Australia: High Court upholds constitutional validity of superannuation guarantee scheme

The High Court has unanimously upheld the constitutional validity of the Superannuation Guarantee (Administration) Act 1992 (Cth) (Administration Act) and the Superannuation Guarantee Charge Act 1992 (Cth) (Charge Act) and held that the superannuation guarantee charge (the Charge) levied by the Charge Act is a valid tax. The case is Roy Morgan Research Pty Ltd v Commissioner of Taxation [2011] HCA 35.


Between 2000 and 2006 Roy Morgan paid people to conduct interviews on its behalf. Roy Morgan did not consider these people employees and did not make superannuation guarantee contributions in accordance with the Administration Act.

In 2007 the Commissioner of Taxation issued Roy Morgan assessments and amended assessments for the periods that the Commissioner considered superannuation guarantee charge statements were required. Roy Morgan objected. The Commissioner disallowed the objection. The Commissioner's decision was affirmed by the Administrative Appeals Tribunal (AAT).

Roy Morgan appealed the decision of the AAT to the Federal Court, which constituted a Full Court to hear the appeal. One ground of appeal was that the Administration Act and the Charge Act were constitutionally invalid. The appeal was dismissed.1

By special leave, Roy Morgan appealed to the High Court from the Full Federal Court's decision.

The Administration Act and the Charge Act

The High Court briefly described the effect and function of the Administration Act and the Charge Act2. The High Court broadly described that the effect of the Administration Act is that if an employer fails to provide to all employees a prescribed minimum level of superannuation, then any shortfall by failure to meet that minimum level in full, becomes the Charge, which is levied on the employer by the Charge Act. The Charge Act does no more than impose what is said to be a tax and fix the rate. It is the Administration Act which deals with the incidence, assessment and collection of the Charge (this includes Part 8 of the Administration Act which deals with payments of shortfall components3 to employees). In providing separately for the Charge Act and the Administration Act, the legislation follows the well-established procedure to comply with the requirement of s 55 of the Constitution that laws imposing taxation shall deal only with the imposition of the taxationS4.

The amount of the Charge is a debt due to the Commonwealth and payable to the Commissioner5. The revenue raised by the Charge is to be paid into the Consolidated Revenue Fund. The result is to supply an incentive to employers to make contributions to superannuation for their employees without incurring a liability to the Commissioner for the Charge.

Roy Morgan's submissions

Roy Morgan challenged the validity of the provisions made in the Administration Act and the Charge Act. Roy Morgan submitted that the Charge was not a "tax" because it was not imposed for "public purposes". This was because the Charge conferred a "private and direct benefit" on the employees of those employers who pay the Charge and that this is effected by the compulsory transfer of money from the employers. Roy Morgan argued that it followed that neither the Charge Act nor the Administration Act was a law with respect to "taxation" within the meaning of s 51(ii) of the Constitution, and that, there being no other head of supporting power to be found in s 51, the legislation establishing the Charge and providing for its administration was invalid.

Roy Morgan also submitted that the "linkage" between the Charge Act and the Administration Act supported the proposition that the Charge Act was not what otherwise it obviously appeared to be, namely, a law imposing a taxation which complied in form with s 55 of the Constitution and was not a law supported by s 51 of the Constitution.


The High Court (French CJ; Gummow, Hayne, Heydon, Crennan, Kiefel and Bell JJ) dismissed the appeal and unanimously held that the Charge was a valid tax. The plurality judgment (French CJ; Gummow, Hayne, Crennan, Kiefel and Bell JJ), after general considerations of taxation, public law and relevant authorities, concluded that6:

"The submission by [Roy Morgan] that the Charge is invalid because the legislation confers upon employees a 'private and direct benefit' cannot be accepted. Nor does this 'linkage' indicate that the Charge is not imposed by the Parliament for 'public purposes'. It is settled that the imposition of a tax for the benefit of the Consolidated Revenue Fund is made for public purposes. That is not to say that the receipt of funds into the Consolidated Revenue Fund conclusively establishes their character as the proceeds of a tax. But it does establish in the present case that the Charge is imposed for 'public purposes' and thus, if other necessary criteria are met, as they are in this case, the Charge is a valid tax."

The plurality judgment went on to say7 that the case presented by Roy Morgan appeared to depend upon the proposition that payments of the Charge by an employer can be traced through the Consolidated Revenue Fund with the consequence that any payments made to employees under Part 8 of the Administration Act are properly viewed as having come from the employer. However, the plurality judgment said that when a charge is paid by a particular employer into the Consolidated Revenue Fund, its identity is lost. The funds raised by the Charge are thereafter available under s 83 of the Constitution for an appropriation to be spent on any purpose for which the Commonwealth may lawfully spend money.

Take away points

The High Court has established once and for all the constitutional validity of the superannuation guarantee scheme. This decision and the decision of the Full Federal Court contain a useful explanation of the effect and function of the Administration Act and the Charge Act.


1 Roy Morgan Research Pty Ltd v Commissioner of Taxation (2010) 184 FCR 448; (2010) 268 ALR 232; (2010) 76 ATR 264; [2010] FCAFC 52; BC201003449 (Keane CJ; Sundberg and Kenny JJ).
2 At [3]-[8], [54] and [57].
3 In general terms, the "shortfall component" is the lesser of the amounts paid by the employer of the Charge, and the amount of employee entitlement calculated at the time the payment was made – see ss 64A and 64B of the Administration Act.
4 At [5].
5 Taxation Administration Act 1953 (Cth), Sch 1, s 255-5.
6 At [49], footnote omitted.
7 At [51].

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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