Confirms that a trust of income for religious and charitable institutions where the settlor retains only a power of selection among beneficiaries effectively divests the settlor of beneficial interest in the income for tax purposes.
Later decisions that cite Tunley v Federal Commissioner of Taxation
Tunley Appellant; and Federal Commissioner of Taxation Respondent.
H C of A
23 June 1927
Rich J.
Walsh, for the appellant.
Henchman, for the respondent.
Rich J.
In this appeal two questions are involved. The first relates to the genuineness of the settlement. Clear and convincing evidence was given which enabled me, without any hesitation, to hold that the settlement was not void within sec. 93 of the Income Tax Assessment Act 1922-1925. The remaining question is concerned with the construction of the settlement.
The declaration of trust—after reciting that the settlor was the holder and absolute owner of 1,500 fully paid up shares in the capital of Joyce Bros. and was desirous of dealing with the income to be henceforth derived therefrom to and for the ends, intents and purposes therein declared, and for that purpose of creating the trust therein contained—declared that the income to be derived from 1,500 specified shares should be held by the settlor to and for the sole and separate use and benefit of such religious and charitable institutions as the settlor should think fit during his lifetime, and that all income forthwith to be derived from the said shares should be paid by the settlor to any charitable or religious institutions or body for the sole use and benefit of such religious or charitable institutions as the settlor should decide. It was further declared that he held the said shares as trustee to and for the ends, &c., above set out and for the due fulfilment thereof. The document then provides that after the death of the settlor the said shares shall revert to and become part of his estate.
It was urged on behalf of the Commissioner that under the terms of the settlement it was competent for the settlor to retain the whole or portion of the income from the shares so settled, for his own benefit, according to whether he made no distribution or a partial distribution to religious and charitable institutions. Mr. Henchman, for the Commissioner, argued the case with great clearness and commendable frankness. And on the authorities cited by him (In re Willis[1] and In re White[2]) I hold that a power of selection only is reserved to the settlor, and that the gift to religious institutions is one to them for religious purposes. I also consider that the words "think fit" and "decide" in their connotation sufficiently bind the settlor, and that the settlor has effectually divested himself of the whole of the income of the shares the subject of the settlement. And I make a declaration accordingly.
The question is really of academic interest, and in view of the evidence given by the settlor I cannot imagine that the Commissioner will persist in any attempt to defeat a genuine desire on the part of this settlor to benefit charities. The settlor stated in his evidence that if the settlement now under consideration were inoperative he was willing to execute another document which would legally carry out his charitable intentions. His instructions were clear and definite enough. Indeed, he wished to set apart not only the income but also the corpus of the shares, but was advised to retain the corpus for his estate. Under these circumstances it seems rather futile and harassing to prosecute this matter further.
I hold that the document creates a trust of the whole of the income of the shares for the benefit of such religious and charitable institutions as may be selected by the settlor and that no interest in this income is reserved to the settlor.
In answer to me counsel for the settlor has undertaken to supply the Attorney-General of the State of Queensland and the Commissioner with an annual statement of such institutions and of the sums allocated to them.
Appeal allowed. Declare that the declaration of trust dated 19th February 1925 is not void under sec. 93 of the Income Tax Assessment Act 1922-1925 and that it completely divests the settlor of all beneficial interest in the income of the shares settled thereby during his lifetime. And the appellant by his counsel undertaking so to do, direct the appellant to supply the Attorney-General of the State of Queensland and the Commissioner with an annual statement of the institutions selected by him and of the sums allocated to them. Respondent to pay the costs.
Solicitor for the appellant, Stephens & Tozer.
Solicitor for the respondent, W. H. Sharwood, Crown Solicitor for the Commonwealth, by Chambers, McNab & McNab.