High Court rules that the Federal Government can retrospectively validate unconstitutional State laws

On 15 October 2025, the High Court handed down its decision in G Global 120E T2 Pty Ltd v Commissioner of State Revenue; G Global 180Q Pty Ltd v Commissioner of State Revenue; G Global 180Q Pty Ltd v Commissioner of State Revenue; Stott v The Commonwealth of Australia [2025] HCA 39 (G Global). The decision concerned laws passed by the governments of Queensland and Victoria that sought to levy surcharge rates of duty and land tax on foreign residents that, at least in respect of certain countries, was in conflict with non-discrimination clauses in various international tax treaties given domestic effect by the International Tax Agreements Act 1953, a piece of Commonwealth legislation.

More specifically, certain tax treaties entered into by the Commonwealth contained provisions requiring that foreign nationals not be subject to taxation that is more burdensome than the taxation faced by resident nationals. For example, Article 24 of the tax treaty between Australia and Germany provides:

"Non-discrimination

Nationals of a Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith, which is other or more burdensome than the taxation and connected requirements to which nationals of that other State in the same circumstances, in particular with respect to residence, are or may be subjected. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States.

...

Enterprises of a Contracting State, the capital of which is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State, shall not be subjected in the first-mentioned State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which other similar enterprises of the first-mentioned State in similar circumstances are or may be subjected.

The provisions of this Article shall, notwithstanding the provisions of Article 2, apply to taxes of every kind and description."

Given these clauses, questions arose about the constitutional validity of State surcharge regimes with the NSW tax authorities publishing a ruling recognising that its own regime would not apply to nationals that were residents of countries with which there was a tax treaty that included such a non-discrimination clause.

In response to this uncertainty, the Federal Government passed the Treasury Laws Amendment (Foreign Investment) Act 2024 (Amending Act) essentially providing that the treaties were subject to anything inconsistent with any State or Commonwealth law continuing Australia's regular practice of departing from the terms of its international agreements when enacting those treaties in domestic law. That law was expressed to apply retroactively.

The decision in G Global essentially considered three main issues:

• whether prior to the enactment of the Amending Act, the State laws levying surcharge duty and land tax on foreign residents were inconsistent with a law of the Commonwealth and therefore invalid under section 109 of the Constitution;

• whether the Amending Act was effective to retrospectively cure the relevant inconsistency; and

• whether the Amending Act effected an acquisition of property otherwise than on just terms.

As concerns the State laws in issue, the Court stated that:

"there was clearly an inconsistency between Art 24 of the Agreements … and the higher rates imposed by the two land tax regimes on enterprises owned or controlled by residents of Germany and on nationals of New Zealand."

The State laws were considered to be a: "circumstance that is an exemplar of the application of s 109" of the Constitution and clearly "impaired or detracted from the operation of the Commonwealth law". Thus, if the Amending Act was ineffective to cure this inconsistency, the State laws would be invalid

However, the High Court unanimously held that the Amending Act was effective to cure this inconsistency including with retroactive effect overturning its prior precedent in University of Wollongong v Metwally (1984) 158 CLR 447 (Metwally). By way of background, in Viskauskas v Niland, the High Court held that Pt II of the New South Wales Anti‑Discrimination Act 1977 (NSW) was inconsistent with the Racial Discrimination Act 1975 (Cth) (RDA) and therefore invalid under section 109 of the Constitution. In response, the Commonwealth introduced amending legislation providing that the RDA was not intended and shall be deemed never to have been intended to exclude the operation of certain State laws. It was these amendments that were in issue in Metwally. As explained by the High Court in G Global:

"In Metwally, a majority of this Court (Gibbs CJ, Murphy, Brennan and Deane JJ) held that this amendment to the RDA did not result in Pt II of the ADA having a valid operation during any period prior to the amendment coming into force. Each of Murphy, Brennan and Deane JJ held that the Commonwealth Parliament could not retroactively undo or alter the invalidating effect that s 109 previously had upon a State law. The reasoning of Gibbs CJ was arguably narrower in that his Honour held that the Commonwealth could not retroactively undo or alter the invalidating effect that s 109 previously had upon a State law by "declaring" or "asserti[ng]" that the relevant Commonwealth law was never intended to exclude the operation of that State law."

The High Court in G Global accepted that the principle in Metwally would preclude the revival of the State laws in issue but also concluded that Metwally should be overturned. The reasons for overturning Metwally are reproduced below but it is apparent that the Court was concerned that Metwally imposed an unjustifiable limit on the Commonwealth's ability to introduce legislation with retroactive effect. Specifically:

"Not only does the principle for which Metwally stands not rest upon principles carefully worked out in a succession of cases before or after it was decided, the reasoning is contrary to authorities which have consistently confirmed the capacity of the Commonwealth Parliament to enact (effective) retroactive laws. Further, Metwally achieves no useful result in that the means of retroactively avoiding an inconsistency between a Commonwealth law and a State law suggested by the majority is to have the Commonwealth Parliament amend its laws to enable the State Parliament to enact retrospective legislation to the same effect as legislation that it has already enacted. Thus, even assuming that it is a purpose of s 109 to ensure that the citizen may know which of two inconsistent laws they are required to observe, the Metwally principle does not advance that purpose. There are no countervailing considerations. Metwally concerns a question of "constitutional importance". It is "manifestly wrong". It should be reopened and overruled."

It followed from this conclusion that the Amending Act was effective to remove the inconsistency and revive the State laws imposing surcharge duty and land tax. This meant the Court was required to consider the third issue concerning an acquisition of property otherwise than on just terms. To briefly summarise this position, it is to be appreciated that the Commonwealth can only make laws that are referable to a legislative head of power. In this respect, section 51(xxxi) of the Constitution provides that the Commonwealth may only make laws with respect to the acquisition of property on just terms. In G Global, the argument advanced on behalf of the taxpayers essentially proceeded as follows:

• the States had passed laws and had levied taxes that were invalid and there was a period of time within which the taxpayer was owed moneys incorrectly collected by the States;

• the moneys owed were a chose in action being a type of property right;

• by passing the Amending Act and retrospectively validating the State legislation, the Commonwealth had extinguished that property right and was therefore an acquisition of property other than on just terms such that the Commonwealth had no power to pass the Amending Act to this effect.

In answer to these submissions, the Court drew on prior authority considering the relationship between genuine taxation and the acquisition of property noting that except in very limited circumstances, the two are mutually exclusive. Specifically, in Mutual Pools & Staff Pty Ltd v The Commonwealth [1994] HCA 9, Mason CJ considered that:

"because the purpose served by an exercise of the taxation power conferred by s 51(ii) is compulsorily to acquire money for public purposes, a law that relates to the imposition of taxation will rarely, if ever, amount at the same time to a law with respect to the acquisition of property within the meaning of s 51(xxxi). Of its nature 'taxation' presupposes the absence of the kind of quid pro quo involved in the "just terms" prescribed by s 51(xxxi)."

This passage was endorsed by the Court in G Global at [107]. The Court considered that the State laws plainly imposed genuine taxation with the result that a Commonwealth law that revived taxation laws could not be characterised as a law with respect to the acquisition of property; "even if the Commonwealth law can also be characterised as a law extinguishing choses in action for the recovery of payments of taxes levied pursuant to State laws that were previously rendered inoperative by s 109 of the Constitution".

The decision is interesting in that it confirms that the State-based foreign surcharge regimes are contrary to Australia's international obligations as set out in treaties negotiated with foreign countries. Although the Commonwealth was able to retroactively ensure that those regimes were valid as a matter of our domestic law, it is apparent that those laws are inconsistent with international law notwithstanding the Commonwealth's claims to the contrary. The decision also emphasises and enhances the ability of the Commonwealth to make retrospective and retroactive laws with few limits on such powers.

The outcome is disappointing for taxpayers who may have correctly surmised that these regimes were unconstitutional only to have those liabilities revived by legislation enacted with retroactive effect.