The Commissioner of Taxation has forwarded the following memorandum for advice:

Section 8(6) of the Estate Duty Assessment Act 1914 reads as follows: (6) In respect of so much of the estate as by will intestacy gift inter vivos or settlement passes to the widow or children or grandchildren of the deceased estate duty shall be assessed and payable at two-thirds of the rate which would otherwise be payable.

The question of the correct interpretation to be placed on the word 'passes' in the second line has now arisen. This word does not appear in any other part of the Act, consequently the intention of the legislature is not clear. The intention appears to be to treat with the gross estate 'passing' though it is possible to argue in favour of treatment of net estate only.

The former interpretation favours the taxpayer, and the latter the Department. Will you kindly favour me with an opinion in the matter and as the word is used in the English Estate Duty Act whether any ruling has been given by the English Court which may be accepted as a precedent.

The Act provides that duty is assessable on the total value of the estate less the debts due by the deceased, from which it might be assumed that the duty assessable to the widow and children is on the amount they receive from the estate after the debts have been deducted. It will depend, however, mainly on the actual circumstances of the different classes of cases.

Under a gift inter vivos or a settlement, the property is paid over before the testator's death, and, though included in his estate for the purpose of estate duty, is not part of his estate for the payment of his debts. The total value of the property having been paid over to or for the benefit of the widow and children, in my opinion, this total value is the amount which passes.

Under an intestacy the whole of the testator's estate affected by the intestacy is liable for his debts, and the amount the widow or children receive will be the amount paid over to them after the debts of the deceased have been paid.

In my opinion, in an intestacy the amount that passes under the intestacy is the net amount received.

Under a will, the testator may make no provision as to the fund from which debts are paid. In such a case the debts are borne by the whole estate, and consequently, in my opinion, the amount passing under the will is the net amount.

The testator may, however, provide that the shares of the widow and children are to be free from legacy or estate duty. In this case the debts are borne by the remainder of the estate, and, in my opinion, the amount passing under the will is the gross value of the shares.

[Vol. 13, p. 366]