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

I shall be glad of your advice on the following question:

By her will (copy of which is attached) A.B.C. a person domiciled outside the Commonwealth bequeathed free of duty £1100 to certain English charities.

The trustees of the estate claim for purposes of assessment of estate duty a deduction in respect of these bequests from the value of the Australian assets in terms of section 8 (5) of the Estate Duty Assessment Act 1914, which reads:

Estate duty shall not be assessed or payable upon so much of the estate as is devised or bequeathed or passes by gift inter vivos or settlement for religious,scientific, charitable or public educational purposes.

It is understood the trustees base their claim upon a decision of the New South Wales Supreme Court, In re Buzzard (vide State Reports, N.S.W. 1902 Vol.2, p. 42), in which it was held by a majority of the Court that the Commissioner of Stamp Duties could not take cognisance of the fact that there were assets outside New South Wales or that the legacies had been paid out of such assets.

The will does not indicate whether these bequests are to be paid out of the Australian assets or out of the assets in the English estate.

The decision does not seem to commend itself on the ground of equity. It is true this Department deals only with the Australian estate and to that extent can only take cognisance of what is subject to assessment under the Federal law. I consider however if bequests are payable primarily out of personalty and there is no personalty in Australia, the plain inference is that the bequests are payable in England out of English personalty and to English charities.

As however the legal standpoint may be different I should be glad of your advice as to whether the bequests in question should be allowed as a deduction from the Australian assets.

I have considered the case In re Buzzard, but I do not think that that case is an authority on the question raised in the Commissioner's memorandum.

The decision of the majority of the Court, as shown in the judgment of Owen J. at p. 45, was based upon the particular wording of the New South Wales Act. That Act provided that the seal of the Court should not be affixed to any probate or letters of administration until all such probate stamp and other duties, if any, have been paid as would have been payable if the probate or administration had been originally granted by the Court. If the probate had been originally granted in the New South Wales Court the Commissioner could not take cognisance of the fact that there were assets outside that State, so the majority of the Court held upon the above provision in the Act that the same rule must apply on the resealing of the probate.

Cohen J. dissented from this view, holding that the Commissioner must look at the actual facts as to the assets out of which the legacies are actually paid. He cited in support of his decision the decision of the Victorian Full Court in The Queen v. Butler 18 V.L.R.239. This was a unanimous decision of the Full Court, consisting of Higinbotham C.J., Williams and Hood J.J. In that case a testator owned assets in Scotland, England, Queensland, New Zealand and Victoria. By his will he left his widow a legacy of £20,000, and the executors claimed that the Victorian assets must be considered as contributing to the legacy, so that only half rates on duty payable on the legacy to a widow would be payable. The Court refused to concur in that view, and Higinbotham C.J. in delivering judgment said:

We do not concur in this view . . . When an executor applies for probate in Victoria, the duty mentioned in the Seventh Schedule is prima facie chargeable on the value so determined of the estate in Victoria. The words in sec. 116 'property devised or bequeathed to the widow of a testator' clearly relate to property in Victoria, and strictly construed they would justify a reduction of the percentage only in cases where property in Victoria was specifically devised or bequeathed to the widow. But where it can be proved to the satisfaction of the master that a general legacy was necessarily payable, wholly or in part, out of the proceeds of property in Victoria, the master would be justified in allowing a proportionate reduction. In the present case as the legacy is not specific, and as it appears that there is property outside Victoria from which it might be paid, the burden of proof undoubtedly lies on the executor claiming the reduction, and no proof has been afforded by the executor that the whole or any part of the legacy must be paid out of the property of the testator in Victoria.

In my opinion, on the general question of the payment of legacies out of particular assets, In re Buzzard is no authority in the present case and is not binding on the Commissioner, but on the authority of The Queen v. Butler the Commissioner, before allowing a deduction from the Australian assets, is entitled to proof from the executors that the legacies must be paid out of assets in Australia. This proof has apparently not been forthcoming in the case under review. Apart from the point already discussed I think that on another ground the executors in this case are not entitled to the deduction on the proper construction of section 8 (5) of the Estate Duty Assessment Act 1914. That section grants a deduction in respect of gifts for religious, scientific, charitable or public educational purposes.

Now the objects which it is desired to obtain by this provision are twofold, viz.: (a) to encourage gifts for those purposes; (b) to ensure that the institutions receiving these gifts shall not be liable to a deduction of estate duty from these gifts.

I think, however, that it is manifest that the Commonwealth Parliament would, in passing an Act to raise revenue for the Commonwealth, only forgo that revenue for objects relating to institutions in the Commonwealth. There appears to me to be no reason why the Commonwealth Parliament in its Acts should make provision for the encouragement of gifts to institutions in Great Britain. See also Acts Interpretation Act 1901, section 21 (b).

Upon a consideration of the objects for which section 8 (5) was inserted I think that that section must be limited to institutions in the Commonwealth.

I am fortified in this construction by the dictum of Higinbotham C.J. in The Queen v. Butler where he held that the words 'property devised or bequeathed to the widow of a testator' in the Victorian Act clearly relate only to property in Victoria.

In my opinion, the claim of the executors should not be allowed.

[Vol. 14, p. 53]