Rofe v Deputy Federal Commissioner of Land Tax (NSW) [1920] HCA 71; (1920) 28 CLR 347 (11 November 1920)

HIGH COURT OF AUSTRALIA

Rofe and Another Appellants; and The Deputy Federal Commissioner of Land Tax for New South Wales Respondent.

H C of A

11 November 1920

Knox C.J., Isaacs and Rich JJ.

Leverrier K.C. (with him J. A. Browne), for the appellants.

Flannery K.C. (with him Corringham), for the respondent.

Leverrier K.C., in reply.

Nov. 11

Knox C.J.

The special case having been amended is now limited to the assessment for land tax for the financial year 1916-1917. The appellants challenge the assessment on the ground that they should have been allowed four deductions of £5,000 each instead of one deduction of £5,000. The appellants are the trustees of the will of Alfred Rofe, and they hold certain property for the benefit of the grandchildren of the testator. The trusts as set out in the will are for such of the children of his son Thomas Ernest Rofe living at the date of the testator's death or born afterwards as should attain the age of twenty-one years and if more than one as tenants in common in equal shares, but if all of the issue of such son should die under the age of twenty-one years then upon trust for the next-of-kin of such son in equal shares. Then there is a direction that until the shares of the children or next-of-kin of Thomas Ernest Rofe should be conveyed to them the trustees should receive the rents and profits of the property, over which they were given certain powers of management, and should accumulate the net rents and profits of the same until one of the children of Thomas Ernest Rofe should first attain the age of twenty-one years or until twenty-one years after the testator's death whichever period should first happen (such period being called "the income distribution period for Tom's children"), with a provision for maintenance, education and advancement of such children. Then follows the provision which is directly relevant to the question raised in the present case. It is stated in the special case as follows: "The testator further directed that from and after the income distribution period for Tom's children his trustees should thereafter on the first day of January in each year divide the net rents and profits" of the property "into as many equal parts or shares as there were children of his said son Thomas Ernest Rofe who were living on such day or who had died before such day over the age of twenty-one years, and should pay one of such equal parts or shares to each of such children or, if such child were under the age of twenty-one years, to the parent or guardian of such child or, if such child should have died after reaching the age of twenty-one years, to the representative of such deceased child, for and on behalf of such child under the age of twenty-one years or deceased child respectively."

The assessment appealed against being for the financial year 1916-1917, the relevant date at which to consider the ownership of the property is 30th June 1916. On that date the eldest child of Thomas Ernest Rofe, a daughter, had attained the age of twenty-one years and there were then living three other children all under the age of twenty-one years. The income distribution period referred to in the will had arrived on 9th October 1915, the date on which the eldest child attained the age of twenty-one years. The question then is whether, under the gift in the will which I have read and under the circumstances which I have stated, the appellants are entitled to one or more than one deduction of £5,000 in their assessment for land tax. Sec. 10 of the Land Tax Assessment Act provides that "land tax shall be levied and paid upon the unimproved value of all lands within the Commonwealth which are owned by taxpayers, and which are not exempt from taxation under this Act." Sec. 11 provides that "(1) Land tax shall be payable by the owner of land upon the taxable value of all land owned by him, and not exempt from taxation under this Act." Sec. 12 provides that "Land tax shall be charged on land as owned at noon on the thirtieth day of June immediately preceding the financial year in and for which the tax is levied." It is apparent from those sections that the person who is liable to pay land tax is the owner, or some person who by virtue of the Act is deemed to be the owner, on 30th June immediately preceding the year of assessment. "Owner" is defined in sec. 3 as including "every person who jointly or severally, whether at law or in equity, (a) is entitled to the land for any estate of freehold in possession; or (b) is entitled to receive, or in receipt of, or if the land were let to a tenant would be entitled to receive, the rents and profits thereof, whether as beneficial owner, trustee, mortgagee in possession, or otherwise." Now, the position of these beneficiaries on 30th June 1916 was that the eldest daughter, who had attained the age of twenty-one years, had a vested right to an aliquot share of the income of the property, the amount of that share being determined by the aggregate number of the beneficiaries who were in existence on 1st January in each year and of the beneficiaries who had died after attaining the age of twenty-one years. But under no circumstances could she, or her estate in the event of her death, be deprived of that share of the income. She had an absolutely vested interest in the share, the amount of which was to be determined by the state of facts existing on 1st January in each year. As to the other children, all of whom were under the age of twenty-one years on 30th June 1916, none of them had any right or title to any of the income which had accrued up to that date from 1st January 1916 unless he or she survived until 1st January 1917. It was not a case of the income being apportioned in the case of a child dying during the year, but the right to a share of the income depended on the child surviving until 1st January 1917. It is clear, therefore, as to the three children under the age of twenty-one years, first, that none of them was on 30th June 1916 entitled to the land for any estate of freehold in possession, and, secondly, that none of them was on that day entitled to receive or in receipt of the rents and profits either as beneficial owner or otherwise. That being so, none of those three children was an "owner" within the meaning of the Act, and therefore none of them was taxable under the Act, it not being suggested that their case comes under any provision of the Act under which they would be deemed to be owners.

Mr. Leverrier put his case on two grounds, to which the circumstances of the case afford a complete answer. The first ground rests on sec. 38 (7), which provides that where under the will of a testator who died before 1st July 1910 the beneficial interest in any land or in the income thereof is for the time being shared among a number of persons, standing in a certain relationship to the testator, in such a way that they are taxable as joint owners, then they shall be entitled, subject to certain qualifications, to more than one deduction of £5,000. That case depends on the beneficiaries being taxable as joint owners, and it is obvious that they cannot be "joint owners" unless they are "owners," and, as there is only one beneficiary who was an owner at the material time, it is quite clear that sec. 38 (7) cannot apply. Mr. Leverrier also put his case on the ground that the appellants, being assessed as trustees, could not be assessed for more tax than the aggregate of the amounts for which their cestuis que trustent would have been assessable, and that, as each of the cestuis que trustent would have been entitled to one deduction of £5,000, the trustees must be allowed four deductions of £5,000 each. But the same answer meets that argument. The fact is that none of the three younger children was assessable at all, and so there could only be two "owners" within the meaning of the Act. The trustees were owners, for they are declared to be so by sec. 33, and the eldest daughter was also an owner within the definition of that word. It is quite clear that she was the only owner, apart from the trustees, at the relevant date. That being so, it follows that even if effect were to be given to the second contention of Mr. Leverrier as to the extent of the liability of a trustee, as to which we need express no opinion, there could only be one deduction of £5,000.

For these reasons I am of opinion that the questions should be answered as follows: question 1, Yes; question 2, No. Question 3 need not be answered.

Isaacs J.

I agree.

Rich J.

I agree.

Questions answered accordingly.

Solicitors for the appellants, Alfred Rofe & Sons.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.