Taylor v Commissioner of Taxation (Cth) [1970] HCA 10

High Court of Australia Kitto J. Taylor v Commissioner of Taxation (Cth) [1970] HCA 10

ORDER Appeals allowed with costs. Assessments set aside.

Cur. adv. vult.

April 8 Kitto J. delivered the following written judgment:—

I have heard together by consent of the parties three appeals against assessments of income tax in respect of income derived in the year ended 30th June 1968. The appellants are the same two persons in each case, the assessments having been made against them as trustees of three settlements made by one Leslie Norman Taylor on 28th April 1967. He had three infant children and each of them was the principal beneficiary of a settlement. The settled fund in each case was a sum of $10, and this sum the appellants as trustees invested in shares from which they derived dividends in the relevant year of income.

The Commissioner assessed the appellants to tax under s. 99A of the Income Tax Assessment Act 1936-1967 Cth in respect of each settlement, taking the view that no part of the net income of the trust estate was included in the assessable income of a beneficiary in pursuance of s. 97, and that in respect of no part of it were the trustees to be assessed and liable to pay tax in pursuance of s. 98: see sub-s. (4) (a) of s. 99A. The appellants objected on the ground that s. 97 or alternatively s. 98 applied to each of the three cases, contending that throughout the year the principal beneficiary in each case was presently entitled to the whole of the income of the trust estate. The contention was really limited to s. 98, for that is the section that applies where a beneficiary presently entitled to the income of a trust estate is under a legal disability.

It will be convenient to take as typical the settlement under which one of the settlor's sons was the principal beneficiary. The tenor of the settlement was that the income arising from the fund from the date of the settlement until the attainment by the son of the age of twenty-one or his death should be held upon trusts which, so far as material, may be shortly stated as follows: (1) to pay the son's parent or guardian for the son's maintenance, education, advancement, support or benefit, or to apply for such purposes, the whole or such part (if any) of the income as the trustees should in their absolute discretion think fit; (2) to accumulate and invest the balance (if any), or the whole if none should be applied as aforesaid, but so that it should not form an accretion to the trust fund but should be available for payment or application in accordance with (1) and otherwise should go in accordance with trusts next to be mentioned; (3) if the son should attain twenty-one years to hold the accumulated income (as well as future income) for him for his own use and benefit absolutely; (4) but if he should die before attaining twenty-one years to hold that income upon trust for his personal representatives absolutely to the intent that it should form part of his estate.