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With a vast array of over 125 taxes which includes commonwealth Taxes, The Australian Taxation system is one of the most intricate taxation systems in the globe. The Australian Taxation system was established to ensure equality among all Australians and to constantly thrive to maintain the integrity  of the system. The Australian constitution provides Exclusive powers, Concurrent powers and Residual powers in the case of tax imposition and execution. The taxation system of Australia dates back to the late 1800’s but the introduction of the Income tax by the Commonwealth Government took place in 1916.This was done in order to fund the country’s revenue with its involvement in the First World War. The Commonwealth and the states unified under a tax system after 1916. Since, then with various agreements and amendments the Australian taxation has reached the status that it upholds today as a major funding source for the treasury.

Today multiple organizations play multiple roles to reach the aforementioned goals in tax collection and revenue maintenance of the country. Under the superfine umbrella of the Australian federal taxation system, the ATO (Australian Taxation Office) which is Australia’s main revenue collection wing plays the principle role of executing and ensuring the taxation of the country within smooth trails. The ATO performs a multitude of functions providing social and economic benefits while carrying out impetus programs.


Figure 1: ATO official logo.

Source: (ATO,2017)

A federal government comprises of three major sectors; the legislature, which makes the law, the judicial branch foresees the correct execution of law while the executive branch enforces and executes the law. An executive body’s primary responsibility is to enforce the law made under the country’s legislature.

The Australian Constitution vests the power to impose taxation under the section 51(ii). The Australian parliament is made of two houses: House of Representatives a.k.a Lower house and the Senate a.k.a the upper house. The parliament bill must pass through both houses with only the house of representatives being able to make changes to the proposed bill. The Bill then becomes a law with the Royal consent from Governor-General.

The ATO’s (Australian Taxation Office) primary responsibility is to administer the Australian Federal Taxation System. It is responsible and bound to collect all forms of taxation that is in performance within the country. This includes the Income tax, Capital Gains Tax, Goods and services Tax etc.. Apart from this the ATO manages the Australian Business Register, the Higher Education Loan Program and the administration of the key components of the superannuation system functional within the country. Thus, the ATO functions as an executive branch for the government enforcing the taxation system of the country in accordance to the laws of taxation brought to light by the parliament. The ATO also carries out the creation of the annual report for each financial year highlighting the performance and achievements for the year. It upholds the correct execution of all the tax based laws in practice within the country as well as monitors and manages the higher education loan system. The income of each individual is monitored and taxation in lieu is correctly determined while deducting the government loans and superannuation of funds. ATO monitors the personal income, foreign income, assets, business transactions and other tax related monetary and non-monetary criteria of individuals and the related documentation they hold. To further, the ATO imposes penalties for those individuals who cannot provide valid documents and are of shortfall to pay the taxes due.

Thus, it is proven that the ATO functions as an executive body within Australia, executing and enforcing the law related to taxation. It’s direction and monitoring of the Australian Federal Taxation System ensures the proper functioning of the taxation and tax collection within the country. Ensuring the proper maintenance of a current system is another task carried out by an executive body, thus making ATO the main executive body under the Australian Taxation system.


In any federal government laws are made through parliament acts or bills passed in the parliament. The executive bodies are to uphold and shape the law enforcement within the country and to assist the necessary changes that the public demands for. The ATO is an executive body with the Australian taxation system thus it cannot make law within the federal system.

Once a new law is made through a parliamentary Act the ATO provides the necessary guidelines for the public incompliance with the newly made law Act. It provides the support and guidance for the tax payers to assist in their decision whether to follow the current law procedure or to await the necessary changes due. It also promotes the awareness within the tax payers about the existing system and changes due and initiates the public feeling regarding the newly made law, if exists any.

The ATO merely executes the law made under the constitution of the country and it has no power to put forth new laws into the existing system. The power is inhibited under the judicial precedent because ATO is an executive body not the country’s legislature. If there exists any misinterpretation or any wrong manipulation of the law the ATO has to subject the attention towards the judicial branch. The ATO has the power to carry out the necessary penalty actions and force incase tax payers resist to follow the protocols they are bound by law to adhere to.

CASE STUDY- Ms. Anstis V ATO-a briefing

After her claim for a deduction for education expenses against her youth Allowance Income was denied by the Australian Taxation Office or The ATO, Ms.Anstis sought the help of the law. With the assistance of her father, a lawyer she appealed to the High Court claiming that the ATO didn’t apply the tax legislation in a proper manner.

Having lost one case, the ATO appealed to the High Court. On November 11th of 2010 the High Court dismissed the Australian tax commissioner’s appeal against the decision of the Full Federal Court in Federal Commissioner of Taxation Vs Ms. Anstis. According to the previous decision of the Federal court Ms. Anstis was entitle to a tax deduction for her educational expenses spent from her income allowance. The full bench of the High Court stated that the expenses incurred in the gaining of the youth allowance were neither private nor domestic in nature as of under the general deduction provisions. The ATO commissioner stated they advise all tax payers on potential claims during a press release after the court’s issue of judgement.


Under any law which is in practice around the globe, be it either UK, US or Australia the constitution demarcates the separation of power. The Australian constitution separates its federal government into three main branches (as mentioned):

  1. The parliament or Legislature – makes and amends the law of the country
  2. The executive- puts the law into practices and monitors its execution
  3. The Judiciary- gives judgments about the law and those who bypass or act against the prevailing law.

A close up of text on a white background Description generated with high confidence

Figure 2: Division of power

Source: (PEO, 2017)

The Division of Power refers to this separation of the federal government. Although in the separation of powers doctrine clear demarcations of the three sectors are provided. In practice there are more than ample situations where these powers overlap when reaching at the most feasible decision. Within Australian the complete separation of powers doesn’t exist due to some ministers being involved in the legislative and the executive sectors. Same goes for the judicial sector due to the play of interrelated roles. Although separation of powers exists within the state it is interlaced with the concept of a responsible government. A responsible government is where the majority in the House of Representatives maintain a similar interest to retain the government in it’s best interest and in the interest of those it serves.

When looking at the above case where Ms. Anstis whose claim for a deduction for educational expenses against her youth allowance income was denied by the ATO, as stated in the briefing. Ms. Anstis who is a University student was allowed a Youth Income Allowance and the tax on her educational expenses were reduced. But the ATO did not allow such a reduction to take place in this case. According to the question three institutes have given their decisions with regards to this case.

The ATO belongs to the executive branch and functions as an executive body under the sector of Taxation. According to the impending law and regulations for Taxation functioning within Australia, the ATO carries out the tax legislation. They provide tax provisions and tax related functions for the tax payers in the country including Ms. Anstis. Her claims for tax reduction and the provision of Higher education loans are carried by the executive body, in this case the ATO. The ATO derives its power from legislative enactments.

The legislature is the law maker of the country and the law for taxation and the protocols to follow by all citizens with regards to Taxation are laid out by the parliament through Acts biased towards Taxation. The legislature empowers the other two sectors the executive wing and the judicature. According to the above case the legislature has done its duty by empowering the ATO. Thus , ATO has implemented the legislative enactments.

The judicature interprets the law and makes decisions through precedent. The High court which took the appeal of the ATO and the Federal court belongs to the judicature. The judicature (High Court and Full Federal Courts) has reviewed and interpreted the law.

The ATO has not taken to interpret the law the Judicature has carried out the function and the legislature has merely made the law regarding the Taxation. Thus, there can be seen a separation of powers in Australia with regards to taxation.


The high court of Australia is the highest court in the Judicial system functional in the country. The high court provides decisions for the cases that possess a higher degree of federal significance. It also applies law to the challenges that are posed to the constitution and the ongoing laws of the nation.

Australia provides a youth allowance income is provided for those who are under the age of 24 and is receiving an education, an apprentice in Australia, someone looking for employment or who is ailed. As for Ms. Anstis, she receives the youth allowance income because of her status as a university student who is within the eligibility criteria.

The expenses incurred in the gaining of Youth Allowance are not of a private nature or domestic nature under the general deduction provisions in Australia, was the decision of the High court. Under the Assessable income under the 1997 Act states that the taxable income is done by deduction of a tax payers deduction from assessable income he or she receives. In this case it is the youth allowance income. The youth allowance income according to the tax commissioner with regards to ordinary concepts is a gain which is one of a number derived periodically. The youth allowance income enables the respondent to use it for their regular expenditure as long as they satisfy various criteria in the social security legislation. Thus, it is considered as income in general terms. According to the 1997 Act[1] it is given the ability to deduct essential provisions from the assessable income. The tax deductions were for her educational expenses which has enabled her for the youth allowance income in the first place. The terms “private” and “domestic” of nature are not to be applied here on the grounds that they were done in order to better herself as a part of an investment in human capital. But, the necessity of the respondent to obtain a degree, which entitled to her to the youth allowance income was not her sole purpose in following the degree. According, to Commissioner of Taxation V Finn[2] it was stated that expenses that were done in the genuine purpose of obtaining or carrying out the process of acquiring knowledge, skill or vocation does not become of private nature just because the tax payer gained satisfaction in doing so. Hence the High court dismissed the appeal of the FC of T v Anstis at all costs.

Hence the significance of the High court is resembled.


The above describes and examines the functions and the resemblance of the ATO within the Australian system of law with regards to taxation and the significance of the Australian High Court in the arrival at the decision.


ABC News. (2017). Student beats Tax Office in landmark case. [online] Available at: [Accessed 7 Dec. 2017]. (2017). ATO Annual Report 2015-16 |. [online] Available at: [Accessed 7 Dec. 2017]. (2017). Commissioner of Taxation v Anstis. [online] Available at: [Accessed 7 Dec. 2017]. (2017). Anstis, Symone (M64 of 2010 ). [online] Available at: [Accessed 7 Dec. 2017]. (2017). Separation of Powers–An Overview. [online] Available at: [Accessed 7 Dec. 2017].

Office, P. (2017). Home | Parliamentary Education Office. [online] Available at: [Accessed 7 Dec. 2017].

TressCox Lawyers. (2017). Assessable income and deductions for expenses incurred in gaining or producing that income – High Court takes broad approach. [online] Available at:—high-court-takes-broad-approach/ [Accessed 7 Dec. 2017].

  1. Income Tax Assessment Act 1997
  2. FCT V Finn 1961