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

The following case is submitted for favour of advice:

Section 17 of the Estate Duty Assessment Act 1914 reads:

For the purpose of assessing the value for duty of the estate of any person dying after the commencement of this Act, all debts due and owing by the deceased at the time of his death shall be deducted from the gross value of the assessable estate if the deceased was at the time of his death domiciled in Australia.

By section 3 'debts' includes 'probate and succession duties payable under any State Act, but does not include voluntary debts'.

A claim has been made for deduction in respect of Federal land tax for the financial year 1914/15.

By section 12 of the Land Tax Assessment Act 1910-1914 land tax is 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.

Section 49 of the Land Tax Assessment Act reads:

Land tax for each year shall be due and payable on such date as appointed in that behalf by the Governor-General by notice published in the Gazette not less than one month before the date so appointed.

The date fixed by the Governor-General for payment of land tax for the financial year 1914/15 was 19th May 1915. Deceased died on 22nd March 1915. Notice of assessment of such tax issued on 20th April 1915.

It is contended by the solicitors for the estate that although the tax was not assessed till after testator's death nevertheless when so assessed it related back and was payable for a period in advance commencing 1st July 1914.

I shall be glad of your advice as to whether the amount in respect of land tax may be allowed as a deductible debt.

The section in question in the Estate Duty Assessment Act 1914 allows the deduction of 'debts due and owing by the deceased at the time of his death'.

In Wharton's Law Lexicon it is stated that a debt is said to be due the instant that it has an existence as a debt, and in Ex parte Kemp. In re Fastnedge L.R. 9 Ch. App. 383, Mellish L.J. in dealing with the meaning of the words 'debts due' in an insolvency said:

Now, the words 'debts due to him' are certainly words which are capable of a wide or a narrow construction. I think that prima facie, and if there be nothing in the context to give them a different construction, they would include all sums certain which any person is legally liable to pay, whether such sums had become actually payable or not. On the other hand, there can be no doubt that the word 'due' is constantly used in the sense of 'payable', and if it is used in that sense, then no debts which had not actually become payable when the act of bankruptcy was committed would be included. Lastly, the expression 'debts due' is sometimes used in bankruptcy proceedings to include all demands which can be proved against a bankrupt's estate, although some of them may not be strictly debts at all.

I think it is clear that, apart from special provisions, a debt to be due must be an ascertained sum, and not a mere future liability for an unascertained amount. There is nothing in the Estate Duty Assessment Act to override this meaning of 'debts due'.

The question then is whether at the time of the testator's death land tax was a debt for an ascertained sum.

Section 49 of the Land Tax Assessment Act 1910-1914 provides as follows:

Land tax for each year shall be due and payable on such date as appointed in that behalf by the Governor-General by notice published in the Gazette not less than one month before the date so appointed.

Section 51 (1) of the same Act provides:

Land tax shall be deemed when it becomes due or is payable to be a debt due to the King on behalf of the Commonwealth and payable to the Commissioner in the manner and at the place prescribed.

From these sections it is clear, I think, that land tax is not a debt due until the day on which it is declared to be due by the Governor-General by notice in the Gazette.

The land tax may be payable in respect of a period which commenced prior to the taxpayer's death, but there is nothing that I can find in the Act which makes it a debt due by the taxpayer before the time specified in the Gazette notice.

Although the land tax is not a debt 'due and owing by the deceased at the time of his death' within the meaning of section 17 of the Act, I do not think that that section alone contains the amounts that may be deducted from a person's estate.

I think that the administrator is entitled to deduct any other amounts which are not debts but which may be considered to be proper deductions for ascertaining what is the real value of the estate left by the taxpayer.

The land tax is, when due, a charge against the estate of the deceased taxpayer, and is payable out of his estate. The only persons personally liable for the tax are the taxpayer and his executors and administrators. The charge is in respect of the ownership of land at a time prior to the taxpayer's death, and as either he or his estate must pay the tax, if he has or leaves an estate of any value, the real value of his estate cannot properly be ascertained without deducting the amount due by the estate for land tax.

The liability for land tax having been imposed prior to the taxpayer's death, the fact that the amount of the liability was not ascertained at the time of the taxpayer's death does not make that liability any the less a deduction from the value of the estate.

In my opinion, the claim of the executors should be allowed.

[Vol. 14, p. 49]