1 The applicant is the owner and registered proprietor of a property on which is situated a house at 34 Rannoch Avenue Mt Eliza (the land). It is agreed between the parties that the land is owned by the applicant in its capacity as trustee for the J. & K. Trust (the trust) and since late 1989, the house on the land and the land has been occupied by Mr & Mrs de Wijn and their children as their principal place of residence.

2 On 26 March 2004, the respondent issued to the applicant an assessment for land tax for 2004 in respect of, inter alia, the land. On 9 May 2004 the applicant objected to the assessment. By letter 17 February 2005, the Commissioner disallowed the objection. Because the March assessment included land not owned by the applicant at the relevant time (31 December 2000), on 23 February 2005 respondent issued an amended notice of assessment for land tax in the sum of $13,102.50. By a letter dated 18 March 2005, the applicant's solicitors requested that the decision of the respondent be referred to the Tribunal for review, which the respondent did on 13 May 2005.

3 The application before me proceeded on the issues of whether the trust deed which established the Trust was a discretionary trust within the meaning of S.13AA of the Land Tax Act 1958 (the Act) and a further ground upon which the respondent sought leave pursuant to S.26 of the Act that Mr & Mrs de Wijn and their children were not beneficiaries within the meaning of S.13A of the Act.

4 Ms Alpins who appeared on behalf of the applicant conceded that her client did not suffer prejudice by the respondent arguing whether Mr & Mrs de Wijn and their children were beneficiaries of the trust pursuant to S.13A of the Act, however she did not consent to leave being given to the Commissioner. On that basis, it was agreed that the point should be argued before me and I should determine it.

5 In deciding the points in issue it is imperative, that I should examine both the deed as amended and the relevant parts of the statute and determine the points in that context.

6 The trust was established by a deed made 28 June 1976, which deed was amended several times the last date being on 10 November 2003. The relevant parts of the deed as amended read as follows:

1. IN this Settlement the following terms where the context admits shall have the following meanings:-

(a) the 'Specified Beneficiary' and the 'Specified Beneficiaries' mean the person or persons named and described or defined as such in the Schedule.

(i) the Specified Beneficiary and the Specified Beneficiaries;

(ii) the brothers and sisters, children and grandchildren of the Specified Beneficiary or Specified Beneficiaries and the spouses, children and grandchildren of such brothers and sisters children and grandchildren;

(c) 'Additional Income Beneficiary' means any person or persons adverted to in the Schedule and such person or persons shall be treated as a General Beneficiary for the purposes of declarations of exclusion under the last proviso ...

(e) 'the Trust Fund' means the said settled sum being a sum paid or to be paid by the Settlor to the Trustees upon the execution hereof all moneys investments and property paid or transferred to and accepted by the Trustees as additions to the Trust Fund the accumulations of income hereinafter directed or empowered to be made all accretions to the Trust fund and the investments and property from time to time representing the said money investments property accumulations and accretions or any part or parts thereof respectively.

(i) the first to occur of the following dates, namely:-

A. the day specified in the Schedule as 'the Vesting Day';

B. such date being earlier than the day so specified as the Trustees may in their absolute discretion (subject to clause 10 hereof) with the consent of the Guardian if there is a Guardian on the date of appointment and if there is then no Guardian without any consent appoint; or

(ii) such date being later than the day specified in the Schedule as 'the Vesting Day' as the Trustees may in their absolute discretion ...

2. IN consideration of the premises the Settlor as Settlor HEREBY DECLARES that the Trustees shall and the Trustees HEREBY DECLARE that they will henceforth stand possessed of the Trust Fund and of the income thereof upon the trusts and with and subject to the powers and provisions hereinafter expressed concerning the same.

3. (a) The Trustees shall in each Accounting Period or as soon as practicable thereafter determine the net income of the Trust Fund and in particular all expenses paid or payable by the Trustees as described in Clause 7(g) hereof,

(b) The Trustees may at any time prior to the expiration of each Accounting Period until the Vesting Day determine with respect to all or any part or parts of the net income of the Trust Fund for such Accounting Period to do all or any of the following:-

(i) pay apply or set aside the same for any one or more of the General Beneficiaries living or in existence at the time of the determination;

(iii) pay apply or set aside the same for such charitable purposes as the Trustees may think fit.

(c) The following rules shall apply to any determination made pursuant to paragraph (b) of this Clause, namely:-

(iv) The Trustees shall have a complete discretion as to the making of any determination and shall not be bound to assign any reason therefore;

(v) In making any determination to pay apply to set aside any amount the Trustees may exclude any General Beneficiary and may determine to apply or set aside such amount to or for or divide the same between General Beneficiaries in such proportions and in such manner as they in their absolute discretion shall think fit;

(vi) Without limiting the Trustees ability to make a determination by other means the Trustees may effect a determination for the purposes of this clause by oral declaration or by written statement whether or not published to any person and a certificate by the Trustees as to any determination shall be prima facie evidence that such determination was made as and when set out in such certificate.

(e) The Trustees shall hold as much of the net income of the Trust Fund for each Accounting Period as shall not be the subject of a determination effectively made at or prior to the end of such Accounting Period pursuant to paragraph (b) of this Clause as and accretion or accumulation to the Trust Fund.

4. AS from the Vesting Day the Trustee shall stand possessed of the Trust Fund and the income thereof

(a) if one Specified Beneficiary is named or described in the Schedule in trust for such Specified Beneficiary absolutely and where two or more Specified Beneficiaries are so named or described in trust for such of the Specified Beneficiaries as tenants in common in equal shares absolutely provided always that the children (if any) of any Specified Beneficiary who dies before the Vesting Day shall take as tenants in common in equal shares the share which such deceased Specified Beneficiary would have received had he or she survived to the Vesting Day and the children of any deceased child (who dies before the Vesting Day) of any such Specified Beneficiary shall take (and in turn the descendants of any such children who dies before the Vesting Day shall take the share calculated per stirpes which that deceased would have taken) as tenants in common in equal shares the share which such deceased child would have received had he or she survived to the Vesting Day;

(b) if one Specified Beneficiary is named or described in the Schedule and if the Trust Fund is not disposed of by the last preceding paragraph in trust for the brothers and sisters then living of the Specified Beneficiary as tenants in common in equal shares provided that the children (if any) of a deceased brother or sister shall take as tenants in common in equal shares the share which such deceased brother or sister would have received had he or she survived to the Vesting Day and the children of any deceased child (who dies before the Vesting Day) of any such brother or sister shall take (and in turn the descendants of any of such children who die before the Vesting Day shall take the share calculated per stirpes which that deceased would have taken) as tenants in common in equal shares the share which such deceased child would have taken had he or she survived to the Vesting Day;

(c) if in the events which happen or if for any reason whatsoever any part or parts of the Trust Fund shall not be effectively or validly disposed of by the trusts declared by this Deed or by any Deed from time to time in force varying altering or adding to such trusts the Trustees shall stand possessed of such part or parts of the Trust fund as aforesaid for the next-of-kin (but not including the Settlor, Guardian, appointor or any of the Trustees hereof unless specifically included in the Schedule as a Specified Beneficiary) of the Specified Beneficiary if one only is named or described in the Schedule and if more than one then in trust for the next-of-kin (but not including the Guardian Appointor Settlor or any of the Trustees hereof unless specifically included in the Schedule as a Specified Beneficiary) of the last to die of the Specified Beneficiaries who in either case are living when the said part or parts of the Trust fund falls or fall into possession as tenants in common in equal shares absolutely and if there shall be no such next-of-kin then upon trust for the Scout Association of Australia - Victoria branch.

7 By Clause 6 of a deed amending the trust deed, dated 10 November 2003 the following was inserted into the deed:

That such further and consequential amendments be made thereto as to ensure that the vesting of the whole or any part of the property of the J. & K. Trust is:

(a) No required to be determined by the Trustee (or any other person) either in respect of the identity of the beneficiaries or the quantum of interest to be taken, or both; and/or

(b) Will not occur in the event that a discretion conferred under the Deed of Settlement is not exercised.

SPECIFIED BENEFICIARY/BENEFICIARIES: Any children and their spouses born or unborn at the date hereof of Kaye Helen Marsh and John Willem de Wijn, Kaye Helen de Wijn.

ADDITIONAL MEMBERS OF THE CLASS OF BENEFICIARIES: Kaye Helen Marsh, John Willem de Wijn, any employee their spouse widow or children of the trustee, any school college or University to which any beneficiary hereof may from time to time attend, Darwed Estates Pty Ltd in its capacity as trustee of the M. & K. Property Trust, Atter Pty Ltd in its capacity as trustee of the Atter Trust.

VESTING DAY: SEVENTY-NINE YEARS FROM THE DATE HEREOF

9 The legislation relevant to this application is the Act. By Section 3 of the Act owner is defined as follows:

'owner' in respect of land means, except in Part IIA, -

(a) every person entitled to any land for any estate of freehold in possession;

(b) every person entitled to any land under any lease or licence from the Crown as to which he has any right either absolute or conditional of acquiring the fee-simple;

(c) every settler grantor assignor or transferor of land comprised in any settlement grant assignment transfer or conveyance not made bona fide for valuable consideration;

(d) every person entitled as aforesaid to any land subject to any mortgage;

(e) every person entitled to any land partly in one and partly in another or others of the foregoing ways -

and includes every person who by virtue of this Act is deemed to be an owner.

PART IIA - PRINCIPAL PLACE OF RESIDENCE EXEMPTION

'discretionary trust' means a trust under which the vesting of the whole or any part of the trust property -

(a) is required to be determined by a person either in respect of the identity of the beneficiaries or the quantum of interest to be taken, or both; or

(b) will occur in the event that a discretion conferred under the trust is not exercised;

'trustee' means trustee within the meaning of section 3(1) but does not include -

13A (1) Subject to this Part, the following land is exempt from taxation -

(a) land owned by a natural person that is used and occupied as the principal place of residence of that person;

(b) land owned by a trustee of a trust that is used and occupied as the principal place of residence of a natural person who is a beneficiary of the trust.

13J (1) Despite anything to the contrary in this Part, if -

(a) an exemption from taxation or a refund of tax is provided for in this part as a consequence of the continuous use and occupation of land as the principal place of residence of one or more beneficiaries under a trust; and

(b) other beneficiaries under the trust who do not use and occupy the land as their principal place of residence have a beneficial interest in the land -

the amount of the exemption or refund is determined as if the value of the land for the purposes of the exemption or refund were such proportion of the value of the land as is equal to the proportion that the interest in the land held by the beneficiary bears to the total interests of all beneficiaries in the land.

51 Equitable owners to be liable as if legal owners subject to deduction of any tax paid by legal owner

Subject to the other provisions in this Act, the owner of any equitable estate or interest in land shall be assessed and liable in respect of tax as if the estate or interest so owned by him was legal, but there shall be deducted from the said tax so payable by him in respect of that estate or interest the amount of any tax paid in respect thereof by the legal owner of the land.

52 Trustees to be liable as if beneficially entitled

(1) Every person in whom land is vested as a trustee, shall make returns and be assessed and liable in respect of the tax as if he were beneficially entitled to such land, save that when he is the owner of different lands in severalty in trust for different beneficial owners who are not, by reason of joint occupation or otherwise, liable to be jointly assessed for tax in respect of the same, the tax so payable by him shall be separately calculated and assessed in respect of each of those lands; and save also that when a trustee is also the beneficial owner of other land, he shall be separately assessed in respect of that land, and of the land of which he is a trustee, unless by reason of joint occupancy or for any other reason he is liable to be jointly assessed independently of this section.

(2) Provided that any trustee who has paid any tax under this section shall be entitled to be repaid the amount he has so paid by the owner of any equitable estate or interest in land who is also liable to pay such tax and in addition shall have a right to be recouped out of any of the trust property in his hands subject to the same or the like trusts as the land on which the tax is charged.

10 It should also be noted, that Section 6 and Section 8 are the charging provisions of the Act.

11 The High Court in C.P.T. Custodian Pty Ltd and Commissioner of State Revenue; Commissioner of State Revenue and Karingal 2 Holdings Pty Ltd [2005] HCA 53 (28 September 2005), (the Karingal case) in a case concerning the Act, but dealing with unit trusts commented on the approach which should be taken. They Honours stated at paragraph 14:

The first step was to ascertain the terms of the trusts upon which the relevant lands were held. The second was to construe the statutory definition to ascertain whether the rights of the taxpayers under those trusts fell within that definition. ...

[15] All depends upon, as Tamberlin and Hely JJ put it in Kent v SS 'Maria Luisa' (No. 2), upon the terms of the particular trust.

ARE MR & MRS DE WIJN AND THEIR CHILDREN BENEFICIARIES OF THE TRUST?

12 It is conceded, that Mr & Mrs de Wijn and their children used and occupied the land as the principal place of residence within the meaning of S.13A(1)(b). It was also conceded by implication that they were natural persons within the meaning of that sub-section. However, Mr Caleo, Counsel for the respondent submitted that they were not beneficiaries within the meaning of the sub-section. Mr Caleo stated:

The phrase 'a beneficiary of the trust' requires the identification of a person with proprietary interest in the relevant trust property. It contemplates

'beneficiaries who may be capable of being assessed to land tax in respect of their equitable estate or interest pursuant to S.51 and who may be liable to reimburse the trustee under S.52(2)': Liken Nominees Pty Ltd v Commissioner of State Revenue [105] VSC 247 at [16]

A person is not properly characterised as 'a beneficiary of the trust' for the purpose of Section 13A(1)(b), merely because he or she is a member of a class or object of a power of appointment. The phrase 'beneficiary of the trust' should be interpreted consistently with the phrases 'beneficial owners' in Section 52(1) and 'the owner of any equitable estate or interest in land' in Section 51. The provisions of Section 13J(1) (compel such an interpretation).

13 Mr Caleo further stated that at the relevant time there was no natural person who had an interest in the property held subject to the trust sufficient to characterise that person as a beneficiary or a beneficial owner.

14 S.13A(1)(b) exempts land from land tax in the circumstances described therein. A beneficiary for the purposes of the exemption in 13A(1)(b) may, but need not, have a proprietary interest in the land for the land to be exempt. In my view the provision merely requires that the land be owned by a trustee and that the relevant natural person be a beneficiary of the trust. Whether a beneficiary constitutes an equitable owner of the land who could be liable for tax for the purposes of Sections 51 and 52 is completely irrelevant to whether the land is exempt under S.13A(1)(b). A beneficiary of a trust has a right to due administration thereof, which constitutes an equitable chosen action see Ford and Lee, Principles of the Law of Trust 3rd Edition at [1790, 1800]. A person who is merely an object of a power of appointment under a trust is a beneficiary. See Ford and Lee, [5000].

15 While, Mr Caleo has attempted to limit the meaning of beneficiary by reference to S.13J and S.51 and 52 of the Act, in my view, where a term is clear on its face and not ambiguous, it is unnecessary to go searching through other provisions of the statute in order to determine its meaning. If the legislature had intended the term beneficiary to have the limited application suggested by Mr Caleo, it would have been relatively easy for it to define the term with that limited application in S.13AA as it has with other terms. However it has chosen not to do so. In K. & S. Lake City Freighters Pty Ltd v Gordon and Gotch [1985] HCA 48; 157 CLR 309, at 324 where the High Court were construing words in the Motor Vehicle Act 1959 (SA), it said:

The word is so used in many places in Part IV. There is, in my view no valid reason for holding that it is not used with that ordinary wide meaning when it first occurs in S.133.

16 Mr Caleo cited the same case for the proposition that this section should not be read in isolation. At p.315 the Court stated:

... to read the section in isolation from the enactment of which it forms a part is to offend against the cardinal rule of statutory interpretation that requires that the words of a statute be read in their context ... problems of legal interpretation are not solved satisfactorily by ritual incarnations which emphasise the clarity of meaning which were to have been viewed in isolation, divorced from their context. The modern approach to interpretation insists that the context be considered in the first instance, especially in the case of general words, and not merely at some late state when ambiguity might be thought to arise.

17 However here there is no warrant whatsoever for giving the word beneficiary any other than the wide meaning to which it is normally used. S.13J only becomes relevant if the land is only partially exempt. Further it is noted, that 13J(1)(a) like 13A(b) uses the term beneficiaries under a trust, this should be contrasted with the term used in 13J(1)(b) a beneficial interest in the land. The term beneficial interest in land requires that the beneficiary have a proprietary interest, as a beneficiary must have a proprietary interest to have a beneficial interest in a specific trust asset. See Costa and Duppe Properties Pty Ltd v Duppe [1996] VR 90 at 96. It would seem that it necessarily follows that a beneficiary to qualify pursuant to S.13A(1)(b) is not required to have a proprietary interest although such an interest would not of course be exclusionary from that provision.

18 Mr & Mrs de Wijn and their children are and were at the relevant time each a beneficiary of the trust for the purposes of S.13A(1)(b) by virtue of being an object of the trustee's power of appointment pursuant to Clause 3(b)(i) of the deed. Further they are each a beneficiary by virtue of their contingent proprietary interest under Clause 4 of the deed.

19 Sections 51 and 52 of the Act have no bearing on whether land is exempt under S.13A(1)(b). Those provisions use different terminology for what is a completely different purpose, that is, whether the land is exempt from tax has nothing to do with who is assessable for land tax. Sections 51 and 52 are largely concerned with avoiding double taxation. Sections 51 and 52 have no application with respect to land that is exempt from land tax. They can only become relevant if a beneficiary is liable to land tax chargeable by virtue of the application of S.13J(1), which is a completely different situation to what I am concerned with here.

20 Given the different purpose and ambit of Part IIA of the Act and S.51 and 52 in my view there is no reason to read down the exemption in 13A(1)(b) in the manner suggested by Mr Caleo. The terminology used in Part IIA and Section 51 and 52 are intentionally different. The requisite nature of a beneficiary's interest for the purposes of the land being exempt from land tax as their principal place of residence is different from that which is required for the purposes of a beneficiary's liability to land tax.

21 Thus in conclusion on this point I find that Mr & Mrs De Wijn and their children are beneficiaries of the Trust within the meaning of the word beneficiary as used in S.13A(1)(b). As a result, it necessarily follows that the respondent cannot succeed on the extra point, and leave will be refused pursuant to S.26 of the Act.

WHETHER THE TRUST IS A DISCRETIONARY TRUST BY VIRTUE OF THE DEFINITION OF TRUSTEE AS CONTAINED IN S.13AA

22 A trustee of a discretionary trust is not entitled to the exemption in S.13A of the Act. In deciding whether the Trust is a discretionary trust within the meaning of the Act, it is important that the definition of discretionary trust in S.13AA be examined.

23 It should be noted, that Mr Caleo stated that he did not intend to argue that the Trust came within the provision of paragraph (a) of the definition of discretionary trust however he wished to reserve his position in relation to that argument should this application be taken further to another place. He said he took this position because while he was aware of the decision of Milligans and Sons Pty Ltd v Chief Commissioner of Land Tax (NSW) (1986) 17 ATR 994, he was of the view that that decision was wrong. As a result, the only issue that I will decide here is whether the Trust comes within the paragraph (b) of the definition of discretionary trust in S.13AA. Both parties agreed, that the term discretionary trust is defined exhaustively in S.13AA. Mr Caleo on behalf of the respondent submitted that the words trust property mean real and personal property the subject of the trust. He stated that the definition of owner in S.13AA refers to land and that if the legislature had intended the definition of discretionary trust to be confined to land it would have used that expression. He also referred to the fact that in S.13J the word land is used. He stated that the definition of discretionary trusts deals with the character of the trust itself not with the land that it may own. He said that one must look at the trust and the trust deed to determine what is the trust property.

24 Contrary to Mr Caleo's submission, Ms Alpins stated in regard to the meaning of trust property:

In that regard, it must be noted that the statutory definition only applies to trusts under which 'trust property' will vest. Trust property' is defined in Butterworth's Encyclopaedic Australian Legal Dictionary as 'property forming the subject of a trust'. Furthermore it is common usage to refer to the subject matter of a particular trust as the 'trust property' or synonymously as the trust estate. Trust property is to be distinguished from income derived therefrom. Accordingly, the definition is only concerned with the disposition of corpus and not income. This focus perhaps arises from the fact that the Act concerns tax imposed on land, which might be trust property; it is not tax on income derived from land. ...

Clause 4 of the deed provides for the vesting of the trust corpus. It provides that, as from the vesting day, the trustee is to hold the trust fund (and any income thereof) on trust for specific beneficiaries in specific shares. The 'Trust Fund' is the subject matter of the Trust and so includes the Property (see definition in Clause 1(e)).

If it is accepted that the statutory definition is only concerned with vesting corpus in trust, it is clear that neither the trustee nor any other person is required to determine the identity of the beneficiaries or the quantum of interest to be taken. Nor does the trustee (or any other person) have any discretion which if not exercised, would cause the corpus to vest. The trust is fixed with respect to corpus.

25 Mr Caleo accepted in his submissions that the term trust property as used in S.13AA equates to the term trust fund as defined in the deed (see Clause 1(e)). Trust income only becomes part of the corpus of the trust or part of the trust fund if and to the extent that it is accumulated see Garside v IRC [1967] UKHL 6; [1968] AC 553 at 614. Trust income that has not been accumulated does not form part of the corpus. That is reflected in Clause 2 of the deed, which distinguishes between trust fund and ... the income thereof. Accordingly, Clause 4 of the deed and not Clause 3, is relevant for the purposes of the definition of discretionary trust in S.13AA. Clause 4 provides for the vesting of the trust corpus. In that as from the vesting day, the trustee is to hold the trust fund (and the income thereof) on trust for the specific beneficiary in specified shares. Therefore in my view it follows that the words trust property in the definition of discretionary trust in S.13AA are only concerned with the vesting of corpus of the trust. Therefore it follows that neither the trustee nor any other person is required to determine the identity of the beneficiaries or the quantum of interest to be taken. Nor does the trustee (or any other person) have any discretion which, if not exercised would cause the corpus to vest. It follows that the trust is fixed with respect to corpus and in relation to the corpus there is no discretion to be exercised within the meaning of 13AA(1)(b). In my view this seems the logical view to take, as Part IIA is concerned with taxing of land not taxing of income.

26 It thus follows, that the Trust is not a discretionary trust within the meaning of S.13AA. Even though having decided the question in the negative in relation to the trust coming within the definition of discretionary trust, if I am wrong about the meaning of the word trust property, it would be relevant to consider whether the distribution of trust income falls within the definition of discretionary trust in S.13AA. As this point was argued before me in my view it is desirable that I decide the same.

27 Mr Caleo submitted that the words referred to in S.13AA(1)(b) mean that the trust is a discretionary trust within the meaning of the section. He stated:

As at the relevant time, the Trust was a 'discretionary trust' because, within the terms of sub-paragraph (b) of the definition, the terms of the Amended Deed provided that the vesting of part of the trust property 'will occur' in the event that a discretion conferred under the trust is not exercised.

The 'trust property' of the trust comprises 'the Trust Fund', as defined in clause 1(e) of the Amended Deed. That definition expressly includes 'accumulations of income' and 'all accretions to the Trust Fund'. Further, clause 2 of the Amended Deed provides that the applicant 'stand possessed of the Trust fund and of the income thereof upon the trusts' thereinafter expressed. Accordingly, the income of the Trust forms part of the 'trust property' within the terms of the definition of 'discretionary trust' in section 13AA(1).

Clause 3 of the Amended Deed relates to income of the Trust. Clause 3(b) provides as follows:

'The Trustees may at any time prior to the expiration of each Accounting Period until the Vesting Day determine with respect to all or any part or parts of the net income of the Trust fund for such Accounting Period to do all or any of the following:-

(i) pay apply or set aside the same for any one or more of the General Beneficiaries living or in existence at the time of the determination;

(iii) pay apply or set aside the same for such charitable purposes as the Trustees may think fit.'

The power to distribute income pursuant to clause 3(b) is a mere power which the applicant is not required to exercise. In the event that the applicant does not exercise the power of appointment with respect to the net income of any particular Accounting Period, clause 3(e) provides:

'The Trustees shall hold as much of the net income of the Trust Fund for each Accounting Period as shall not be the subject of a determination effectively made at or prior to the end of such Accounting Period pursuant to paragraph (b) of this Clause as and accretion or accumulation to the Trust fund.'

Such an 'accretion or accumulation' is subject to the provisions of clause 4 of the Amended Deed. That clause provides that, as from the Vesting Day, the applicant stands possessed of 'the Trust fund and the income thereof' on the trusts therein specified. That is, in the event that the power conferred on the applicant pursuant to clause 3(b) is not exercised with respect to the net income of any particular Accounting Period, that income is added to the corpus and, pursuant to clause 4, will vest in the beneficiaries named as from the Vesting Day. This satisfies sub-paragraph (b) of the definition of 'discretionary trust'.

Whether the beneficiaries specified in clause 4 are properly characterised as 'takers in default' is irrelevant. For the purposes of sub-paragraph (b) of the definition of 'discretionary trust', the only relevant question is whether the vesting of that part of the trust property subject to the discretion conferred under the Amended Deed 'will occur' in accordance with the terms of the Amended Deed in the event that the discretion is not exercised. Plainly, the answer is that it will.

28 It is difficult to see how the submission that the net income of an accounting period, which if accumulated, will form part of the trust fund under Clause 3(e) will vest on the vesting day pursuant to Clause 4, is sustainable. The whole of the trust property will vest on the vesting day under Clause 4 regardless of whether the trustee exercises its discretion under Clause 3(b). Pursuant to Clause 4 on vesting day there will be no circumstances pursuant to which only part of the property will vest. However, it is impossible to identify what part of the property will vest in that event as there is no provision in the deed under which either a specific portion of a trust fund or a specific asset will vest in the event that a discretion under Clause 3(b) is not exercised. It is clear that the property that will vest on vesting day is that which exists at that date. Further the identity of the property which vests on vesting day will depend upon many factors, such as the investment undertaken by the trustee in administering the trust, but it will not tun on whether discretion under Clause 3 has been exercised. This is a similar matter to what was considered by Nettle J in the Supreme Court of Victoria and approved by the High Court in the Karingal case. At paragraph 37 His Honour's remarks were quoted by the High Court:

On this issue, remarks by Nettle J are in point and conclusive. His Honour said-:

It may well be that the income of the fund as finally constituted and distributed will include all of the rents and profits generated by a particular parcel of land within the fund. But it is distinctly possible that it will not. Each of the deeds gives power to the trustee to provide out of receipts for future and contingent liabilities; to apply receipts in the purchase of any property or business; to invest receipts in authorised investments and to deal with and transpose such investments; and the only right of the unit holder is to a proportionate share of the income of the fund for the year.

The Commissioner contends that the trustees' powers of disposition and transposition make no difference. He submits that insofar as receipts from particular properties may be applied in making payments other than to a unit holder, they must be seen as made on behalf of the unit holder and in that sense as received by the unit holder. He says that it is in principle no different to the case of a simple trust of land with only one beneficiary, under the terms of which the trustee is entitled to apply receipts in the payment of obligations and in the making of provisions in connection with the management of the land. The Commissioner contends that in such a case there can be no doubt that the beneficiary would be liable to tax as 'owner'.

But I think there is a difference. In the case of a simple trust of the kind instanced by the Commissioner the entitlement of the trustee to apply part of the receipts in defined ways determines the amount of the income which the beneficiary has a right to receive. Contrastingly, in a case of a complex unit trust of the kind with which I am concerned, the entitlement of the trustee to apply receipts in defined ways informs the nature of the income that the unit holders have a right to receive: not a total of all of the receipts derived from each asset the subject of the fund but rather such if any income as may be derived from the product of the application of gross receipts in various ways. (footnotes omitted)

29 The respondent's submission seems to assume that when income is accumulated, into corpus that part of the corpus will remain untouched by the trustee until the vesting day arrives at which time it will vest under Clause 4. However there is clearly no such requirement in the deed and in my view it is most unlikely that the same would occur. It is more likely that when the income is accumulated to form part of the corpus, the property reflecting it may be used or dealt with by the trustee in many ways under the term of the deed. For example it may be invested, lent, used to purchase or lease property, to pay costs or charges and expenses incidental to the management of the trust or to defray losses of subsequent accounting periods. Therefore, because the property reflecting the accumulated income may not be in existence on vesting day or may have been converted to other property, it cannot be sustained that it will vest on vesting day. It is even possible, that it could become the subject of the trustee's right of indemnity under Clause 14 and the trustee's right to remuneration under Clause 20. The High Court referred to a similar situation in the Karingal case at paragraph 51. It there stated:

In the present case, the unsatisfied trustees right of indemnity was expressed to be an actual liability in each of the relevant accounts of each 31 December date and rendered applicable the sense of the above words of Lord Davey. Until satisfaction of the rights of reimbursement or exoneration, it was impossible to say what the trust fund in question was.

30 The deed provides that there are fixed entitlements of the beneficiaries on vesting day. Further, if the discretions under Clause 3(b) are not exercised there will not be any beneficiaries who will take in that circumstance. Nor are there takers in default of any part or point corpus. Paragraph (b) of statutory definition is concerned only with deeds under which there are takers in default.

31 Having made the findings which I have made, it necessarily follows that even if the respondent's argument as to the meaning of trust property in S.13AA is accepted the Trust is not a discretionary trust within the meaning of the definition.

32 As I have found that Mr & Mrs de Wijn and their children are beneficiaries within the meaning of S.13A(1)(b) and the trust is not a discretionary trust within the meaning of the statutory definition contained in 13AA of the Act, it necessarily follows that the applicant is entitled to the exemption referred to in S.13A(1)(b) of the Act therefore I will order that the decision of the respondent disallowing the applicant's objection be set aside, that the assessment and amended assessment be set aside.