Incidence of Integrated Estate and Gift Duty
24.64. Since the base of the estate duty will include property not actually owned by the deceased at his death, it would be unfair to require that the whole estate duty be paid out of the property actually owned by the deceased which passes to his personal representative. The appropriate general principle is that duty should be apportioned between the actual estate and each item in what might be called the notional estate; and the personal representative and the Commissioner should, in respect of the duty attributable to the notional estate, have rights of recovery such that duty will fall on the person who might be said to be the beneficiary in that estate.
24.65. The application of the principle will be clear enough where the assets of a trust in which the deceased had a life interest are treated as part of his estate. Duty will be recoverable from the trustee. It will also be clear enough where assets over which the deceased had a general power of appointment that lapsed at his death are treated as part of his estate. Duty will be recoverable from the person who is or becomes owner in default of appointment. Where, however, shares are included in the estate at the value they would have had if rights attaching to them had not ceased on death, it may be difficult to identify the relevant property and the person who may be said to be the beneficiary. If ultimate liability to duty is to fall in any case on some person other than the personal representative, there should be a specific provision determining the incidence of duty.
24.66. Where a gift is made, the donor and the donee should have the choice as to who will pay any tax that may be attracted by the gift and an election should be made when the duty return is lodged by the donor. If the donor elects to bear the tax and the Commissioner is unable to recover the tax payable by the donor, he should have the right to assess the donee; conversely, if the donee elects and the Commissioner is unable to recover, he should be able to assess the donor. Where the tax base is extended in accordance with Appendix A to include deemed gifts, there should be a provision, wherever possible, identifying the donee.
24.67. Where the duty is assessed against the donor, then, as indicated in paragraphs 24.25–24.26, the gift must be grossed up by the amount of the duty. Where the duty is assessed against the donee, the tax should be assessed on the gift at the donor's rate. Neither a donor nor a donee who has paid tax should have any right to reimbursement from the other.
24.68. Where the legal personal representative is not resident in Australia and has no assets in Australia, it may be impossible under the present law for duty to be recovered because of the rule that the revenue laws of one country will not be enforced by another. This rule has been exploited in the past to the detriment of the Revenue, and the Committee recommends that steps be taken to prevent, as far as possible, its exploitation in the future. Where the Commissioner is otherwise unable to recover duty, each beneficiary should become personally liable for the whole of the duty up to the limit of the value of the property received by the beneficiary and interest should accrue on the unpaid tax. The legislation giving effect to this rule should be widely drawn.