Australian Medical Services Pty Ltd and Commissioner of Taxation

[2012] AATA 758

[2012] AATA 758 

Division	TAXATION APPEALS DIVISION
File Number	2011/4789
Re	Australian Medical Services Pty Ltd
APPLICANT
And	Commissioner of Taxation
RESPONDENT

DECISION

Tribunal	Professor R Deutsch, Deputy President
Date	1 November 2012
Place	Sydney

The Tribunal affirms the decision under review.

................................[sgd]........................................

Professor R Deutsch, Deputy President

CATCHWORDS

SUPERANNUATION - Nominal interest component of the superannuation guarantee contribution imposed under the Superannuation Guarantee (Administration) Act 1992 - whether nominal interest could be remitted – decision affirmed

LEGISLATION

Superannuation Guarantee (Administration) Act 1992

Tax Laws Amendment (Loss Recruitment Rules and Other Measures) Bill 2005

CASES

Minister of Lands and Forests v McPherson (1991) 22 NSWLR 687

Jarra Hills Pty Ltd v FCT (1997) 37 ATR 1022
Re Kancroft Pty Ltd (acting as Trustee for Robertson Family Trust) and Commissioner of Taxation (2004) 56 ATR 1086
Benross Pty Ltd & Anor and Commissioner of Taxation (2005) 58 ATR 1292

IWEC Pty Ltd and Commissioner of Taxation (2007) ATR 447

SECONDARY MATERIALS

Tax Laws Amendment (Loss Recruitment Rules and Other Measures) Bill 2005, Explanatory Memorandum

The Macquarie dictionary (5^th edition 2009)

REASONS FOR DECISION

Professor R Deutsch, Deputy President

1 November 2012

BACKGROUND

1. The Applicant seeks review of the decision made by the Respondent on 16 September 2011 to disallow parts of objections made against amended superannuation guarantee assessments issued on 20 June 2010 for the four quarters ended 31 March 2007, 30 June 2007, 30 September 2007 and 31 December 2007.

   ISSUES

2. The issues to be determined by the Tribunal are:

   (a) was the nominal interest component of the superannuation guarantee contribution (“SGC”) imposed under the Superannuation Guarantee (Administration) Act 1992 (“SGAA”) in relation to the quarters ended 31 March 2007, 30 June 2007, 30 September 2007 and 31 December 2007 (“the four relevant quarters”) correctly calculated in accordance with section 31 of the SGAA?

   (b) can the nominal interest component of the SGC imposed under the SGAA for the four relevant quarters be remitted?

   THE FACTS

3. At the relevant time the Applicant was an employer and was obligated to provide superannuation support for a number of employees during the four relevant quarters.

4. The Applicant failed to provide the minimum level of superannuation support prescribed under the legislation in respect of the four relevant quarters.

5. The Applicant made superannuation guarantee contributions for its eligible employees for the four relevant quarters but was late in making those contributions.

6. The Applicant did not at any time lodge superannuation guarantee statements for the four relevant quarters even though the Applicant was obliged under the law to do so.

7. As a result of the Applicant's failure to lodge superannuation guarantee statements for the four relevant quarters, the Respondent raised default superannuation guarantee charge assessments for the relevant quarters.

8. The Applicant's tardiness in making the superannuation support payments was clearly in breach of the existing law. However, the delay involved was not extensive.

9. The due dates and the dates the Applicant made SGCs in respect of the four relevant quarters are as follows:

Relevant Quarter	Due Date	Date Paid
Quarter ended 31 March 2007	28 April 2007	Early May 2007
Quarter ended 30 June 2007	28 July 2007	Early September 2007
Quarter ended 30 September 2007	28 October 2007	Early November 2007
Quarter ended 31 December 2007	28 January 2007	Early February 2008

1. As can be seen from the above, the Applicant was less than two weeks late in respect of three of the quarters and less than six weeks late in respect of the other quarter.

   THE LAW AND ITS APPLICATION TO THE FACTS

2. At all relevant times the Applicant was an employer with a number of employees in respect of whom the Applicant had an obligation to provide minimum superannuation support in accordance with obligations imposed by the relevant taxation laws. The applicable rate was 9% for all relevant quarters with the due date being the 28th day of the month following the end of each applicable quarter or such later time as might have been allowed by the Respondent.

3. As such an employer the Applicant failed to pay the requisite SGCs by the due date and accordingly a superannuation guarantee shortfall was imposed for the four relevant quarters. The normal rule is that an employer who has a superannuation guarantee shortfall for a quarter is obligated to lodge a superannuation guarantee statement by the 28th day of the second month after the end of the quarter. The Respondent may allow an employer to lodge a superannuation guarantee statement on a later day.

4. Where an employer has failed to lodge a superannuation guarantee statement for a quarter and the Commissioner of Taxation (“the Commissioner”) is of the opinion that the employer is liable to pay a superannuation guarantee charge, the Commissioner may make an assessment of the employer’s superannuation guarantee shortfall for the quarter and the superannuation guarantee charge payable on the shortfall. Such a charge amount in relation to a default assessment issued by the Commissioner is payable in accordance with section 36 of the SGAA on the day on which the assessment is made.

5. In this case the Applicant failed to lodge its superannuation guarantee statements for each of the four relevant quarters. Accordingly, the Respondent raised default superannuation guarantee assessments for the four relevant quarters.

6. The superannuation guarantee charge effectively comprises three components namely:

   (i)the Superannuation Guarantee shortfall;

   (ii)the Nominal Interest Component; and

   (iii)the Administration Component.

7. There is no dispute in this matter as to the imposition of the superannuation guarantee shortfall or the administration component.

8. The two issues raised both relate to the nominal interest component.

9. Section 31 of the SGAA defines the nominal interest component as:

   the amount that would accrue by way of interest on the total of the employer's individual superannuation guarantee shortfalls for the quarter if interest were calculated at the rate applicable under the regulations for the purposes of this subsection from the beginning of the quarter in question until the date on which superannuation guarantee charge in relation to the total would be payable under this Act.

10. Importantly section 46 of that Act provides that the superannuation guarantee charge for a quarter is payable on the day on which the employer lodges a Superannuation Guarantee statement (if one is lodged). Under note 1 to section 46 it is specified that if the default assessment is made for a quarter, then the superannuation guarantee charge is payable on the day on which the assessment is made. Reference is then made to section 36.

11. Although the Tribunal was not provided with specific details as to the exact time at which payment was made to cover in particular the superannuation guarantee shortfall and the Administration Component, it appears that this payment was made well before 7 May 2010.

    THE NOMINAL INTEREST COMPONENT

12. It is clear that the Applicant did not make the necessary superannuation contributions on behalf of its employees within the time required by the legislation. Therefore, the Applicant incurred a superannuation guarantee shortfall for those employees and in addition is required to pay the nominal interest component and the administration component.

13. The law in regards to the method of calculating the nominal interest charge imposed upon the Applicant is clear and unambiguous and is expressed in terms which require the interest charged to run from the date being the beginning of the relevant  quarter up until such time as the Respondent raised the assessments, in this case through a default assessment which was raised on 7 May 2010.

14. As clear as the position seems to be, the result is unsatisfactory from a policy perspective on many levels.

15. First, it is clear from the facts that the required payment from the Applicant was in fact made late but well in advance of 7 May 2010 and yet interest is being charged up to that date. According to the calculations presented by the Applicant, interest in one case ran for 1,109 days whereas the time that the monies were outstanding was only 128 days. This arises as a direct result of the wording of the legislation.

16. Secondly, the statutory formulation refers to “nominal interest”. In my view the payment required here is neither nominal nor interest. Nominal is defined by the Macquarie Dictionary to mean “trifling in comparison with the actual value”. In this context the actual value is referring to what might be considered to be normal commercial rates of interest. 10% is hardly trifling in comparison with such commercial rates. Indeed, it may be higher than many commercial rates at the relevant time. Thus, 10% would hardly seem to be nominal. Interest is meant to compensate for the time value of money but that hardly seems to be the case here, where interest is charged for a substantially longer period than that for which the payment has been outstanding.

17. I note that the Applicant has asserted that the outcome arising from the Respondent’s calculations is inequitable and unfair and that the application of these rules in this way will not serve the purpose of encouraging taxpayers to make payments early where they recognise that they have a problem under the existing taxation framework. I have much sympathy with this position, particularly in relation to the Applicant who has tried to comply with the existing laws by making payments of the shortfall amount and the administration component as soon as the Applicant became aware of the problem.

18. There is a broad principle that in the absence of any unambiguous contrary intention statutes should be interpreted so as to be in consonance with the principles of equity. So much has been clearly indicated by the New South Wales Court of Appeal in Minister of Lands and Forests v McPherson (1991) 22 NSWLR 687. Nonetheless, having regard to the clearly expressed intention in the explanatory memorandum and the clear and unambiguous language used in the construction of the nominal interest component provisions (see in particular section 31 SGAA), the principle can have no application in this case.

19. The law is clear and unambiguous in its terms and I note that the outcome does not appear to be unintended with a comment being made in the Explanatory Memorandum to the Tax Laws Amendment (Loss Recruitment Rules and Other Measures) Bill 2005 which states that in respect of the lodgement of the superannuation guarantee statement:

    Nominal interest is charged until the superannuation guarantee statement due date, even if the employer…makes the payment before the due date for lodgement of the superannuation guarantee statement.

20. Clearly this indicates that Parliament contemplated that interest would be calculated up until the lodgment date of the superannuation guarantee statement or the default assessment if no superannuation guarantee statement was lodged, even if the superannuation guarantee contribution was paid prior to lodgment of tat statement.

    REMISSION

21. There is no discretion available under the terms of the SGAA to allow the Respondent to remit any part of the SGC. The point has been made in a number of cases including Re Jarra Hills Pty Ltd v FCT (1997) 37 ATR 1022, Re Kancroft Pty Ltd (acting as Trustee for Robertson Family Trust) and Commissioner of Taxation (2004) 56 ATR 1086, Benross Pty Ltd & Anor and Commissioner of Taxation (2005) 58 ATR 1292 and IWEC Pty Ltd and Commissioner of Taxation (2007) ATR 447.

22. With some regret I conclude that there is no discretion in the circumstances to remit or waive the nominal interest or the administration component. I would suggest a review of these provisions to ensure that if an amount of nominal interest is to be charged it should be both nominal and interest. Perhaps some consideration should be given to conferring on the Commissioner some discretion in these matters.

    DECISION

23. The Tribunal affirms the Respondents decision.

I certify that the preceding 32 (thirty-two) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President.

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Associate

Dated 1 November 2012

Date(s) of hearing	26 September 2012
Advocate for the Applicant	Inhouse Tax Services
Respondent	ATO Legal Services