The Secretary to the Treasury has forwarded the following memorandum from the Commissioner of Land Tax for advice:

Since the inception of the Land Tax Assessment Act, some owners of large estates have sought by various expedients to lessen their taxation burden.

Where there has been a distinct surrender of part of the land interest, beneficial as well as legal, no reasonable protest can be registered, but some of the transactions, while nominally protected by the law, are of such a nature that reasonable suspicion exists as to the bona fides of the parties concerned.

I submit some concrete cases in illustration of the principles involved. It will be seen that they are of a character calculated to defeat the purpose of the Act, viz. to make a person beneficially interested in land or the product of land, taxable on the aggregate value of the land which produces the income he enjoys.

The position can only be met by legislation, as even if the bona fides of a transaction be suspected, it is impossible under present conditions to secure legal proof of evasion. The courts also-inclusive of the High Court-will stand between the Department and the landowner if an attempt be made to tax him in respect of land which he has surrendered by form of law, though by some private agreement he may retain his beneficial enjoyment of the proceeds.

I would suggest that in any amending Act that may be contemplated, a provision be inserted requiring transfers to minors who are relatives of the transferor, or transfers to wives, who are not minors as a rule, to be made in trust-the trustee to be a Public Trustee or one of the public trust companies-before the transfer is recognised for purposes of taxation.

A special provision forbidding the retention of annuity charges in favour of the transferor, or the taking of mortgages by the transferor from the relative transferee, might be included.

If any such provisions would be illegal in a Taxing Act, it would be necessary to introduce special legislation, provided such powers are intra vires the Constitution Act.

I do not think that the Commonwealth can carry into effect by legislation the proposals set out in the memorandum of the Commissioner of Land Tax.

Under the Constitution the Commonwealth has power to legislate with regard to taxation, but the proposals of the Commissioner deal not with taxation but with the transfer of land.

The Commonwealth has power to say that such a thing being done, such and such taxation shall be imposed, but has no power under the guise of a taxation measure to legislate as to how landowners are or are not to transfer their land, that being a matter reserved to the States.

In my opinion, the Commonwealth has no power under the Constitution to legislate in the manner desired by the Commissioner of Land Tax.

[Vol. 13, p. 186]