political compromise which resulted in the current constitutional provisions that deal with the power of the Senate in relation to money bills. Surprisingly, many of the issues discussed, and the concerns raised by the delegates to the Constitutional Conventions, are highly relevant today.

The paper also discusses problems which have arisen in the interpretation of the provisions in the Constitution relating to the passage of money bills, and considers how reference to the original purpose of these provisions may be useful in attempting to resolve these contemporary problems.

1 Australia, House of Representatives, Parliamentary Debates, 3 March 1994, p. 1747.

2 'Keating PM: two years on', The Sunday Age, 19 December 1993; 'Keating hints at change to Senate vote system', The Australian, 3 March 1994; 'Senate faces prospect of losing power', Sydney Morning Herald, 18 March 1994.

3 'Ray rejects PM's Senate threat' The Australian, 4 April 1994; 'Ray at odds with PM over Senate', Sydney Morning Herald, 4 April 1994; We will use jail option: Kemot', The Australian, 14 February 1994. 4 Senate power in relation to money bills

Constitutional Provisions

The final paragraph of s. 53 of the Constitution provides:

Except as provided in this section, the Senate shall have equal power with the House of Representatives in respect of all proposed laws.

The exceptions to this principle relate to the treatment of bills 'appropriating revenue or moneys or imposing taxation' ('money bills'). The classification of 'money bills' does not include bills which only impose fines, penalties, licence fees or fees for services. As they are not money bills, there are no restrictions on the power of the Senate to initiate or amend these bills.4

Section 53 provides that money bills shall not originate in the Senate. It further provides that the Senate may not amend the more limited category of money bills 'appropriating revenue or moneys for the ordinary annual services of Government' or 'imposing taxation', but the Senate may request the House of Representatives to amend them. In those cases where the Senate can amend bills relating to money matters, it may not increase 'any proposed charge or burden on the people'.

Section 53 is supported by ss. 54-55, which prevent the House of Representatives from exploiting its superior power in relation to money bills by tacking extraneous matters to the bills or forcing the Senate to consider a variety of tax matters all in the one bill.

A copy of sections 53-58 is attached as Appendix A. Rationale for the distinctions

Tradition

The tradition that the lower house has control over money bills was established as part of the long struggle for power between the Westminster Parliament and the Crown. In 1678, the House of Commons resolved that all 'aids and supplies' are gifts of the Commons and therefore bills granting them should begin with the Commons and they should not be changed or altered by the House

4 Sometimes the distinction between a money bill and a bill imposing a fee is hard to detennine. In Air CaJedom'e International v The Commonwealth (1988) 165 CLR 462, the High Court held that the 'fee' of $5 which passengers had to pay to enter Australia was really a tax, and not a fee for services as the Government had asserted. See the discussion below at p. 26. Senate power in relation to money bills 5

of Lords.5 Since that time, in parliaments based on the Westminster system, the lower house has had control over money bills. This was the system adopted in the legislatures of the Australian colonies, and therefore it was not surprising that this distinction was also made in the Commonwealth Constitution.6

Some participants in the Constitutional Conventions however, challenged this adoption of this Westminster principle on the basis that it was not appropriate to the circumstances of the Senate. In the Sydney Convention of 1891, Mr Baker (SA)' criticised the drafting committee for blindly following this British precedent:

I cannot help thinking that in dealing with this clause the Constitutional Committee foUowed the roles which apply to ordinary upper houses, and which have no application to the federal senate...8

'Unrepresentative swill' or an 'aristocracy of ability and worth'?

Arguments about the representative nature of the Senate, in which the Senate has recently been described as 'unrepresentative swill,,9 are echoes of arguments from the 1890s.

One of the reasons for the restrictions on the financial powers of the House of Lords and the Legislative Councils was that these bodies were not elected by the people. lo It was argued, however, that the Senate would be a more worthy body which represented the States, and should therefore have equal power over money bills, as befits its status.

5 Quick, J. and Garran, R., The Annotated Constitution of the Australian Commonwealth, Legal Books, Sydney, 1901: 667. The powers of the House of Lords were subsequently further restricted by the Parliament Act 1911 (UK). so that money bills may now be passed without the approval of the House of Lords.

6 Quick, J., The Legislative Powers of the Commonwealth and the States of Australis, Melbourne, 1919: 624.

7 The colony which the member of the Convention represented is given in brackets after each member's name.

8 Official Record of the Debates of the Australasian Federal Convention, (hereafter 'Convention Debates') Sydney, 3 April 1891: 705

9 Australia, House of Representatives, Parliamentary Debates, 4 November 1992: p. 2549, per The Hon. P.J. Keating MP.

10 Harrison Moore, W., The Constitution of the Commonwealth of Australia, London, 1902: 117. 6 Senate power in relation to money bills

At the time of the 1891 Convention, it was proposed that memhers of the Senate he appointed hy the legislatures of the States, allowing the most illustrious men of the day to he chosen, while still including an element of representation. Sir John Downer (SA) considered this method superior to election by the masses, arguing that analogies with the House of Lords or the Legislative Councils were not applicable for the Senate would be 'an aristocracy of ability, of worth' and would be more worthy of exercising power than members of the House of Representatives who 'are elected by the people themselves, indiscriminately'.ll

Mr Forrest (WA) also held high hopes for the quality of the Senate, although he expressed some concern as to whether it would be representative of the people. He anticipated that the Senate would he:

... an august and experienced body, and I hope will be thoroughly representative. If they will not be thoroughly representative, all I can say is, that I hope that some other means will be devised by which they will become as thoroughly representative as the lower house, and that no occasion will be left to those who are opposed to having any upper house to taunt them with not representing anyone but themselves. It seems to me that the proposal to make the lower house superior to the senate can only result in lowering its

prestige, in making it appear to the people of Australia an inferior body 4 a body with a disability upon it. 12

The people's House must have control of the people's purse13

The objection taken by the House of Commons to the interference of the House of Lords with money bills. was that the taxes come from the people, and therefore their imposition and expenditure should be controlled by the House which represents the people. Mr Reid (Premier, NSW) discussed this principle at the Sydney Constitutional Convention of 1897 as follows:

mn taxation...• inasmuch as the whole of the people are subject to the taxes, and have to pay them, it is in a peculiar sense the right of the representatives of those who are taxed not only to prescribe the form in which they shall be taxed, but also to dispose of the moneys which are the proceeds of that taxation. That principle is not an Australian principle. It is an old principle

11 Convention Debates. Sydney, 3 April 1891: 717.

12 Convention Debates, Sydney, 6 April 1891: 732.

13 Convention Debates, Adelaide, 13 April 1897: 527, per Mr Trenwith. Senate power in relation to money bills 7

of the British Constitution as we understand it now, which took a long time and a great many battles to establish in the old rountry... 14

He went on to object to the idea that a majority of the Senate, who may represent a small proportion of taxpayers, could dictate to a majority in the House of Representatives, representing a majority of taxpayers. IS

Responsible Government

A more compelling reason given for allowing the lower house to control money bills is that this is essential for the maintenance of responsible government. A question raised frequently at the Constitutional Conventions was how a government can remain responsible to the lower house when the upper house can control the money which is essential to the exercise of government?

Mr Playford (SA) called upon British precedent to establish the incompatibility between responsible government and co-equal houses. He asserted that nowhere in the world had responsible government ever adapted itself to circumstances of co-equal houses, and went on to observe:

mn England we never obtained responsible government until the coequal power was taken from the House of Lords. At one time, in fact, that House had greater power than the Commons; but we never obtained responsible government in the mother rountry until the power of the House of Lords was taken away and lodged in the House of Commons. I hold the opinion I have previously expressed on this point, that I believe you cannot carry on responsible government satisfactorily with two absolutely coequal houses. 16

Mr Higgins (Vic) came to the same conclusion, saying bluntly:

No man can serve two masters. You cannot have responsible government that is responsible to two Houses, and - to go one step further - you cannot have responsible government unless to that House which has the power of the purse. 17

Mr Deakin (Vic) considered that if you estahlish two houses with equal powers, and place responsible government in one of those houses, 'you will simply provoke internecine conflict on a more

14 Convention Debates, Sydney, 14 September 1897: 501.

15 Convention Debates, Sydney, 14 September 1897: 504.

16 Convention Debates, Sydney, 6 April 1891: 734.

17 Convention Debates, Adelaide, 13 April 1897: 492. 8 Senate power in relation to money bilJs

colossal scale than anything which has ever been witnessed in a constitutionally governed country'.'· Mr Reid (Premier, NSW) also predicted dire consequences from allowing the Senate even the power to request or suggest amendments to money bills. He stated:

There is a radical difference between the system obtaining in the two Houses regarding money matters as we understand government in Great Britain and as we understand it in these colonies, and the question is: are we going to preserve in the main the principle of government as we understand it, by which one House is to be the master of finance, or are we going to endeavour by various means to have two Houses masters in finance? Any system of finance based upon two Houses is fraught with disaster. It will not work; it will lead to endless differences. because, fl% this clause as you like, there will be a resolute attempt on the part of the House of Representatives to assert the principles which I have mentioned. On the other band, with the power of suggestion the Senate will consider it really is entitled to a voice in the financial adjustment of the Commonwealth, or else why the power?19

Otber members of tbe Convention disagreed that the Senate would ever come into conflict with the House of Representatives, because the Senate would recognise that the lower house is the more representative chamber. Mr McMillan (NSW) observed:

I do not bold for one moment that the senate, attracting the best men of Australasia within its four walls, would be of that pettifogging character that it would interfere with every little jot and tittle connected with the expenditure sanctioned by the house of representatives.

The men who compose that assembly will deal very carefully with all matters connected with the people. They will know that the lower house will have an appeal to the people . an appeal which they cannot resist, and they are not likely to lower their dignity by continual jealousy of and wrangling with that assembly representing the whole of the country.20

Mr Leake \VVA) also disputed the view that co-equal power would be politically unmanageable. He observed that if the Chambers have equal power, and each knows that the other may reject or amend its legislation, there will be less chance of friction and trouble, because they will be more willing to accommodate the views of each other. He concluded:

It is the fact of unequal power which has led to trouble, and this unequal power has led to the creation of a dominant force in the Lower Houses, which

18 Convention Debates, Sydney, 3 April 1891: 710.

19 Convention Debates, Adelaide, 13 April 1897: 484-85.

20" Convention Debates, Sydney, 3 April 1891: 719. Senate power in relation to money bills 9

regard most jealously anything which they may consider encroachments on their rights.21

Mr O'Connor (NSW), on the other hand, argued that the differences in the constitution of the two houses would lead to a greater imbalance of power and a threat to responsible government. He postulated a situation, which has become familiar in recent years, in which the Government has a majority in the House of Representatives, but does not control the Senate. He continued:

If you place the power in the Senate of throwing out a measure or of amending it, and therefore moulding it, you cannot say the moulding of the measure is in the hands of one House. It is in the hands of that House which can show itself the strongest.... when you put that in the hands of a House not subject to dissolution, which has a fixed existence, I say you are putting in the hands of the Second Chamber the power of dislocating the government of the country, and of absolutely stopping the machinery of responsible government. It is for that reason you cannot give coequal powers to these two Hou.ses.22

Federation

Those members of the Constitutional Conventions who argued in favour of equal powers for the two Chambers did so on the basis that the Senate's role was to represent the States, and that it was an essential part of federation for the Senate to have equal powers in relation to money bills.

Dr Cockhurn (SA) argued against. equal powers for the two houses if the Senate were not to be elected by the people. However, once it was agreed that the Senate was to be an elected body, he argued against restrictions on the Senate's powers, saying that any restriction would strike 'at the very root of the principle of federation, because the principle of federation is that there should be houses with co-ordinate powers - one to represent the population, and the other to represent the States,.23

Sir John Forrest (Premier, WA) expressed concern for the smaller Colonies which would have little representation in the House of Representatives. He concluded that unless the Senate had the power to amend tax, excise and tariff bills, 'we may as well hand

21 Convention Debates, Adelaide, 1"3 April 1897: 523.

22 Convention Debates, Adelaide, 13 April 1897: 500.

23 Convention Debates, Sydney, 3 April 1891: 707. 10 SeDate power in relation to money bills

ourselves over, body and soul, to those colonies with the larger populations,.2(

Sir John noted that representatives of the less populous colonies had been prepared to concede that the appropriation bills should not be amended by the Senate, because they agreed that government should be able to be carried on without continual conflicts between the two Houses, but they were not prepared to cede all control over taxation bills. Other members of the Conventions challenged the validity of the distinction between taxation and appropriation bills. Mr Higgins (Vic) stated:

[Y]ou cannot dissever the Money Bills from the policy upon which the money is spent. You cannot dissever Taxation Bills from Appropriation Bills.... The whole power of appropriation is based upon taxation, and you cannot draw the line between them in that arbitrary way.25

The Political Compromise

Power to amend or power to 'request' amendments?

The conflicting requirements of responsible government and federation led to a political compromise by which the Senate was given the power to reject money bills or request amendments to them, but not the power to amend them itself, or to introduce them. This compromise protected the interests of the States, because the Senate retained the ultimate power of rejecting a money bill, but also protected the power of the House of Representatives to originate and secure the enactment of money bills by forcing the Senate to take the responsibility for any rejection of a money bill, rather than letting it pass the responsibility back to the House of Representatives by means of passing amendments.

This issue of responsibility was given a great deal of consideration by the members of the Constitutional Conventions. Mr O'Connor (NSW) noted that if it were granted the power of amendment, with no power of initiation, the Senate would not have to take any responsibility for framing a practical law. He said:

The Senate under those circumstances is put in this position: it may amend, and amend, and amend, without taking the responsibility of rejection, and under these circumstances it throws the responsibility for the rejection of a

24 ConveDtion Debates, Adelaide, 13 April 1897: 490.

25 Convention Debates, Adelaide, 13 April 1897: 493; see also Mr Deakin at 507, and Mr Barton, Sydney, 14 September 1897 at 532. Senate power in relation to money bills 11

whole policy upon the House which by a large majority has fanned that policy.26

Some members of the Constitutional Conventions did not recognise any difference between a power to amend a money bill, and the power to request amendments.27 However, other members considered that this distinction would affect the whole manner in which scrutiny of money bills in the Senate is approached, as well as heightening the responsibility which the Senate must take for its own actions. Mr Deakin (Vic) outlined the way he considered the Senate would deal with a tariff bill under the system where it can only request amendments:

Instead of criticising every item and every figure, and weighing the question as to whether a duty should be 10 or 12.5 per cent., I take it that the Senate would look broadly through the tariff. Their first question would be: Is this a tariff in accordance with the mandate of the people? If they in their wisdom considered that the House of Representatives had departed from the mandate of the people, and had given a protective tariff instead of one for free-trade, or a high protective tariff instead of a low one, they would have the power to reject the whole measure. After this, I should take it that their next duty would be to glance through the measure for any glaring inequalities that might have crept in through lack of knowledge, or factious opposition, or oversights, and that they would send it back to the House of Representatives with a message pointing out such glaring inconsistencies. They would be either cured, or amended or persisted in, according to the will of the House of Representatives, who would then take the whole of the responsibility for the flSCal system. If, however, the Senate made amendments, there would have to begin a process of compromise and balancing between Chamber and Chamber, the final effect of which would be that the practical responsibility of the tariff could not be placed on either House in particular. It would be divided between the two Chambers, one of which is elected for six years, and retires half at a time. Accordingly, the responsibility would never be sheeted home as it ought to be. The Senate could not, for a long time, and the representatives probably would not, be effectively brought to account for their action.28

Mr Trenwith (Vic), in discussing the difference between power to amend and power to request an amendment, suggested limits on the justifications the Senate could use to reject a money bill if its request for amendments was not agreed to by the House of Representatives. He stated that the Senate 'would only be justified in rejecting it only under the gravest possible circumstances - only

26 Convention Debates, Adelaide, 13 April 1897: 500.

27 See for example Convention Debates, Adelaide, 13 April 1897: 495 per Sir Joseph Abbott.

28 Convention Debates, Adelaide, 13 April 1897: 508; see also Mr Barton, Sydney, 14 September 1897 at 532. 12 Senate power in relation to money bills

in fact if it appeared to them very evident that states rights were being menaced, and that the object for which they were constituted was being threatened.'29 He contrasted this with the 'danger of materially and banefully altering legislation' which would result from the power of direct amendment.

There appears to have been an assumption made by at least some of the delegates to the Conventions that once the Senate had requested amendments, and its request had been refused by the House of Representatives, then the only course left to the Senate was to pass or reject the bill. In the very frrst session of the Commonwealth Parliament, the Senate responded to the failure of the House of Representatives to accede to all the Senate's requests for the amendment of the Schedule to the Customs Tariff Bill by pressing some of its requests to the House of Representatives. Sir John Quick described the reaction of the House of Representatives as follows:

The prevailing view expressed was that the Constitution did not oont.emplat.e the pressing of requests; that the right to -insist on- a request would be, in everything but name, a right to make amendments; and that the words -at any stage- meant at anyone stage, and implied that when the Senate had once returned a Bill to the other House with requests, its power of requesting was, as regards that Bill. exhausted.30

The practical necessity of passing the Bill led the House of Representatives to deal with the Senate's request, while reserving its constitutional rights. The Senate reasserted that it had undoubted constitutional power to press requests. Since that time the Senate has continued its practice of pressing requests. 31

Unlike the power to press requests, the power of the Senate to reject money bills was generally debated and accepted at the Constitutional Conventions. Even those who wished to deny the Senate the power to amend money bills accepted that it should have the ultimate power to reject money bills. Mr Reid (Premier, NSW) argued that this power should be recognised as one which the Senate is entitled to exercise:

29 Convention Debates, Adelaide, 13 April 1897: 527.

30 Quick, J., The Legislative Power of the Commonwealth and the States of Australia, Melbourne, 1919: 628.

31 For a discussion of whether this practice is in acoordance with the Constitution, and its significance for the satisfaction of the double dissolution procedures in s. 57 of the Constitution, see Pearce, D., 'The Legislative Power of the Senate' in Zines, L. (00.), Commentaries on the Australian Constitution, Butterworths, 1977: 126-30. Senate power in relation to money bills 13

We know that in the old country it has ceased to be a right by disuse; but I quite agree that in this compact the Senate should have not an abstract right,. but an absolute right,. and be perfectly entitled to use it,. to throw out a Bill when it is stamped with such a serious wrong or injustice as to cause the Senate to feel itself justified in 80 throwing it out. This is the only interference with the finances that I should allow to the Senate. namely, the right of preventing a gross wrong or injustice, and any attempt to allow it to playa more active part in the finances of the Commonwealth than I have mentioned will, in my opinion, be a serious mistake.32 Tackjng""

History has shown that when restrictions have been placed upon the power of an upper house to amend money bills, the lower house has sought to exploit this advantsge by tscking other types of unpopular proposals onto essential money bills, in order to force the upper house to pass them as one package. Quick and Garran record that the House of Lords objected to the use of this practice by the House of Commons, as far back as 1702, when it passed the following motion:

That the annexing of any clause or clauses to a bill of aid or supply, the matter of which is foreign to, and different from, the matter of the said bills of aid or supply, is unparliamentary, and tends to the destruction of the Constitution of the Government.34

Professor Harrison Moore noted that the practice of tscking was 'often adopted in the colonies for the purpose of compelling the Upper House to accept an unwelcome measure,.35

Sections 54 and 55 of the Constitution were drafted to prevent tscking. Section 54 provides that a proposed law which appropriates revenue or moneys for the ordinary annual services of the Government shall deal only with such appropriation. Section 55 provides that laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect. It also provides that laws imposing taxation shall deal with one subject of taxation only.

32 ConvenUon Debates, Adelaide, 1~ April 1897,485.

33 'Tacking' is the term used for inserting unrelated material into money bills in order to benefit from the limited powers of upper houses over money bills.

34 Quick, J., and Garran, R., The Annotated Constitution of the Commonwealth ofAustralis, Legal Books, Sydney, 1901,674.

35 Harrison Moore, W., The Constitution of the Commonwealth of Australia, London, 1902: 122. 14 Senate power in relation to money bills

At the Melbourne Constitutional Convention Mr Barton (NSW) asserted that there was no member of the Convention who would not aay that tacking ia wrong. He then went on to argue that the purpose of s. 55 is not to protect the Senate. Rather, it is to protect the public from laws which are not freely passed according to the will of both Houses."

In later years, as a Justice of the High Court, Barton J. concentrated on the protection that s. 55 affords the States, when describing its rationale in Osborne v The Commonwealth.37 He noted that ss. 53-54 refer to 'proposed laws' whereas s. 55 refers to 'laws'. While the validity of 'proposed laws' cannot be challenged in the courts,38 s. 55 allows the constitutional validity of 'laws' to be challenged in the courts. If this were not the case, it would remove the effective check on the tacking together taxes of different kinds in the one bill. He continued to observe:

This would be to annihilate the intended powers of the Senate, who, favouring some and dissenting from the rest, would find themselves forced either to pass the entire agglomeration, perhaps including much that they considered an outrage on the interests of the States they represented; or to reject all, and thus perhaps cripple the finances of the Commonwealth.... We cannot fail to remember that the Constitution designed the Senate to be a House of greater power than any ordinary second chamber. Not only by its express powers, but by the equality of its representation of the States, the Senate was intended. to be able to protect the States from aggression. And from no source could aggression be more dangerous than from measures of finance when unjustly bound together.39

Tacking and the balance of power between the Houses

Harrison Moore also observed that although s. 54 ia usually considered to protect the Senate, it also, indirectly protects the House of Representatives 'from taking a course which might justify or excuse the Senate in rejecting an Appropriation Bill. t He went on to comment that the Senate may, indirectly, contribute to the stability of government by protecting the Miniatry from the caprice of the House of Representatives. He stated:

... it will be no small service to the Commonwealth if Ministers, owing a certain responsibility to both Houses learn that it is their duty not less than that of the Crown, to preserve a good correspondence between the two

36 Convention Debates, Melbourne, 8 March 1898: 2017.

37 (1911) 12 CLR 321.

38 See discussion below at p. 15.

39 (1911) 12 CLR 321,353. Senate power in relation to money bills 15

branches of the Legislature. The Cabinet system depends 60 much upon understandings and oonventions that it would be rash to declare any development impossible.'O

Members of the Constitutional Conventions also saw the tacking provisions as having a greater significance to both houses. When Sir John Downer (SA) characterised s. 55 as a clause to prevent tacking, Mr Barton (NSW) interjected: 'It is to secure both bodies from the effects of popular passion'.'l

'Proposed Laws': Do the Courts have jurisdiction?

Another debate which ran throughout the Constitutional Conventions was whether the High Court should have jurisdiction to enforce the restrictions in ss. 53-55, or whether this should be an internal matter for the two Houses of Parliament to decide. A distinction was drawn by the drafters between the use of the words 'proposed laws' and 'laws'. Mr O'Connor (NSW) explained the distinction by saying that the word 'law' indicates that the law must comply with the specified conditions or otherwise be unconstitutional, whereas the words 'proposed law' mean that it is merely a matter for the two houses. He concluded:

In the powers between the two Houses dealing with money Bills it is most essential that those should be made matters of oonstitutional objection, and not matters of order.42

Mr O'Connor later noted that unless the courts had the power to enforce the constitutional requirements concerning money bills, laws would be passed through political manipulation. He noted the case where:

... one House happens to take an unpopular view of a question - a view which for the time being is not the view of the majority of the people. We know it is easy to bring the pressure of the majority of public opinion on one House for the purpose of obtaining a violation of the law.43

Mr Isaacs (VicJ, on the other hand, considered that the possibility of money bills being struck down after they had already come into force, would be a far greater danger. He said:

40 Harrison Moore, W., The Constitution of the Commonwealth of Australia, London, 1902: 122.

41 Convention Debates, Melbourne, 8 March 1898: 2005.

42 Convention Debates, Adelaide, 13 April 1897: 471.

43 Convention .Debates, Adelaide, 14 April 1897: 591. 16 Senate power in relation to money bills

It would be a terrible calamity if, after any law were passed and the Federal Parliament had risen, and the Treasurer had thought 'WeU here is an Appropriation Bill that is in proper order,' and it was disputed afterwards, for the courts to have to declare it unconstitutional and void."

Section 53: A matter of procedure

A compromise was eventually agreed, so that s. 53, which deals with the power to introduce and amend tax and appropriation bills, deals only with 'proposed laws' and therefore is a matter for internal agreement between the Houses.'5

If the Senate were to introduce a tax or appropriation bill, or to purport to amend one, it would be within the rights of the House of Representatives to reject the Senate's actions, as being contrary to s. 53. If, however, the House of Representatives were to acquiesce in such action, then the constitutional validity of the law could not be challenged in the High Court.

Section 54 : Beyond dermition

Sect.ion 54, which prevents the tacking of other matters onto the appropriations bill for the ordinary services of government, also refers to 'proposed laws'. It is therefore a matter for the two Chambers to enforce. A law which was passed contrary to s. 54 could not be challenged in the High Court as being constitutionally invalid.

During the drafting stages the substance of s. 54 was included within s. 55, and would have been subject to challenges in the High Court. It was considered, however, that the phrase 'ordinary and annual services of the Government' offered such scope for different interpretations, that it was far too dangerous to allow appropriation bills to be challenged and held invalid'S Accordingly, the fInal version of the Constitution split up the provision into sections 54 and 55, and confIned the application of s. 54 to 'proposed laws'.

44 Convention Debates, Adelaide, 13 April 1897: 472.

45 Note, however, that Professor Pearce has argued that the fifth paragraph of s. 53, which states that except as provided in tbat section the Senate shall have equal power with the House of Representatives in respect of all proposed laws, is mandatory. Accordingly, if the Senate's law-making powers were limited otherwise than in accordance with s. 53, the validity of subsequent laws could be challenged in the High Court: Pearce. D., 'The Legislative Power of the Senate', in Zines, L. (ed.), Commentaries on the Australian Constitution, Butterworths, 1977: 122.

46 See for example: Convention Debates, Melbourne, 8 March 1898: per Mr McMillan at 2025, and vote at 2076. Senate power in relation to money bills 17

Section 55: A lawyer's picnic?

Section 55, on the other hand, refers to 'laws imposing taxation', so that if a law imposing taxation deals with more than one subject of taxation, it may be declared unconstitutional by the High Court, or if it deals with other matters, its provisions in respect of those other matters shall have no effect.47

The debate at the Melbourne Constitutional Convention over whether s. 55 should allow recourse to the High Court was long and passionate. Mr Reid (Premier, NSW) argued that the 'moral hasis' of taxation was over once the two Houses agreed, and that the question of whether you put the taxes on one sheet of foolscap or two is purely a matter of procedure.48

Fears were raised that a mere technical breach of 5. 55 would lead to important tax measures being struck down despite that fact that they were approved by both Houses. Mr Isaacs (Attorney-General, Vic) warned that a law may he held invalid at a time when Parliament was not sitting, bringing the whole machinery of government to a stand-still." Mr Holder (Treasurer, SA) suggested that a Federal Treasurer would not be ahle to sleep at night with s. 55 hanging over him like a nightmare. Mr Barton (NSW) replied: 'We do not want to pass a Constitution as a cure for insomnia,.50

Mr Deakin (Vic) argued that the consequence of a breach of s. 55 would be the punishment of the people:

The punishment falls not on the guilty persons, not upon the members of the Senate upon whom really the burden of such a blunder should rest, but upon the pockets and the fortunes of the people of the whole Commonwealth. They are to be penalized for a mistaken reading of their legal responsibilities by their representatives.51

Some took the view that 5. 55 would result in a lawyer'S picnic, to the detriment of the people. Mr Deakin described s. 55 as a clause

47 Osborne v The Commonwealth (1911) 12 CLR 321, per Griffith CJ at 336; per O'Connor J. at 355; cf Higgins J. at 373.

48 Convention Debates, Meloourne, 8 March 1898: 2029.

49 Convention Debates, Melbourne, 8 March 1898: 2000.

50 Convention Debates, Melbourne, 8 March 1898: 2069.

51 Convention Debates, Melbourne, 8 March 1898: 2042. 18 Senate power in relation to money bills

made for lawyers rather than for the pOople.52 Mr Trenwith (Vic) suggested that it was more likely to lead to 'ingenious searching' for the purpose of instigating litigation than any other clause of the Constitution.53 Mr Reid (Premier, NSW) even suggested that 'unemployed lawyers' and 'any person in the street' with 'nothing else to do' would be able to throw all the affairs of the Commonwealth into confusion by discovering some technical flaw in a tax law. 54

Others criticised making s. 55 subject to enforcement by the courts, on the grounds that it showed distrust of the Senate. They argued that the Senate would be perfectly capable of protecting its privileges, and that it would only take one Senator to raise a point of order objecting to the validity of a bill which breaches the substance of s. 55 and the President of the Senate would be duty­ bound to rule the bill out of order." Mr Reid put this view particularly bluntly:

If a House is 90 low, weak and corrupt, as not to be willing to maintain its own rights, all the courts in the world cannot make it straight and honest, and a source of respect to the people.56

On the other side, members such as Mr Glynn (SA) recognised that the Senate would not always vote as a States House, and raised the scenario of a Senate in sympathy with the House of Representatives, not objecting to a law which would breach s. 55. In such a case he considered that it was essential for the protection of the States that they be able to challenge the law in the High Court.57

Mr O'Connor (NSW) also argued that because of the drastic consequences of a law breaching s. 55, the Government and each of the Houses will take exceptional care to ensure that everything is done in order and without illegality, and that this can only be advantageous." Mr Reid (Premier, NSW), on the other hand,

52 Convention Debates, Melbourne, 8 March 1898: 2006.

53 Convention Debates, Melbourne, 8 March 1898: 2009.

54 Convention .Debates, Melbourne, 8 \!arch 1898: 2013.

55 Convention Debates, Melbourne, 8 March 1898: per Dr Quick at 2007; Mr Carruthers at 2007;

56 Convention Debates, Melbourne, 8 March 1898: 2032.

57 Convention Debates, Melbourne, 8 March 1898: 2003.

58 Convention Debates, Melbourne, 8 March 1898: 2011. Senate power in relation to money bills 19

argued that this result would obtein even without the possibility of court intervention. He asked the following interesting question:

What Government would be 90 foolish, having any interest in the passing of a measure, 88 to bring forward that measure in a form offensive to the Constitution~9

Most importantly, members of the Convention feared that the Senate could be manipulated, by reason of political pressure, to pass a money bill to which it would not otherwise agree. Hence the need for the independent enforcement of the Constitution through the High Court. Accordingly, s. 55 applies to 'laws' instead of 'proposed laws' and therefore the validity of laws passed contrary to the requirements of s. 55 can be challenged in the High Court. Contemporary problems in the interpretation of 88.53-55

The political compromise over the powers of the Senate was essential to gain the participation of all the Stetes in the Federation. It was part of a wider compromise which included the equal representation of each State and the rotation and terms of Senators. The words used to implement the compromise in relation to money bills, have resulted in considerable problems of interpretation and implementation.

Two related problems have gained prominence in recent years, and are discussed in some detail below.

The fU'St is the problem of determining what amounts to a 'law imposing taxation'. The scope of this category of laws determines the powers of the Senate in relation to the initiation and amendment of a large category of bills relating to taxation. An important consequence of an Act being considered to be a law 'imposing taxation' is that it then becomes subject to the requirements of s. 55, and risks being held invalid if it does not comply with them. The recent Taxation (Deficit Reduction) Bill 1993 brought these problems to public attention.

The second problem is the actual consequences of an Act being in breach of s. 55. This is of particular concern when the law 'imposing taxation' is part of an amending Act which would insert the tax provision in a principal Act which deals with other important matters. Must the High Court then strike down the whole of the principal Act and leave only the tax provision standing?

59 Convention Debates, Melbourne, 8 March 1898: 2029. 20 Senate JX)wer in relation to money bills

The High Court has encountered this problem in several recent cases which are discussed below.

Laws 'imposing' taxation

The twilight zone

Section 55 of the Constitution provides that 'laws imposing taxation shall deal only with the imposition of taxation' snd thst 'laws imposingtaxation... shsll deal with one subject of taxation only'.

Mr Isaacs (Attorney-General, Vic), at the Melbourne Constitutional Convention, noted that the definition of a law 'imposing taxation' was far from certain. He queried whether a tax Act which contained machinery provisions would breach the section because it deals with matters other than the imposition of taxation. He observed that it was 'not simply a question of daylight on the one side and midnight darkness on the other, but a question in the region of legal twilight, where lawyers could hardly distinguish one from the other'.60

Concern that laws 'imposing' or 'dealing with the imposition of taxation would not include the necessary machinery provisions for the collection of the tax, led to an amendment being proposed by Mr Barton at· the Melbourne Constitutional Convention, to include reference to the collection of taxation. Mr Barton (NSW) noted that this would restrict the power of the Senate to amend these Bills, under s. 53, however a power to amend the machinery provisions may be a de facto right to amend tax Bills. 61 This became the ultimate sticking point, with some members arguing that unless its powers were restricted the Senate could amend the machinery provisions so as to cut the collectable value of a tax in half,·' and others arguing once again in favour of the rights of States and against any further diminishment of Senate power. The amendment was lost by a margin of 26 to 16.63

60 Convention Debates, Melooume, 8 March 1898: 2002.

61 Convention .Debstes, Melooume, 8 March 1898: 2057 and 2060.

62 Convention Debates, Melbourne, 8 March 1898: per Mr Kingston at 2058; and per Mr O'Connor at 2059.

63 Convention Debates, Melbourne, 8 March 1898: 2070. Senate power in relation to money bills 21

However, Mr Barton observed that laws relating to the 'amount and extent' of taxation are laws which 'impose' taxation, rather than laws concerning its collection.&t

Laws 'imposing taxation', 'dealing with the imposition of taxation' and 'relating to taxation'

The choice of words in the Constitution have led High Court Justices to develop three categories of laws:

(a) laws imposing taxation;

(b) laws dealing with the imposition of taxation; and

(c) laws relating to taxation.

There has been disagreement, however, as to the extent of these categories. Some Justices have considered that laws 'dealing with the imposition of taxation' may include provisions 'fairly relevant or incidental to the imposition of a taxi, including a complete system of collection.65 Others have held that laws relating to the collection and recovery of tax are laws which relate to taxation under s. 5Hii) of the Constitution, but do not 'deal with the imposition of taxation,.66

Isaacs J., in F.G.T. v Munro.67 considered that it is important to limit the category of laws 'dealing with the imposition of taxation', in order to protect the Senate from the restrictions of s. 53 of the Constitution on its power to amend bills imposing taxation. He explained:

We have only... to imagine a complete taxation measure combining the Taring Act and the A JDent Act. If ... the Bill is 'a proposed law imposing

64 Convention Debates, Melbourne, 8 March 1898: 2060.

65 Osborne v The Commonwealth (1911) 12 CLR 321 per Higgins J. at 373; and possibly per Griffith C.J. at 336 (although see interpretation to the contrary by Isaacs J. in F.G.T v Munro (1926) 38 CLR 153, 190). See also F.G.T. v Munro per Higgins J. at 209 and Starke J. at 215; Resch v F.e.T. (1942) 66 CLR 198, per Starke J. at 213; Moore v The Commonwealth (1951) 82 CLR 547, per Latham C.J. at 564; and Mutual Pools & Staff Pty Ltd v PC.T. (1992) 173 CLR 450 per Deane J. at 457.

66 PG.T. v Munro (1926) 38 CLR 153, per Isaacs J. at 190; Re Dymond (1959) 101 CLR 11, per Fullagar J., with whom Dixon C.J., Kitto and Windeyer JJ. agreed, at 19.

67 (1926) 38 CLR 153. 22 Senate power in relation to money bills

taxation' ... it is throughout unamendable by the Senate. It may include, as the Income Tar Act would, .. " provisions for Boards of Review, their remuneration and duties, provisions enabling this Court to make rules, provisions for criminal consequences, provisions for validating fanner statutory rules; and yet, because included in a Bill which inter alia does impose taxation, the Senate is entirely precluded from amending a letter of the whole measure. That, in my opinion, is a radical error and cuts away a right which, on the well-understood meaning of parliamentary terms, is conserved to the Senate by the words of the Constitution.68

In contrast, in Re Dymond, Menzies J., with whom McTiernan J. agreed, criticised this distinction. He argued that the consequential restriction upon the amending powers of the Senate was not sufficient reason to read down 'laws dealing with the imposition of taxation'. He noted that the English parliamentary convention upon which s. 55 was based did not allow the House of Lords such freedom, and he did not consider that there was any reason why the Senate should have such power.69

Practical consequences of the distinction

The practical consequences of the distinction between laws imposing taxation and laws dealing with the imposition of taxation were highlighted in the debate concerning the constitutional validity of the Taxation (Deficit Reduction) Bill 1993.'· This was an omnibus Bill which covered several areas of taxation and would therefore breach s. 55 of the Constitution if it was a 'law imposing taxation'.

One of the functions of the Bill was to raise the rates at which taxation was imposed in relation to existing subjects of taxation (e.g. fringe benefits tax). The Government argued that a law providing for a rise in the rate of taxation, in relation to existing categories of taxation, did not amount to a 'law imposing taxation', as the actual imposition of the obligation to pay taxation was already contained in existing legislation (e.g. the Fringe Benefits Tax Act 1986)." Such a law, it was argued, is merely a law 'dealing with the imposition of taxation'.

68 (1926) 38 CLR 153, 190.

69 (1959) 101 CLR 11, 27-28.

70 The Bill was withdrawn after an adverse report of the Senate Standing Committee on Legal and Constitutional Affairs: Constitutional Aspects ofthe Taxation (Deficit Reduction) Bill 1993, September 1993.

71 See Press Release by the Attorney-General, the Hon. Michael Lavarch. on 31 August 1993, containing copy of advice provided by the Chief General Counsel, Mr Dennis Rose, dated 30 August 1993. Senate power in relation to money bills 23

It was argued by others, however, that a law which provides for higher levels of tax amounts to a 'law imposing taxation', because there is a new and greater liahility to pay tax.72

This disagreement hae ramifications beyond the operation of s. 55. Section 53 of the Constitution also refers to proposed 'laws imposing taxation'.73 It provides that proposed 'laws imposing taxation' may not originate in the Senate, nor may they be amended by the Senate. If the High Court were to accept the argument that laws raising the rate of taxation are not 'laws imposing taxation' then the practical consequence would be that the Senate would have the power to initiate and amend such tax bills. In effect, the only restriction on the Senate's power in relation to money bills would be that the Senate could not introduce or amend bills which impose taxation upon a new subject, or amend other money bills so as to increaee any proposed charge or burden on the people.

Ironically, in introducing the Taxation (Deficit Reduction) Bill 1993, the Government, which is responsible to the House of Representatives, endorsed the view that the Senate's power in relation to bills raising rates of existing taxation is not limited by s. 53,74 as such measures do not 'impose' taxation. To complete the irony, the Senate Opposition and its legal advisers rejected this interpretation,75 which would give the Senate power to amend or initiate such tax bills, and sought instead the protection of s. 55.

Although, in this context, the Government appears to be advocating greater powers for the Senate, and the Opposition appears to be attempting to restrain these powers, the rationale behind this approach is understandable. The advantage to the Senate in being able to introduce or amend most money bills, is probably minimal. The Senate's practice of 'pressing its requests' has provided an

72 See opinions by: Mr Anthony Morris Q.C. and Mr Liam F. Kelly, dated 27 August 1993; Dr Colin Howard. dated 30 August 1993; Mr D.F. Jackson Q.C., dated 10 September 1993.

73 The High Court held in Air CaJedonie International v The Commonwealth (1988) 165 CLR 462, at 468 that references to 'laws imJXl8ing taxation' in sections 53 and 55 are to be treated as having a ronstant meaning.

74 Except to the extent that the Senate rould not amend such bills to increase any proposed charge or burden on the people.

75 See opinions by: Mr Anthony Morris Q.C. and Mr Liam F. Kelly, dated 27 August 1993; Dr Colin Howard, dated 30 August 1993; Taxation Institute of Australia, dated August 1993; Mr D.F. Jackson Q.C., dated 10 September 1993; and supplementary opinion of Mr Anthony Morris Q.C., dated 1 September 1993. 24 Senate power in relation to money bills

effective sUQstitute for the power to amend. The power to introduce money bills may also have little substantial effect, as such bills will not be enacted unless they are passed by the House of Representatives. It may, however, be a useful political tool to put taxation proposals on the agenda.

On the other hand, the protection granted by the anti-tacking measures in s. 55 is still of great value to the Senate, because in the case of money bills there is often great pressure to pass them before a particular deadline (e.g. the date at which income tax cuts are proposed to come into force). Even if the Senate has the power to amend an omnibus bill containing a number of different taxation measures, it may be pressured to pass the bill to meet these time constraints rather than delay the implementation of the entire bill by passing an amendment and returning it to the House of Representatives. If, however, increases in the rates of different subjects of taxation must be placed in separate bills, the offensive bill may be returned to the House of Representatives while the majority of them may be passed.

The legal position as to the characterisation of laws raising tax rates is not clear.76 Although a number of Justices have categorised laws fLXing the rate of taxation as 'laws imposing taxation' it has never been clarified whether such laws in isolation actually 'impose' the taxation or 'deal with its imposition,.n

If the High Court were called upon to decide the matter, it would probably consider the purposes of sections 53 and 5578 in its attempt to discern what amounts to the 'imposition' of taxation. The arguments based on the Senate's role as the States House would probably now be considered subordinate to the argument in favour of responsible government.

76 The Senate Standing Committee on Legal and Constitutional Affairs, in its report Constitutional Aspects of the Tazation (Deficit Reduction) Bill 1993, September 1993, concluded that there was a real risk that the High Court would find that the Bill imposes ta.z and would breach s. 55, and that this risk was not worth taking.

77 See for example: Osborne v The Commonwealth (1910 12 CLR 321, per Barton J. at 350; lUi Dymond (1959) 101 CLR 11, per Fullagar J. at 20; F.G.T. v Munro (1926) 38 CLR 153 per Starke J. at 214.

78 See. for example, the use of Convention Debates in Cole v Whitfield (1988) 165 CLR 360. Senate power in relation to money bills 25

Amending Acts and invalidity

As noted earlier, during the Constitutional Convention Debates, a great deal of concern was expressed about the drastic consequences of a law being held invalid under s. 55. Mr Isaacs (Attorney­ General, Vic.) suggested that at the very least there should be a provision in the Constitution stating that the invalidity should go no further than the additional matter (i.e. the part that does not deal with the imposition of taxation). He noted that this would not he possible, however, where the law comprised more than one subject of taxation, because it would be impossible to identify which was the additional matter.79

Mr Reid (Premier, NSW) later moved an amendment to provide, in effect, that:

... so far as a law is good it shall not be ruled to be bad; but any part of it that is bad may be adjudged by the court to be null and void. A case was put to me as to a Bill that contained two subjects of taxation. Under this provision the court would role the first to be good. and any subsequent part of it to be bad. The first subject of taxation would not infringe the rule, but any other subjects in the Bill amounting to two or three subjects would be roled to be bad.so

The amendment was rejected, however, due to concern as to how such an amendment would work,Sl but the Drafting Committee promised to consider the problem further.

The result of the Drafting Committee's deliberations was that s. 55 was divided into two paragraphs. If the first paragraph is breached, then the provisions imposing taxation remain valid, but any other provisions are of no effect. The second paragraph, which deals with a law containing more than one subject of taxation, does not specify the consequences of a breach of the paragraph.

Paragraph 1 of section 55

The first paragraph of s. 55 provides:

Laws imposing taxation shall deal only with the imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.

79 Convention Debates, Melbourne, 8 March 1898: 2002.

80 Convention Debates, Melbourne, 8 March, 1898: 2085.

81 Convention Debates, Melbourne, 9 March 1898: 2095. 26 Senate JXJwer in relation to money bills

In Air Caledonie International v The Commonwealth82 the High Court faced the question of invalidity of provisions when s. 55 has been breached. Several airlines challenged a provision which had been inserted by the Migration Amendment Act 1987 in the Migration Act 1958, requiring all passengers who travel to Australia on an overseas flight to pay a 'fee' of $5. The Court held that it was a tax, rather than a fee for a service, and that s. 55 had been breached because the almost all of the provisions of the Migration Act did not deal with the imposition of taxation.

In an unanimous judgment, the Full Court discussed the rationale of s. 55 to determine whether the amending Act could be considered separately from the principal Act. Their Honours stated:

An obvious purpose of the oonstitutional requirement that a law imposing taxation deal only with the imposition of taxation was to confine the impact of the limitations upon the Senate's powers with respect to proposed taxing laws to provisions actually dealing with the imposition of taxation, that is to say, to prevent -tacking". That being so, there is something to be said for the view that, in a case where an amending Act inserts a taxing provision in an existing Act, all that s. 55 requires is that the amending Act itself deal only with the imposition of taxation. On balance, however, it seems to us that the requirement of s. 55 should be oonstrued as extending to laws in the form in which they stand from time to time after enactment, that is to say, as extending to Acts of the Parliament on the statute book.S3

Having determined that the principal Act and the amending Act must be read together, this led the High Court to the prospect that the whole of the Migration Act must be declared to be of no effect, leaving only the entry tax as valid.

Not surprisingly, the Court did not adopt this outcome, and instead constructed the first paragraph of s. 55 in a manner which separates it into two limbs. The first limb restricts legislative power by prohibiting the inclusion of tax measures and non-tax measures in the same law. The second limb rectifies the breach by making the tax provisions valid, while providing that the non-tax measures shall be of no effect. The Court held that the effect of this first limb 'is to invalidate the relevant provision of the amending Act and one never reaches the situation where the second limb operates to strike down all of the provisions of the principal Act dealing with matters other than the imposition of taxation,.84

82 (1988) 165 CLR 462.

83 (1988) 165 CLR 462,471, per Mason C.J., Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ.

84 (1988) 165 CLR 462, 472. Senate power in relation to money bills 27

It is submitted that the logic of this argument would render the second limb of the first paragraph of s. 55 largely redundant, as it could clearly never apply unless the first limb had been breached. It is possible that the High Court is asserting the option of applying the second limb when it suits the circumstances, however this is not made clear from the judgment.

The High Court faced a similar problem in Australian Tape Manufacturers Association Ltd v The Commonwealth. 85 A majority of the Court, comprising Mason C.J., Brennan, Deane and Gaudron JJ., held that a levy imposed on blank tapes by an Act amending the Copyright Act 1968 was, in reality, a tax. Their Honours then considered whether s. 55 of the Constitution operates to retain the tax provision and to render all the related provisions for its implementation of no effect. Their Honours looked to the policy of s. 55, and concluded:

It would make no sense at all to retain the taxing provisions and give them an operation in isolation from the other provisions with which the taxing provisions were intended to operate. Indeed, it would give the taxing provisions an operation inconsistent with the expressed intention of the legislature and when that is the effect of an application of s 55, "the whole Act must fail of effect".86

Paragraph 2 ofsection 55

The High Court found itself facing the invalidity dilemma again, in the case of Mutual Pools & StaffPty Ltd v Federal Commissioner of Taxation. 87 A majority of the Court held that a provision in the sales tax legislation taxing swimming pools constructed in the ground was really a tax on land rather than a tax on goods. This meant that it was not an excise, yet it was included in legislation dealing with the imposition of excise, contrary to the second paragraph of s. 55 of the Constitution.

As notad above, the first paragraph of s. 55 allows the taxing provision to survive, while the non-tax provisions are of no effect. The second paragraph of s. 55 offers no such rectification of a breach. It merely provides that laws imposing taxation shall deal with one subject of taxation only. In their joint judgment, Justices Dawson, Toohey and Gaudron, with whom Mason C.J., Brennan and McHugh JJ. agreed) accepted the view where a bill imposing

85 (1993) 67 ALJR 315.

86 (1993) 67 ALJR 315, 323.

87 (1992) 173 CLR 450. 28 Senate power in reJstion to money bills

taxation deals with more than one subject of taxation, the entire law is invalid. However, their Honours noted that laws imposing duties of customs or excise are closer in nature to paragraph 1, and concluded:

...although the words -and any proVISIon therein dealing with any other matter shall be of no effect- do not appear at the end of the second paragraph. we think that it should be read in an appropriate case as if they do.M

If the Court had not made such a liberal interpretation of s. 55, the consequence would have been the- invalidity of a large part of Australia's sales tax system.

It is clearly an unsatisfactory consequence of s. 55 that if the legislature inadvertently passes an amending Act inserting a tax provision in a 'non·tax' Act, such as the Migration Act or the Social Security Act. that it is the substance of these Acts which is to be of no effect, rather than the single tax provision. Such an outcome could cause a major disruption to the government of the country. It is not surprising, therefore, that the High Court adopted somewhat tortured logic to avoid such a result. Conclusion

The political compromise behind the Senate's powers in relation to money bills is not merely of historical importance. It is a vital element in understanding the nature of the Senate's powers and the reasons behind the words used in sections 53-55.

Although neither the High Court nor the Parliament are bound by the intentions of those who drafted the Constitution, the principles upon which the drafters acted may still be the foundation of current decisions, or at least when recognised and analysed in the different circumstances which prevail today, these principles may be consciously adapted to apply to new situations as they arise.

88 (1992) 173 CLR 450, 471. AP?ENDIX A

The Consrifuflon

(x.x.xix.) Matters incidental 10 the execution of any power vested by this Constitution in the Parliament or in either House thereof, or in the Government of the Commonwealth, or in the Federal Judicatl::Hc. or in any depanment or officer of the Commonwealth. 52. The Parliament shall, subject to this Constitution, have exclusive E;I;c1usive powers of power to make laws for the peace, order. and good government of the 'h, Commonwealth with respect 10- P"r1i.me:nl. (i.) The seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes: (ii.) Mailers relating to any department ofthe public service the can· 1fOI ofwhich is by this Constitution transferred 10 the Executive Government ofthe Commonwealth: (iii.) Other matters declared by this Constitution to be within the ex· elusive power ofthe Parliament.

. 53. Proposed laws appropriating revenue or moneys, or imposing Po..... e:rs of . taxation, shall not originate in the Senate. But a proposed law shall not Ihe: House:~ in respcCI of be taken to appropriate revenue or moneys. or to impose taxation, by Iegislalion. reason only of its containing provisions for the imposition or appropri­ ation of fines or other pecuniary penalties. or for the demand or payment or appropriation of fees for licences, or fees for services under the proposed law.

The Senate may not amend proposed laws imposing taxation. or proposed laws appropriating revenue or moneys for the ordinary annual services ofthe Government.

The Senate may not amend any proposed law so as to increase any proposed charge or burden on the people.

The Senate may at any stage return to the House of Representatives any proposed law which the Senate may not amend. requesting, by mes· sage, the omission or amendment c.f any items or provisions t.herein. And the House of Representatives may. ifit thinks fit. make any ofsuch omis­ sions or amendments. with or without modifications. Except as provided in this section. the Senate shall have equal power with the House of Representatives in respect ofall proposed laws.

54. The proposed law which appropriates revenue or moneys for the Appropnallon ordinary annual services of the Government shall deal only with such 8111s. appropriation.

55. Laws imposing taxation :)hall deal only with the imposition of Tu 8111. taxation, and any provision therein dealing with any other maIler shall be ofno effect. The Constitutiofl

Laws imposing taxation, except laws imposing duties of customs or ofexcise. shall deal wJlh one subject of taxation only; but laws imposing dudes ofcustoms shall deal with duties ofcustOms only. and la ws impos­ ing duties ofexcise shall deal wilh duties ofexcise only.

Recommend· 56. A vote, resolution. or proposed law for the appropriation of allan revenue or moneys shall not be passed unless the purpose of the appro­ o(money vOles. priation has in the same session been recommended by message of the Governor-General to the House in which the proposal originated.

Dlsagree:­ 57. If the House of Representatives passes any proposed law, and ment the Senate rejects or fails to pass it. or passes it with amendments to belween lhe' Houses. which the House of RepresentatIves will not agree. and ifafter an inter­ val ofthree months the House of Representatives. in the same or the next session. again passes the proposed law with or without any amendmems which have been made, suggested, or agreed to by the Senate, and the Senate rejects or fails to pass it. or passes it with amendments to which the House of Representatives will not agree, the Governor-General may dissolve the Senate and the House of Representatives simultaneously. But such dissolution shall not take place within six months before the date ofthe ex piry ofthe House of Representatives by efftuxion oftime.

If after such dissolution the House of Representatives again passes the proposed law. with or without any amendments which have been made. suggested. or agreed to by the Senate, and the Senate rejects or fails to pass ii, or passes it with amendments to which the House of Representatives will not agree, the Governor-General may convene a joint sitting of the members ofthe Senate and of the House of Represen­ tatives.

The members present at the joint sitting may deliberate and shall vote together upon the proposed law ac; last proposed by the House of Representatives, and upon amendments, if any. which have been made therein by one House and not agreed to by the other, and any such amendments which are affirmed by an absolute majority of the total number of the members of the Senate and House of Representatives shall be taken to have been carried, and if the proposed law, with the amendments. if any. so carried is affirmed by an absolute majority ofthe total number of the members of the Senate and House of Represenla­ tives, it shall be laken 10 have been duly passed by both Houses of the Parliament. and shall be presented to the Governor-General for Ihe Queeo .s assent. '

Royal aHcnl 58. \Vhen a proposed law passed by both Houses of the Parliament 10 Bllls is presented to the Governor-General for the Queen's assent, he shall de­ clare, according 10 his discretion, but subject to this Constitution, thai he ,assents in the Queen's name. or that he withholds assent, or lhat he reser\'c~ the l,j\\f for the Quc~n'~ plc,jsur~.