Case X33

Members:
KL Beddoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 14 March 1990.

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K.L. Beddoe (Senior Member)

The question for decision is whether a gift of land to the Apostolic Church is an allowable deduction within the terms of sec. 78 of the Income Tax Assessment Act 1936 (``the Act''). The tribunal has before it six applications by different taxpayers who consented to their applications being heard together. The six applicants are partners in a business, the principal activity of which is the ownership and conduct of a farm.

2. In so far as it is relevant, sec. 78(1)(a) provides that gifts of money, or of property other than money which was purchased by the taxpayer within 12 months immediately preceding the making of the gift, made by the taxpayer in the year of income to a public benevolent institution shall be an allowable deduction.

3. Section 78(2) provides for the purposes of sec. 78(1)(a) that the value of a gift of property other than money shall be deemed to be the value of the property at the time of making the gift or the amount paid by the taxpayer for the property, whichever is the less.

4. Property is not defined for the purposes of the Act generally nor for the purposes of the section in particular. The applicants conducted their case on the basis that the word property referred to the rights of ownership in the

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subject land while the respondent's case was conducted on the basis that the word property referred to the object of ownership, i.e. the land itself. The respondent did not dispute that a gift had been made and that the value of the land gifted was $36,000.

5. Exhibit A is a copy of a memorandum of transfer dated 31 May 1983 evidencing a transfer of the land described therein from F Pty. Ltd. as trustee to the Apostolic Church of Queensland ``in pursuance of the desire of the Transferor to make a gift of the said land to the Apostolic Church of Queensland''.

6. Exhibit K is a copy of a certificate of title in respect of land said to be 8.4479 hectares in the name of F Pty. Ltd. as trustee. Exhibit D is a copy of a deed of grant evidencing the surrender of the land held by F Pty. Ltd. to the Crown in consideration for the grant of 8.372 hectares of land to F Pty. Ltd. It is apparent from examination of the exhibits that the Crown had resumed the balance of the land for road alignment works. No oral evidence was given on this. The deed of grant is dated 30 June 1983 and relates to the land on which the applicants conducted their farm.

7. The deed of grant does not evidence the transaction evidenced by ex. A.

8. It is apparent that a plan of resubdivision was prepared and what became Lot 1 of the new plan of resubdivision was excised from the main body of the land. This is evident from ex. J which is a copy of a certificate of title dated 23 November 1983. The excised land is situated at one corner of the farm property fronting a main road and opposite the Apostolic Church building in that city.

9. The evidence establishes that the trustee transferred Lot 1 to the Apostolic Church by the memorandum of transfer dated 31 May 1983. The transfer was made without consideration. The transfer was made without consideration. The trustee had done all that was necessary of it to effect the gift; the delay in registration of the Church as proprietor not being relevant to determine when the gift was made in these circumstances.

10. Exhibit B is a copy of a ``Nomination of Trustees'' dated 19 November 1973 whereby the previous proprietors of the land (presumably relatives of the present applicants) established a trust for the benefit of the applicants in respect of the land then held on a number of titles. As from 19 November 1973 the applicants were the beneficial owners of the land used as a farm and from which the land gifted to the Apostolic Church was excised. That farm land was committed to the business of the partnership constituted by the applicants albeit that the trustee F Pty. Ltd. was not a member of the partnership and did not derive rent in respect of the said land. Furthermore the land was treated as an asset of the partnership in its accounts.

11. Exhibit C evidences the sale of the farming property to the applicants apparently in 1973 although the documents were not stamped for duty purposes until early 1977.

12. I find as a fact that the applicants were the beneficial owners of the whole property immediately prior to the subject land being severed and gifted to the Apostolic Church and had been the beneficial owners at all relevant times.

13. Oral evidence at the hearing established that the land was transferred to the Apostolic Church to be used for the purpose of building an approved home under the Aged or Disabled Persons Homes Act 1954-1988 (ex. L).

14. Exhibit G is a written valuation by an estate agent in which he values the gifted land at $35,000. The Department of Social Security adopted a value of $36,000 for the purposes of calculating the grant payable under the Aged or Disabled Persons Homes Act 1954-1988 (ex. F).

15. In its income tax return for the year ended 30 June 1984 the partnership claimed a deduction of $36,000 in respect of the gift of land. That claim has not been accepted by the respondent, hence the present applications.

16. It was established by evidence of one of the applicants that the Church is a Christian Church and that the aged persons home was conducted by and within the affairs of the Church.

17. The essence of the case for the applicants is that the subject land was gifted to a public benevolent institution, the land having been purchased by the applicants within the 12 months immediately preceding the making of the gift. The applicants rely upon the subdivision of the land so as to create a separate lot to be gifted to the Church. Registration of the subdivision and transfer of the subdivided

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lot to the Church appear to have occurred contemporaneously.

18. In view of the fact that the applicants have been the beneficial owners of the entirety of the land from at least 1977, if not earlier, it is apparent that the applicants must establish purchase of the land in the prior 12 months. If the applicants had sold the land at market value to the Church and then made a donation of the proceeds of sale, no doubt such donation would be a deductible gift if made to a public benevolent institution.

19. That did not happen here and was recognised in the applicants' submission.

20. The applicants' representative submitted that the land was gifted to the Church for the use of the aged persons home - not for the use of the Church although the Church controls the running of the home. Exhibit L which is the written agreement between the Department of Social Security and the Church dated 19 December 1983 is the only evidence of substance about the status of the home. That document proceeds on the basis that the home was controlled by and was part of the Church. Oral evidence of separate funds held in respect of the Church and the home does not itself persuade me that the home was an institution in its own right. More importantly it does not persuade me that even if the home were an institution which in this sense I understand to be an establishment, that the home was a public institution at the time of the gift (per Starke J. in
Public Trustee (N.S.W.) & Ors v. F.C.T. (1934) 51 C.L.R. 75 at p. 100, the rest of the Court deciding on other grounds).

21. Furthermore, as the home was not in existence at the time of the gift of land upon which the home was to be built - it follows that the gift was made to the Church, as the relevant documents state (ex. A). The Church is clearly not a public benevolent institution. It is, of course, well settled that a gift or devise can create a public benevolent institution (
Lemm & Ors v. F.C.T. (1942) 66 C.L.R. 399) but there is no evidence in this case to show that the gift was made for any purpose other than a gift to the Church to facilitate the construction of the home. While it is readily apparent that an aged persons home could be a public benevolent institution it has not been established that the home is ``public'' nor has it been established that it is an institution outside the Church. If it existed at all when the gift was made then it was, on the evidence, part of the Church.

22. I have refrained from making any finding about whether the applicants purchased the land in the relevant sense because I did not have the benefit of full argument on the point and it is not necessary to decide the issue. It is not necessary in the circumstances to consider the operation of sec. 78(2) of the Act.

23. The objection decisions will be affirmed.