Australia: Death and taxes not certain for government owned corporations

Benjamin Franklin's famous saying that "nothing can be said to be certain, except death and taxes" is not necessarily true for government owned corporations. In Queanbeyan City Council v ACTEW Corporation Ltd [2011] HCA 40, the High Court of Australia recently determined that two monetary charges associated with the abstraction and distribution of water were not taxes. On appeal from the Federal Court of Australia, the High Court ruled that a territory-owned corporation, ACTEW Corporation Limited (ACTEW), was so intimately connected to the Australian Capital Territory (ACT) that it was not distinct from the polity itself and the charges were not duties of excise because they were internal financial arrangements of the ACT.

The Attorney-Generals of each of the States and the Commonwealth were interveners in these proceedings, emphasising the importance of this decision for the regulation and administration of government business enterprises, statutory corporations and state owned corporations across australia.

Federal Court proceedings

In the December 2010 issue of the Public Law Report, we reported on the Federal Court's judgment in Australian Capital Territory v Queanbeyan City Council [2010] FCAFC 124. In that matter, the court considered whether a "water abstraction charge" (WAC) and a "utilities (network facilities) tax" (UNFT) were duties of excise.

A duty of excise is a tax on goods levied at some point in their production or distribution which has the effect of increasing the price of the goods supplied to the customer. Section 90 of the Constitution reserves to the Commonwealth the exclusive powers to impose duties of customs and of excise. The exclusivity of the power prevents States and Territories from imposing a duty of excise.

The Act was established as a body politic under the Crown by the Australian Capital Territory (SelfGovernment) Act 1988 (cth). Under this Act, the ACT Legislative Assembly has powers to make laws and the ACT Executive has the responsibility of governing the Act with respect to an extensive list of matters including water resources and taxation.

ACTEW is a statutory corporation owned by the ACT established under the Territory-Owned Corporations Act 1990 (ACT) (toc act). ACTEW's functions include the supply of water to residents and businesses within the ACT and Queanbeyan in New South Wales, including the Queanbeyan City Council (QCC).

The Water Resources Act 2007 (act), imposes the WAC for water taken by ACTEW from the ACT for supply by ACTEW to its customers. The Utilities (Network Facility Tax) Act 2006 imposes the UNFT upon ACTEW by reference to the length of its water distribution network situated on land not owned by ACTEW.

Both the WAC and the UNFT are passed on by ACTEW to its customers, including QCC. QCC objected to being charged the WAC and the UNFT on the basis that they were duties of excise and it was not within the ACT's legislative competence to impose them on ACTEW or for ACTEW to pass them on to QCC.

In the Federal Court proceedings, the WAC and the UNFT were held by the Federal Court to not be duties of excise because:

  • the WAC is of the nature of a voluntary payment of money in order to acquire rights, and therefore should not be characterised as a tax, and
  • the UNFT is imposed regardless of how much water is transported and therefore the UNFT cannot be construed as a tax on a step in the production, sale or distribution of goods.

Internal financial arrangement

The primary argument made against QCC in the High Court was that a charge imposed by one organ of government upon another organ of government is not a tax and therefore not an excise. A tax involves a government taking money from the governed, as distinct from merely being an incident of the internal financial arrangements of government.

ACTEW has the following features as a result of its regulation by the TOC ACT (amongst others):

  • its voting shareholders are appointed by the chief Minister of the ACT: s 13(2),
  • the voting shareholders must be Ministers of the ACT government: s 13(4)(a),
  • the shareholders hold their shares in trust for the ACT: s 13(5);
  • the voting shareholders may require the directors to ACT in a particular manner: s 17,
  • it is under a duty to comply with the general government policies that the voting shareholders tell them are to apply: s 17a,
  • it is relieved from payment of duties, fees, levies and charges payable under act statutes in respect of various activities: ss 29(5)(d) and (e),
  • whenever it borrows money, it is obliged to pay to the ACT whatever amount the ACT treasurer determines: s 31, and
  • its main objectives are public in character: s 7(1).

Justice Heydon referred to the provisions of the toc act that so affect ACTEW as "subordinating provisions".

The High Court found that, taken together, these subordinating provisions indicate the extensive control exercised by the act executive over the conduct of the affairs of ACTEW. The intervening attorneygeneral of the state of Queensland submitted that ACTEW is so intimately connected to the ACT that it cannot properly be described as independent of it. ACTEW argued that, while the act had legal personality distinct from that of ACTEW, the will of the act was the will of ACTEW such that if ACTEW acted within the authority created by the provisions of the toc ACT it could not avoid acting in accordance with the will of the ACT.

ACTEW argued that the WAC was not a tax on ACTEW, the will of which is the same as the will of the ACT, because there is no compulsion involved in the payment by an entity which is subject to, and directed by, the same will as the entity purporting to impose the tax.

QCC submitted that the features of ACTEW imposed on it by the toc ACT were outweighed by the significance to be attached to section 8 of that statute, which relevantly provides:

  1. A territory-owned corporation or subsidiary is not, only because of its status as a territory-owned corporation or subsidiary —
    1. the Territory;


  1. Accordingly, a territory-owned corporation or subsidiary is not, only because of its status as a territory-owned corporation or subsidiary —
    1. entitled to any immunity or privilege of the Territory, or
    2. exempt from a tax, duty, fee or charge payable under an Act.

The High Court found that section 8 does not deny the effect of the subordinating provisions. ACTEW is a territory-owned corporation because it is listed in schedule 1 of the TOC Act. The High Court held that the effect of section 8(1)(a) is that ACTEW is not the ACT only because of its status as a territory-owned corporation, however, it is the ACT by reason of the subordinating provisions.


Despite statutory provisions such as section 8 of the TOC Act, a government-owned corporation may, after consideration of the particular circumstances in which it is constructed and regulated, be considered to be part of the polity that owns it. This decision may have broader implications in relation to the independence of government business enterprises, statutory corporations and state-owned corporations across Australia and how their commercial arrangements are structured.

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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