This portion of a Fair Work Commission decisions deals with the question whether a local government is a constitutional corporation for the purpose of Fair Work Act coverage.
“The Council is not a constitutional corporation
[8] A constitutional corporation is defined in s.12 of the Act as “a corporation to which paragraph 51(xx) of the Commonwealth of Australia Constitution Act (the Constitution) applies.” Section 51(xx) of the Constitution relevantly confers power on the Australian Parliament “to make laws… with respect to… foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth”.
[9] The Council is constituted and organised according to the LG Act. Although s.220 of the LG Act describes the Council as a body politic and not a body corporate or corporation, State Parliaments cannot determine the limits of federal legislative power.6 The description given to a body created by statute is not determinative of its character for the purpose of section 51(xx) of the Constitution. That is a matter of substance, not form.7
[10] The role of the Council under the LG Act is generally to act for the benefit of the local community and local area.8 This includes providing effective civic leadership, ensuring its own financial sustainability, acting in according with the LG Act and council plans, programs, strategies and policies, endorsing community strategic plans, delivery and other similar programs, optimising the allocation of council resources, continually reviewing council performance, making decisions necessary for the proper exercise of its regulatory functions, determining the process for appointment, and monitoring performance, of its general manager, consulting regularly with key stakeholders about its decisions and activities, and acting honestly, efficiently and appropriately.
[11] The Council can raise revenue and can invest money as well as borrow. It has the capacity to contract, to sue and to be sued. It can hold and sell property. It can engage in business activity. In my view, and despite provision in the LG Act to the contrary, the Council has “the full character of a corporation”.9
[12] The Council is plainly not a foreign or financial corporation. Is it a trading corporation? A corporation will be a trading corporation if it has the capacity to trade and undertakes sufficient trading for that to be considered a substantial, and not merely peripheral activity of the corporation.10 This is the so called ‘current activities test’.
[13] The Federal Court of Australia in Bankstown Handicapped Children’s Centre v Hillman11 observed that there is no ‘bright line’ that establishes the proportion of revenue that must come from a corporation’s trading activities to warrant characterisation as ‘substantial’. It is a matter of fact and degree, requiring an assessment both of the absolute and relative volume of the trading activities of the particular entity.12
[14] Other principles relevant to the characterisation of trading corporations can be found in Aboriginal Legal Service of Western Australia (Inc) v Lawrence [No 2]13 and in Roads and Maritime Services v Leeman.14 Further cases dealing with when a local council might be properly characterised as a trading corporation serve to illustrate the point that it remains, in each case, a question of fact and degree to be answered in light of the particular circumstances there present.15
[15] In this case, the Council has ‘service functions’, ‘regulatory functions’ and other miscellaneous functions under the LG Act. Its service functions include to provide goods, services and facilities, and to carry out activities appropriate to the current and future needs of the local community and wider public.16 Its regulatory functions are directed to management of stakeholder activities in the local government area, including the installation of structures, water, sewerage and stormwater services, waste management, community land use, safe access to public roads and certain other activities.17 The Council’s other functions include the compulsory acquisition of land, entry on private land for certain public purposes and establishment of special entertainment precincts.
[16] In 2024-25, the Council’s total income was approximately $380 million. Income was generated from a range of sources, but mainly from rates and charges (48%) and government grants (35%). Interest and investment income accounted for 5% of revenue, while a further 4% came from user fees. The remaining 8% was comprised of 4% (other revenue), 3% (other income), and 1% (disposal of assets).
[17] User fees included fees and charges related to the Council’s regulatory functions (planning and building, inspection services, environmental certification, animal impounding) as well as income derived from Council-operated childcare centres, car parks and sports fields. There was also rental from community halls and leaseback of council vehicles.
[18] ‘Other revenue’ included ex gratia rates, parking and other fines, fees for external works, sales including from art galleries and energy saving certificates, animal control, the diesel fuel rebate, compensation for easements, recovery of legal fees and insurance, and recycling income. ‘Other income’ included commercial leasing arrangements and income from an equity shareholding in an insurance entity, Civic Risk Mutual Limited.
[19] Some of these activities are trading activities, because they represent a revenue stream for the Council arising from the exchange of goods and/or services. This includes childcare centres, car parks and art galleries as well as the operation of sports facilities such as aquatic centres. Waste management services provided for a fee, and arrangements for the lease or hiring out of fields, halls and other assets are also trading activities. On the other side of the ledger, the Council is a purchaser of services, including design consultants and other contractors engaged to assist with the provision of public facilities and with compliance and reporting obligations. The Council has borrowings to fund the delivery of projects and holds equity in the local government insurance scheme referred to above.
[20] In 2025, the Council achieved a net deficit position of $10.4 million. In the circumstances, each of the Council’s revenue streams has a material bearing on its financial position. However, I am not satisfied that either individually or together, the trading activities of the Council comprise a substantial proportion of its total revenue. The Council clearly has the capacity to trade and does so, but its trading activity is a peripheral or incidental, rather than substantial, activity when considered in the context of its overall service, regulatory and other functions. Although on paper the sums may appear large, the value of the Council’s trading activities are to be considered in proportion to the Council’s operations as a whole.
[21] I find that the Council is not a trading corporation and that it is not otherwise a constitutional corporation.
Conclusion
[22] The Council is not a national system employer and it is not a constitutional corporation. It is not a constitutionally-covered entity for the purpose of Part 3-1 of the Act. This means the general protections provisions of the Act do not apply in relation to the employment of Ms Su and the matter cannot proceed as she requests.
[23] The application is dismissed.”