Smith v Federal Commissioner of Taxation [1928] HCA 5; (1928) 40 CLR 467 (12 April 1928)

HIGH COURT OF AUSTRALIA

Smith and Another Appellants; and The Federal Commissioner of Taxation Respondent.

H C of A

12 April 1928

Knox C.J.

Dudley Williams, for the appellants.

Hooton, for the respondent.

Dudley Williams, in reply,

Knox C.J.

The matter seems to me to be quite clear, though it is one of first impression. The provision in sec. 8 (6) of the Estate Duty Assessment Act is designed to confer on persons more or less immediately connected with the deceased a partial exemption from the duty ordinarily payable in respect of the property of a deceased person. I think that the Legislature has clearly expressed its intention that the benefit is to extend to all property which by force of the will or of the law as to the distribution of the estates of intestates passes directly from the testator or intestate to a member or members of the selected class, provided that on the death of the testator it can be shown from the terms of his will and by reference to the state of his family that the property must go directly from him to persons within that class and that in no conceivable event can it pass from the testator to any person who is outside that class. In other words I think that the section is intended to provide an exemption in the case of the devolution of property from a testator or an intestate to members of the privileged class. In the present case of course it cannot be said, looking at the terms of the will and having regard to the facts at the date of testator's death, that this property will pass to the grandchildren of the testator, because they may never come into existence. But in that case there will be a lapse of the gift of residue to the grandchildren and consequently an intestacy as to this property, and in that event, having regard to the state of the testator's family at the date of his death, the property can only go to his widow and daughter. So that, whatever happens, the persons to whom the property passes by reason of and upon the death of the testator will be members of the exempted class—either grandchildren taking under his will or his widow and daughter taking on an intestacy. For these reasons I think that duty should be charged at the lower rate on the amount in question.

Appeal allowed with costs and assessment amended accordingly.

Solicitors for the appellants, Campbell & Campbell.

Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth.