Queensland Trustees Limited v Deputy Federal Commissioner of Land Tax (Qld)

Queensland Trustees Ltd. appealed to the Supreme Court of Queensland against an assessment for land tax for the year 1916-1917. The appeal concerned the estate of William Perry, who died in 1882, leaving real estate in Brisbane. The trustees were directed by the will to pay several annuities out of the clear annual income derived from this property. All but one annuity, a £300 annual payment to Mary Hay Perry (later Kilby), had ceased by 1910. The Deputy Federal Commissioner of Land Tax assessed the trustees on the full unimproved value of the Brisbane property, disallowing a deduction for the value of Mary Hay Kilby's annuity, which had been allowed in previous years.

The legal issues before the High Court were whether the Brisbane lands were charged with the annuity to Mary Hay Kilby within the meaning of section 34 of the Land Tax Assessment Act 1910-1916, and consequently, whether the trustees were entitled to a deduction for the value of this annuity from the unimproved value of the property, in addition to the general statutory deduction. The Deputy Commissioner argued that the annuity was only a charge on income and not on the corpus of the land, distinguishing the case from others where a deduction was allowed.

The Court held that while the annuities were to be paid out of the income derived from the land, this did not preclude them from constituting a charge on the land itself for the purposes of section 34. The Court reasoned that the testator's intention, as expressed in the will, was to create a charge on the income, but this equitable charge, which diminished the profitable enjoyment of the land and would be taken into account on any sale or mortgage, was sufficient to be considered a charge on the land within the meaning of the Act. The Court distinguished the present case from *Cochrane v. Federal Commissioner of Land Tax*, finding that the issue here was not about the annuitant's liability but the owner's entitlement to a deduction under section 34.

The Court answered both questions in the affirmative, finding that the lands were charged with the annuity and that the trustees were entitled to the statutory deduction. The case was remitted to the Supreme Court of Queensland with this opinion, and costs were to be costs in the appeal.