and and Commissioner of Taxation
[2012] AATA 754
•1 November 2012
[2012] AATA 754
Division SMALL TAXATION CLAIMS TRIBUNAL File Number
2012/1659
Re
Applicant 1659 of 2012
APPLICANT
And
Commissioner of Taxation
RESPONDENT
Decision
Tribunal Deputy President R P Handley
Date 1 November 2012 Place Sydney Decision Summary The decision under review is affirmed.
...........[sgd].................................
Deputy President R P Handley
CATCHWORDS
TAXATION – superannuation – superannuation contributions cap – contribution made in excess of cap – excess contributions tax imposed – reallocation to previous tax year requested – decision under review affirmed
LEGISLATION
Acts Interpretation Act 1901 (Cth)
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Income Tax Assessment Act 1997 (Cth)
Tax Laws Amendment (Simplified Superannuation) Act 2007 (Cth)
Taxation Administration Act 1953 (Cth)
CASES
Bornstein and Commissioner of Taxation [2012] AATA 424
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Longcake and Commissioner of Taxation [2012] AATA 576
McMennemin and Commissioner of Taxation (2010) 53 AAR 187
Peaker and Commissioner of Taxation [2012] AATA 140
Schuurmans-Stekhoven and Commissioner of Taxation [2012] AATA 62
REASONS FOR DECISION
Deputy President R P Handley
Applicant 1659 of 2012 (hereafter referred to as Ms A) has applied to the Tribunal for the review of a decision of a delegate of the Commissioner of Taxation (the Respondent) to impose excess contributions tax on her for the 2009/2010 financial year.
BACKGROUND
Ms A is married with two children, aged 20 and 17. She has been in continuous employment, either part time or full time, since 1991 and commenced salary sacrificing into her superannuation fund in 2005 while working in full time employment.
During the 2009/2010 financial year, Ms A exceeded a superannuation contributions cap set at $25,000.00 by $3,398. Subsequently, the Respondent issued her with a Notice of Assessment dated 28 September 2011 for excess concessional contributions tax during the 2009/2010 financial year. The Notice of Assessment stated that Ms A owed $1,070.35 to the Australian Taxation Office (ATO).
On 10 October 2011, Ms A lodged an application with the Respondent for an excess contribution tax determination, seeking to have the excess concessional contribution reallocated to the 2008/2009 financial year. On 6 December 2011, the Respondent decided that no determination to reallocate the concessional contribution to the 2008/2009 financial year would be made.
On 8 February 2012, the Applicant signed and lodged an objection to the Respondent’s determination decision. This was treated by the Respondent as an objection to the notice of assessment, pursuant to s 292.465(9) and s 292.245 of the Income Tax Assessment Act 1997 (Cth) (the ITAA).
On 5 April 2012, the Respondent decided to disallow the objection and, on 26 April 2012, the Applicant lodged an application for a review of this decision by the Tribunal.
THE RELEVANT LAW
Section 292-465 of the ITAA states:
(1) If you make an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of this Division:
(a) all or part of your * concessional contributions for a * financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination; and
(b) all or part of your * non-concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination.
(2) You may apply to the Commissioner in the * approved form for a determination under subsection (1). The application can only be made:
(a) after all of the contributions sought to be disregarded or reallocated have been made; and
(b) if you receive an * excess contributions tax assessment for the * financial year--before the end of:
(i) the period of 60 days starting on the day you receive the assessment; or
(ii) if the Commissioner allows a longer period - that longer period.
(3) The Commissioner may make the determination only if he or she considers that:
(a) there are special circumstances; and
(b) making the determination is consistent with the object of this Division.
(4) In making the determination the Commissioner may have regard to the matters in subsections (5) and (6) and any other relevant matters.
(5) The Commissioner may have regard to whether a contribution made in the relevant * financial year would more appropriately be allocated towards another financial year instead.
(6) The Commissioner may have regard to whether it was reasonably foreseeable, when a relevant contribution was made, that you would have * excess concessional contributions or * excess non-concessional contributions for the relevant * financial year, and in particular:
(a) if the relevant contribution is made in respect of you by another person - the terms of any agreement or arrangement between you and that person as to the amount and timing of the contribution; and
(b) the extent to which you had control over the making of the contribution.
(7) The Commissioner must give you a copy of the determination.
(8) A determination under this section may be included in a notice of assessment.
Review of determinations
(9) To avoid doubt:
(a) you may object under section 292- 245 against an * excess contributions tax assessment made in relation to you on the ground that you are dissatisfied with a determination that you applied for under this section; and
(b) for the purposes of paragraph (e) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977 , the making of a determination under this section is a decision forming part of the process of making an assessment of tax under this Act.
Section 292.5 states:
The object of this Division is to ensure that the amount of concessionally taxed * superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of the person's life.
The Respondent relies upon s 14ZZK of the Taxation Administration Act 1953 (Cth), which states:
Grounds of objection and burden of proof
On an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment) - the assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessment - the assessment is incorrect; or
(iii) in any other case - the taxation decision concerned should not have been made or should have been made differently.
The Applicant’s Case
Ms A gave oral evidence at the hearing. She said that her husband has worked for the Government for over 30 years in two separate Departments. Because their financial position improved as a result of his also receiving a Retirement Benefit when he changed Departments, they took care to research their superannuation options in order to arrange their finances to best provide for their retirement. Her husband was also able to undertake a greater share of their childcare responsibilities at this time because of increased flexibility in his working hours. As a result, Ms A started salary sacrificing into one of her superannuation funds which, at that time, had relatively low balances because of work patterns that were affected by caring for their children.
Until 30 November 2010, Ms A worked for a company doing administrative work, including the administration of contracts and also, sometimes, the company’s payroll. Altogether, she worked for that company for about 12 years, resigning in late 2010 because she was unhappy in her employment as a result of concern over occupational health and safety issues. Between 2005 and 2010, Ms A was working full-time and every year from 2006 would receive a bonus. She arranged with her employer that each year her bonus would be salary sacrificed into the superannuation fund into which her employer was paying superannuation contributions for her.
In the financial year 2008/2009, the applicable concessional contribution cap was $50,000. However, from 1 July 2009, this was reduced to $25,000. Ms A said she was aware of this reduction and sought to arrange her concessional contributions for that year in order not to exceed the cap. This was not a problem in 2008/2009 because her concessional contributions were well below the higher $50,000 cap. However in 2009/2010, she was careful to keep an eye on her contributions to avoid exceeding the lower cap. The bonus paid to her by her employer was usually paid around April/May each year.
Ms A said her employer paid employer superannuation contributions within 28 days after the end of each month rather than, as it was required to do, quarterly. Ms A’s superannuation provider account statement shows that her employer’s superannuation contributions were usually received by the fund in the first few days after the end of the month in respect of which the payments were due: for example, on 4 March 2009, 3 April 2009, 4 May 2009, 1 June 2009 and 3 July 2009. For the month of June 2009, her employer sent a superannuation contribution (a cheque for both the (employer) ‘super guarantee’ amount and the (employee) salary sacrifice amount) to Ms A’s superannuation provider under cover of a letter dated 1 July 2009.
Ms A said because she was aware that her employer could send its super guarantee employer contribution to her fund within 28 days of the end of the relevant month, and that it would be treated as the employer contribution for the month in respect of which it was paid, she assumed this also applied in respect of her personal concessional contributions. She thought that her concessional contribution received by her provider on 3 July 2009 would be treated as a concessional contribution for June 2009 and therefore fall within the 2008/2009 financial year. She was not aware that employer contributions and employee concessional contributions are treated differently and that her concessional contribution received by her provider on 3 July 2009 would be treated as having been made in the 2009/2010 financial year. Her provider did not inform her that she had exceeded the cap. She did not become aware of this until she received notification of her liability to pay excess contributions tax for 2009/2010 by letter from the ATO dated 15 March 2011.
Ms A said that after leaving her employment with the company, she commenced a part-time position at another company working 21 hours a week.. In early 2012, she commenced studying for a Bachelor of Arts (BA) degree at a local university. Her family situation is that her husband is working, they have a mortgage, and her children are still living at home.
Ms A said that the superannuation laws cannot have been intended to adversely affect women in her situation who have had caring responsibilities. The superannuation laws were intended to encourage superannuation contributions by people to support themselves in their retirement. However, the objective for the relevant Division of the ITAA – encouraging superannuation contributions to be made gradually over the course of a person’s lifetime – seems to be biased against many women’s work patterns which are affected by their caring responsibilities. Ms A also referred to the ATO webpage “Women and superannuation – taking control of your future”, and noted recent legislative changes which allow individuals who have for the first time inadvertently exceeded the concessional contributions cap, to ask for a refund of the excess contribution and then pay tax on that amount at their marginal tax rate.
Ms A noted that the slight delay in her superannuation fund receiving her concessional contribution for June 2009 was beyond her control, and she was not aware of the rules about when concessional payments are treated as being made, mistakenly believing that the same rules apply as for employer contributions. She denied that her strategy of salary sacrificing, without knowing in advance the amount of the bonus she would receive, was ‘high risk’ (as alleged by the Respondent). As she did not intentionally exceed the concessional cap and, indeed, was diligent in attempting to comply with the superannuation law, she contended that in all the circumstances of her case, the Commissioner’s discretion should be exercised to reallocate her excess contribution to the 2008/2009 financial year to avoid what would otherwise be an unfair decision.
The Respondent’s Case
Ms Gatland, for the Respondent, said that the exercise of the Commissioner’s discretion requires Ms A to demonstrate ‘special circumstances’ and that the exercise of the discretion is consistent with the object of the legislation. She said that Ms A’s strategy of making salary sacrifice contributions was high risk because she did not know in advance the amount of the bonus she might receive from her employer, which she had asked the employer to pay as a concessional superannuation contribution. Moreover, Ms Gatland noted that Ms A was receiving monthly statements from her superannuation provider showing the payments going into the fund, and said she should have been aware of how the superannuation contributions were being treated.
Ms Gatland said the legislative changes introduced which allow those who inadvertently breach the concessional contributions cap for the first time to ask for a refund of the excess contribution are not retrospective. Moreover, the amending legislation does not change the special circumstances discretion.
DISCUSSION
The issue in this case is whether the Tribunal, standing in the shoes of the Commissioner of Taxation, should exercise the discretion in s 292-465(1) of the ITAA to allocate to the 2008/2009 financial year Ms A’s excess superannuation contribution made in the 2009/2010 financial year. Section 292-465(3) provides that the Respondent may only make such a determination if the Respondent considers there are special circumstances, and making the determination would be consistent with the object of the relevant Division of the ITAA.
The expression ‘special circumstances’ is not defined in legislation but its meaning has been discussed on many occasions by the Federal Court and the Tribunal: ‘special circumstances’ means something which is unusual or out of the ordinary: see Groth v Secretary, Department of Social Security (1995) 40 ALD 541 (per Kiefel J); for a recent discussion of the expression in the context of s 292-465, see Deputy President Forgie’s discussion in McMennemin and Commissioner of Taxation (2010) 53 AAR 187, at [97].
Parliament’s intention that such a judicial interpretation should be adopted is confirmed by paragraph 1.117 of the Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Act 2007, the Act which amended the ITAA to include s 292-465:
1.117 The courts have considered what ‘special circumstances’ means in many different contexts. It is clear from the case law that special circumstances are unusual circumstances, or circumstances out of the ordinary. Whether circumstances are special will vary from case-to-case as the context requires, but in this context they must make it unjust, unreasonable or inappropriate to impose the liability for excess contributions tax.
Section 15AB of the Acts Interpretation Act 1901 (Cth) permits reference to such extrinsic material to confirm the ordinary meaning of words used in the text of legislation.
The exercise of the discretion in s 292-465(1) must also be consistent with the object of this Division of the ITAA, which is to ensure that the amount of concessionally taxed superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of a person’s life.
Section 292-465(4) states that in making a determination under s 292-465(1), the Commissioner may have regard to the matters in s 292-465(5) and (6) and any other relevant matters. Section 292-465(5) provides that the Commissioner may have regard to whether a contribution made in the relevant financial year would more appropriately be allocated towards another financial year. Section 292-465(6) states that the Commissioner may have regard to whether an excess concessional contribution was reasonably foreseeable, with particular regard to any arrangement as to the amount and timing of the contribution, and the extent to which the person had control over the making of the contribution.
The parties referred me to a number of Tribunal decisions where the exercise of the discretion in s 292-465(1) has been considered. In Peaker and Commissioner of Taxation [2012] AATA 140, which followed a similar decision in Schuurmans-Stekhoven and Commissioner of Taxation [2012] AATA 62, the Tribunal found that a mistaken belief or ignorance of the consequences of making a concessional contribution in July of one financial year rather than in June of the previous financial year did not amount to special circumstances. However, in Bornstein and Commissioner of Taxation [2012] AATA 424, at [12], the Tribunal found that where there was “a ‘perfect storm’ of events, miscommunications and misunderstandings that combined to leave the taxpayer in an unusual and unfortunate position”, special circumstances had been made out. The Tribunal did, nevertheless, warn, that “a mere misunderstanding of one’s obligations” is not enough, of itself, to constitute special circumstances. In Longcake and Commissioner of Taxation [2012] AATA 576, the Tribunal, while finding special circumstances on the particular facts of that case, made the same point: a mistaken belief in how the law applies does not of itself amount to special circumstances.
In Ms A’s case, she was mistakenly of the belief that an employee’s concessional superannuation contributions made by an employer in accordance with a salary sacrificing arrangement were treated as being received in June 2009 if made within 28 days of the end of that month, that is by 28 July 2009. Her mistaken belief came about because she was sometimes involved in administering her employer’s payroll and this is the way in which an employer’s superannuation guarantee contributions for an employee are treated.
I acknowledge that Ms A has been diligent in taking steps to build her superannuation balance by making regular contributions to her superannuation fund from the time her and her husband’s financial situation improved in 2005, when her husband was also able to undertake a greater share of their child caring responsibilities. In the case of a married woman with children, there will commonly be times when the person’s childcare responsibilities make concessional contributions difficult. In my view, Ms A acted responsibly and in accordance with the object of this Division of the ITAA in making arrangements for concessional contributions in accordance with her financial capacity. She was aware of the reduction of the relevant cap on concessional contributions from $50,000 to $25,000 with effect from 1 July 2009 and calculated the quantum of the payments she should make for the 2009/2010 financial year based on her understanding of how such payments are treated. Unfortunately, her understanding was incorrect.
The fact that the legislation has now been changed to permit the refund of excess contributions in the case of a first inadvertent mistake does not assist Ms A, as such provisions have no retrospective effect. Nor does Ms A’s contention that women in her position are discriminated against assist her: the Tribunal is entrusted with applying the provisions of the law as it finds them.
Thus, while I am not unsympathetic to her situation and acknowledge her frustration that such a small mistake should be permitted to undermine what she sees as pursuing the objects the legislation was ultimately seeking to achieve, that is encouraging employees to save for their retirement, such mistakes as to the way in which the law is applied are not unusual or uncommon and do not of themselves amount to special circumstances.
In the absence of some other ameliorating provision in the legislation, the decision under review not to reallocate her excess concessional contribution for the 2009/2010 financial year to the previous financial year, and therefore to impose an excess contributions tax on her for the 2009/2010 financial year, must be affirmed.
DECISION
The decision under review is affirmed.
32. I certify that the preceding 31 (thirty one) paragraphs are a true copy of the reasons for the decision herein of Deputy President R P Handley.
.........[sgd]...............................................................
Associate
Dated 1 November 2012
Date of hearing 22 October 2012 Date final submissions received 22 October 2012 Applicant In Person Solicitor for the Respondent Shaun Gordon Advocate for the Respondent Jill Gatland Solicitors for the Respondent Australian Taxation Office Legal Services Division
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