Opinion Number. 435

Subject

TAXATION : LAND TAX CRITERIA FOR DETERMINING SERIOUS HARDSHIP

Key Legislation

LAND TAX ASSESSMENT ACT 1910-1911. s. 66

Date
Client
The Commissioner of Land Tax

The Treasurer has forwarded the following memorandum by the Commissioner of Land Tax for advice:

Mr A.B. of Rookwood, N.S.W. is an employee of the Railway Department in receipt of 7s per day. He has a wife and six children. According to his own representations, which for present purposes may be accepted as accurate, he has an interest as beneficiary in the estate of Mrs C.D.B., which prior to the imposition of the Federal Land Tax produced an income for him of about £.84 per annum, after providing for certain mortgage charges. After 1916 he will receive a share (1 /56th) of the net sale price of the land that produces this income, lessened by a special legacy of £400.

The estate in which he is a beneficiary owns land the unimproved value of which is declared by the Trustees to be £29700. Deductions from this value to the extent of £5538 were allowed in assessment, and tax to the amount of £ 181.15.1 became due as from 30 June 1910, and a further similar tax will be payable as from 30 June 1911.

The result of the Trustees' apportionment of Federal and State Land Taxation and other expenditure among the beneficiaries has reduced the income from £84 to £58.5.0 per annum. There are, however, 14 beneficiaries and if the £ 181.15.1 Federal Tax were shared equally among them it would only account for a diminution of income in each case to the extent of about £ 13. Mr B. is not a Federal taxpayer excepting through the Trust, and section 66 cannot apply directly to him. Nor can it apply to the Trust which is neither bankrupt nor insolvent nor has it experienced any loss that would bring it in the category of the cases that are entitled to relief under section 66.

Section 66 of the Land Tax Assessment Act 1910-1911 is as follows:

  1. In any case where it is shown to the satisfaction of the Commissioner that a taxpayer liable to pay land tax has become bankrupt or insolvent, or has suffered such a loss that the exaction of the full amount of tax will entail serious hardship, a Board consisting of the Commissioner, the Secretary to the Treasury, and the Comptroller-General of Customs, may release such taxpayer wholly or in part from his liability, and the Commissioner may make such entries and alterations in the assessment as are necessary for that purpose.
  2. The Commissioner shall be the Chairman of the Board, and the decision of the majority shall prevail.
  3. The Minister shall cause to be laid before both Houses of Parliament as soon as may be after the close of the financial year a full statement of all cases in which, and the grounds on which, liability has been so released.

The position, from the papers on the file, appears to be that Mr B. is joint owner with a number of other people of a block of land in Melbourne, upon which the trustee of the estate pays the tax.

In view of the decision of the High Court in Sendall's Case(1) that the trustee is only liable for the amount payable by the beneficiaries in respect of the trust land, I am of opinion that the beneficiaries should be regarded as taxpayers within the meaning of section 66 of the Land Tax Assessment Act.

The question then arises whether Mr B. has suffered such a loss that the exaction of the full amount of tax will entail serious hardship within the meaning of section 66 of the Land Tax Assessment Act 1910-1911.

The section applies only to the cases of bankruptcy, insolvency, and loss that would entail serious hardship if the tax were exacted.

In my opinion the loss must be suffered apart from and must have existed previous to the liability for land tax, and the mere fact that the collection of land tax will cause a diminution of income as in Mr B.'s case is not a loss within the meaning of the section.

Mr B. has not, in my opinion, suffered such a loss that the exaction of the full amount of tax will entail serious hardship within the meaning of section 66 of the Land Tax Assessment Act 1910-1911.

I note that the diminution in income is due to 'Federal and State land taxation, and other expenditure'. If he has one fifty-sixth share in the estate, his proportional share of the Federal land tax on the estate would only be £3.5.0.

[Vol. 9, p. 358]

(1)Sendall v. Federal Commissioner of Land Tax 12 C.L.R. 653.