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

Section 18 (b) of the Income Tax Assessment Act allows as a deduction all rates and taxes including State and Federal land taxes and State income tax actually paid by the taxpayer during the year in which the income was received.

Advice is desired as to whether in a case where the title to a house is in the name of a taxpayer's wife but the husband personally pays all the rates and taxes, he is entitled to claim such payments as a deduction under the section quoted.

Section 18 (b) allows the taxpayer to deduct all rates and taxes including State and Federal land taxes and State income tax actually paid by him during the year in which the income was received.

This paragraph is in general terms and there is nothing in section 18 to limit it, as in some other paragraphs in the same section, to sums paid to produce income.

By paragraph (k) of section 20 it is provided that a deduction shall not be allowed in respect of payments made by husband to wife or by wife to husband. The payment by the husband of the rates due on the property of the wife, being a payment on account of the wife, is in essence a payment by the husband to the wife within the meaning of this paragraph.

Reading sections 18 and 20 together I think that the general words allowing a deduction for 'all rates and taxes . . . actually paid by the taxpayer . . . ' must be limited so as to exclude payments made by a taxpayer on behalf of his wife or by a female taxpayer on behalf of her husband.

In my opinion, the taxpayer is not entitled to deduct the rates paid by him on his wife's house.⁽²⁾

[Vol.14,p.121]

(1)In the opinion Book this opinion is year dated only,but this date is derived from a reference in the further opinion referred to in endnote(2).

(2)Subsequently,the Acting Commissioner of Taxtion requested a further opinion in this matter, stating,

‘The point has been taken that both these sections must be read literally, so that unless a husband has actually paid money to his wife, section 20 (k) cannot apply and that if he has actually paid any rates and taxes he is entitled to deduct them from his income’.

On 23 May 1917 [Vol. 15, p. 172] Sir Robert Garran, as Solicitor-General, replied: ‘I have carefully reconsidered my previous opinion, but see no reason for altering the views expressed therein’.