Dodson and Commissioner of Taxation (Taxation)

Dodson and Commissioner of Taxation (Taxation) [2021] AATA 484 (11 March 2021)
Division:TAXATION AND COMMERCIAL DIVISION
File Number:2020/5521
Re:Lorel Dodson
APPLICANT

AndCommissioner of Taxation
RESPONDENT

DECISION
Tribunal:Member D Mitchell
Date:11 March 2021
Place:Brisbane

The Tribunal affirms the decision under review.
..................[SGD].....................................................
Member D Mitchell
CATCHWORDS
TAXATION – income tax – eligibility for the Senior and Pensioner Tax Offset – Medicare Levy threshold – accessibility of carers payment – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Medicare Levy Act 1986 (Cth)
Taxation Administration Act 1953 (Cth)
Veterans’ Entitlement Act 1986 (Cth)
CASES
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Re Costello and Secretary, Department of Transport (1979) 2 ALD 934
Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286
REASONS FOR DECISION
Member D Mitchell
11 March 2021
INTRODUCTION

Ms Lorel Dodson (the Applicant) is seeking review of an objection decision of the Commissioner of Taxation (the Respondent) dated 3 August 2020.[1]
[1] Exhibit 1, T-Documents, T8, page 38, Notice of Objection Decision.
The reviewable objection decision disallowed the Applicant’s objection to a Notice of Amended Income Tax Assessment for the income year ended 30 June 2019 (2019 year). The objection decision was made on the basis that the Respondent found that the Applicant was not entitled to receive the Senior and Pensioner Tax Offset or the associated Medicare Levy threshold entitlements. The amended income tax assessment resulted in the Applicant being assessed as having a tax payable in the amount of $566.65.[2]
[2] Exhibit 1, T-Documents, T2, pages 14-15, Reasons for Objection Decision.
BACKGROUND
For the purposes of the 2019 year the Applicant was 63 years old and received a carer payment in relation to care she provided for her adult son.
The Applicant completed her 2019 year income tax return using a paper form.[3] On her income tax return, she entered the amount received as carer payment at question 6 (Label 6A) with an annotation “non taxable” and also at IT3 being the label for tax-free government pensions. The Applicant also listed her total income as $30,811 and total taxable income as $30,294.[4]
[3] Exhibit 2, Supplementary T-Documents, ST4, pages 87-96, Lodged 2019 Income Tax Return.
[4] Exhibit 2, Supplementary T-Documents, ST4, pages 87-96, Lodged 2019 Income Tax Return.
As a result of lodging her 2019 income tax return the Applicant received a Notice of Assessment which listed her taxable income as $35,811. The result of the notice was a refund due to the Applicant in the amount of $166.70.[5]
[5] Exhibit 1, T-Documents, T4, pages 21-24, Notice of Assessment.
Upon receiving the Notice of Assessment, the Applicant contacted the Respondent as she noted her taxable income was incorrect. Subsequent to that discussion the Applicant requested that her income tax return be amended to remove the double counting of her carer payment.
As a result of the double entry of the Applicant’s carer pension she received a Senior and Pensioner Tax Offset (SAPTO) of $1,788.50 and an associated Medicare Levy concession was applied.[6]
[6] Exhibit 1, T-Documents, T3, pages 16-20, Income Tax Return for 2019.
A Notice of Amended Assessment was issued on 13 March 2020 amending the Applicant’s taxable income to $30,294. The result of the notice was that an income tax liability was raised and an amount payable of $566.55 arose.[7]
[7] Exhibit 1, T-Documents, T6, pages 29-32, Amended Notice of Assessment.
The Applicant’s carers payment was an exempt payment for taxation purposes[8] and the Respondent determined that the Applicant was not entitled to the SAPTO nor the associated Medicare Levy concession.[9]
[8] Exhibit 2, Supplementary T-Documents, ST3, page 86, Centrelink 2019 PAYG Payment Summary – Individual Non Business.
[9] Exhibit 1, T-Documents, T5, pages 25-28, Amended Income Tax Return for 2019.
On 24 March 2020 the Applicant lodged an objection to the Amended Notice of Assessment providing the following reason:[10]
I lodged my 2019 Income Tax Return (ITR) in October 2019 as required. In the ITR I correctly recorded my taxable income of $30,294 plus the non-taxable Carer Payment of $5517. When my ITR was originally assessed by the Australian Taxation Office (ATO) the assessor incorrectly chose to include my non taxable Carer Payment as taxable income which assessed my taxable income as $35,811 and I was sent a tax refund of $166.70.
As that original assessment was incorrect, I contacted the ATO and an amended assessment was completed resulting in (to my horror) me getting a tax debt of $566.55 which has to be paid in 13 days.
I was told that I have to pay tax because I receive a non taxable Carer Payment so I only receive $2297.88 in offsets instead of the $3,346.09 in offsets I would receive if I received exactly the same amount of income but with a taxable Carer Payment instead. The income/assets test for non taxable Carer Payment is exactly the same as the taxable Carer Payment and Age Pension. I am being discriminated against here. I am being disadvantaged. This may be a small amount of money to you but having to pay this will cause me hardship.
[10] Exhibit 1, T-Documents, T7, pages 33-37, Objection.
On 3 August 2020, the Respondent determined that the Notice of Amended Assessment was correct and therefore refused the Applicant’s objection.[11]
[11] Exhibit 1, T-Documents, T8, page 38, Notice of Objection Decision.
In the reasons for the objection decision, the Respondent provided an outline of the way in which the Medicare Levy was applied to the Applicant’s circumstances:[12]
6You were not a Senior Australian for the relevant year and therefore you were subject to Medicare levy under the normal threshold of $22,398.
7In your original assessment as you were treated as a Senior Australian, paragraph 5 above applied to you. So, the Medicare levy was calculated as follows; $35,811 less 35,418(lower threshold) = $393 multiplied by 10% = $39.30
8In the amended assessment, although your amended taxable income was lower than your original assessment, your taxable income of $30,294 was subject to Medicare levy of 2%. The Medicare levy was calculated as $30,294 multiplied by 2% = $605.88
9As can be seen by the above calculation, the main difference between the original and the amended assessment was the Medicare levy amount brought on by the removal of the amount that you declared at Item 6 Label B in the amended assessment. Therefore, your objection has been disallowed.
[12] Exhibit 1, T-Documents, T2, pages 14-15, Reasons for Decision.
On 24 August 2020, the Applicant sought review of the objection decision by this Tribunal.[13] The reason provided by the Applicant as to why she claims the objection decision was wrong, succinctly summaries her contentions as follows:[14]
I wish to have the decision reviewed because the person who made the decision as advised in the ATO letter of 3 August 2020 has not made a decision based on my circumstances therefore that decision is wrong. I have always advised that I am in receipt of a carer payment from the Australian Government. I have most definitely never ever claimed to be a senior Australian. The letter of 3 August 2020 advising of the decision to my objection does not explain why I do not receive the seniors and pensioners tax offset - it only explains why I do not qualify for the senior Australian tax offset which i was not claiming anyway.
I wish to claim the pensioner tax offset part of the senior and pension tax offset.
[13] Exhibit 1, T-Documents, T1, pages 1-13, Application for Review and Attachments.
[14] Exhibit 1, T-Documents, T1, page 5, Application for Review.
On 19 February 2021, a Hearing by telephone was conducted. At the Hearing the Applicant appeared by telephone and provided evidence under affirmation.
ISSUES
On application for review of a reviewable objection decision, the Applicant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been.[15] Therefore, to be successful in her application before this Tribunal the Applicant must prove that she was eligible to receive the Senior and Pension Tax Offset and associated Medicare Levy threshold for the 2019 income tax year.
[15] Section 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth).
As such the issues before the Tribunal are:
(a)Was the Applicant eligible to receive the Senior and Pension Tax Offset for the income tax year ended 30 June 2019?
(b)Was the Applicant liable to pay Medicare levy for the income tax year ended 30 June 2019?
LEGISLATIVE FRAMEWORK AND PRINCIPLES
The relevant law in this matter includes the Income Tax Assessment Act 1936 (Cth) (ITAA 1936), Income Tax Assessment Act 1997 (Cth) (ITAA 1997), and the Medicare Levy Act 1986 (Cth) (Medicare Levy Act).
Division 52 of the ITAA 1997 prescribes circumstances in which certain pensions, benefits and allowances are exempt for income tax. Specifically, item 4.3 of the table in section 52-10(3) of the ITAA 1997 provides that where both the recipient of the carer payment and the care receiver are under pension age the tax treatment of the carer payment (being the relevant social security payment) is that the payment is exempt. As such in those circumstances the carer payment does not form part of the persons assessible income.
Section 160AAAA of the ITAA 1936 provides a tax rebate for low income aged persons and pensioners. It provides:
Tax rebate for low income aged persons and pensioners
(1)      Subject to subsection 160AAA(4), a taxpayer who is an individual (other   than in the capacity as trustee) is entitled to a rebate of tax in    the taxpayer's assessment in respect of income of a year of income of an   amount (if any), ascertained in accordance with the regulations, if    the taxpayer satisfies the conditions in subsections (2) and (3).
(2)      The first condition is that:
(a)      on at least one day during the year of income, the taxpayer:
(i)       is eligible for a pension, allowance or benefit under   the Veterans' Entitlements Act 1986 (other than Part VII); and
(ii)      has reached pension age, within the meaning of that Act; and
(iii)      is not in gaol; or
(b)      on at least one day during the year of income, the taxpayer:
(i)       is qualified for an age pension under the Social Security Act   1991 ; and
(ii)      is not in gaol; or
(c)      the assessable income of the taxpayer of the year of    income includes an amount of:
(i)       social security pension or education entry payment (within   the meaning of the Social Security Act 1991 ); or
(ii)      service pension, carer service pension, income support   supplement or Defence Force Income Support Allowance    (within the meaning of the Veterans' Entitlements Act 1986 )   or a DFISA-like payment mentioned in Division 4 of   Part VIIAB of that Act;
and, on at least one day during the year of income, the taxpayer is    not in gaol.
(3)      The second condition is that the taxpayer's rebate income for the year of               income is less than an amount ascertained in accordance with the   regulations.
(4)      If the taxpayer is the spouse of another person, the amount applicable to               the taxpayer under subsection (3) is half of the sum of:
(a)      the taxpayer's rebate income for the year of income; and
(b)      the taxpayer's spouse's rebate income for the year of    income (reduced by any amount included in the spouse's assessable                    income under section 100); and
(c)      an amount in respect of which a trustee of a trust estate is liable to    be assessed (and pay tax) under section 98 in respect of    the taxpayer's spouse.
(5)      Regulations made for the purposes of this section may be expressed to apply                  in relation to a year of income any part of which occurred before the   notification of the regulations.
Section 251S(1)(a) of the ITAA 1936 provides that Australian residents are liable to pay a Medicare Levy based on the amount of their taxable income for the income year.
The Medicare Levy Act sets the rate of Medicare Levy payable and also provides relief from having to pay Medicare Levy for certain taxpayers.
Section 7 of the Medicare Levy Act provides relief in the case of small incomes and provides:
Levy in cases of small incomes
(1) Where the taxable income of a person does not exceed the threshold amount, no levy is payable by the person upon that taxable income.
(2) Where the taxable income of a person exceeds the threshold amount but does not exceed the phase-in limit, the amount of levy payable by the person upon that taxable income but for sections 8 and 9 shall not exceed 10% of the amount of the excess.
……..
For the 2019 income tax year the threshold amount was $35,418 for a person who was entitled to a rebate under section 160AAAA of the ITAA 1936 and in any other case, was $22,398.[16]
[16] Section 3 of the Medicare Levy Act.
For the 2019 income tax year the phase-in limit was $44,272 for a person who was entitled to a rebate under section 160AAAA of the ITAA 1936 and in any other case was $27,997.[17]
EVIDENCE AND CONTENTIONS
[17] Section 3 of the Medicare Levy Act.
Applicant
Ahead of the Hearing, the Applicant provide a Statement of Facts and Contentions.[18] The Applicant set out the process she had undertaken with the Respondent that led to her current position.[19]
[18] Exhibit 4, Applicant’s Statement of Facts and Contentions, pages 1-10.
[19] Exhibit 4, Applicant’s Statement of Facts and Contentions, pages 3-5, paragraphs 7-19.
In relation to the requirements of section 160AAAA of the ITAA 1936 the Applicant provided:[20]
·She was a single person and has no spouse.
·She has never been in gaol.
·She is under the age pension age and has never ever claimed to be age pension age.
·She received an Australian Government pension – carer payment for the entire 2018/2019 financial year and continuing to the current date.
·She provides constant personal care to her son.
·There is no age requirement for qualification for the carer payment.
[20] Exhibit 4, Applicant’s Statement of Facts and Contentions, pages 2-3, paragraphs 3-7.
The Applicant contended that she understands that she did not qualify for the senior tax offset because she is not of age pension age however she said she never claimed the Senior Tax Offset for that exact reason.[21]
[21] Exhibit 4, Applicant’s Statement of Facts and Contentions, page 5, paragraph 17.
The Applicant contended that she did not make a mistake when she filed her 2019 income tax return, she clearly marked the amount she disclosed at item 6B as being “non taxable”. She said Question 6 of the tax return form asked if she had any income from Australian Government Pensions or allowances, the answer is yes so she declared that she received a non-taxable pension of $5,517. Further she did not make a mistake by completing item IT3 as the note at question 6 tells her to do so. The Applicant contends that she did not amend the return by removing the Carer Payment from item 6B, the Respondent made the mistake by not reading the information she supplied on the tax return form.[22]
[22] Exhibit 4, Applicant’s Statement of Facts and Contentions, pages 5-8, paragraphs 20-29.
The Applicant took issue at the Respondent’s focus on her lack of eligibility for the age pension. She contends that she has never claimed or inferred in any way that she was of age pension age, she was very clearly claiming the pension tax offset.[23]
[23] Exhibit 4, Applicant’s Statement of Facts and Contentions, pages 6-8, paragraphs 22-28.
The Applicant submitted that she had asked the Respondent to determine her eligibility under the pension tax offset instead of the senior tax offset using the correct section of the ITAA 1936. She confirmed that she did not satisfy section 160AAAA(2)(b)(i) of the ITAA 1936.[24]
[24] Exhibit 4, Applicant’s Statement of Facts and Contentions, page 9, paragraph 35.
The Applicant provided that the decision she is seeking is as follows:[25]
38. I ask the Administrative Appeals Tribunal (AAT) to set aside the ATO decision to not allow me to have the pension tax offset applied to the assessment of my tax in the 2019/20 financial year because of its stated reason that I am not age pension age. I ask that the AAT to find that the ATO made this decision under S160AAAA(2)(b)(i) based on inappropriate, incorrect assumptions and contradiction – therefore the decision is incorrect.
39. I further ask that the AAT to direct the ATO to undertake a new determination of my eligibility for the pension tax offset based on the correct information as already supplied by me and by applying S160AAAA(2)(c)(i) and S160AAAA(3) of the Tax Assessment Act 1936.
[25] Exhibit 4, Applicant’s Statement of Facts and Contentions, page 10, paragraphs 38-39.
At the Hearing the Applicant provided evidence to the Tribunal that was consistent with her written submissions. The Applicant told the Tribunal:
·She may not qualify for the offset but the reasons she has been provided are wrong and she wants a decision made for the correct reasons.
·She feels that the Respondent made their decision based on the fact that she was not eligible for the age pension, however she never claimed to be of age pension age.
·She was aware that the carer payment was non-taxable and she declared this at labels 6A and ITC3 in her income tax return.
·She wants her eligibility determined in accordance with section 160AAAA(2)(c)(i).
·She is financially disadvantaged because of the legislation.
The Respondent did not cross-examine the Applicant.
Respondent
Ahead of the Hearing the Respondent also provided a Statement of Issues, Facts and Contentions.[26]
[26] Exhibit 3, Respondent’s Statement of Issues, Facts and Contentions, pages 1-9.
The Respondent contended that the Applicant’s carer payment did not form part of her taxable income and should have only been included at item IT3 of the 2019 income tax return. By declaring an amount at item 6B, the Respondent contended that the Applicant essentially indicated that she was a senior by having reached age-pension age, and that she had met the requirements to be eligible for SAPTO in the 2019 income year.[27]
[27] Exhibit 3, Respondent’s Statement of Issues, Facts and Contentions, pages 3-4, paragraphs 19-24.
The Respondent contended that the Applicant did not meet the requirements of section 160AAAA(2) of the ITAA 1936 as:[28]
·She is not eligible for a pension, allowance or benefit under the Veterans’ Entitlement Act 1986 (Cth) (VE Act): section 160AAAA(2)(a).
·The carer payment she receives is tax exempt: section 160AAAA(2)(c).
·She was not of age pension age and was not eligible for age pension for at least one day during the 2019 income year.
[28] Exhibit 3, Respondent’s Statement of Issues, Facts and Contentions, pages 5-7, paragraphs 30-39.
The Respondent contended that the Applicant did meet the requirements of section 160AAAA(3) of the ITAA 1936 as her rebate income for the 2019 year of income was less than the income cut-off threshold of $32,279. The Respondent contended that despite meeting the test for section 160AAAA(3) of the ITAA 1936, as the Applicant did not meet the test for section 160AAAA(2) of the ITAA 1936 she therefore could not be eligible for the SAPTO.[29]
[29] Exhibit 3, Respondent’s Statement of Issues, Facts and Contentions, page 7, paragraphs 40-42.

The Respondent provided the following summary of their contentions:[30]
49. To be eligible for SAPTO the Applicant must meet both a) the eligibility test for Australian Government pensions and b) the income test. Although the Applicant met the income test; because she did not reach pension age in the 2019 income year, she did not satisfy the requirements to be eligible for Australian Government pensions and similar payments. Consequently, the Commissioner contends the Applicant is not eligible for SAPTO in accordance with section 160AAAA of the ITAA 1936.
50.      Consequently, the SAPTO amount of $1,788.50 the Applicant received in   the Notice of Assessment issued was subsequently reversed in the Notice                  of Amended Assessment.
51.      As the Applicant was not a senior in receipt of low-income pension and                  qualified to receive SAPTO for the relevant income year, the Applicant was   no longer eligible for the higher concessional Medicare levy income   threshold of $35,418 available to seniors. The correct threshold amount for   the Applicant for the 2019 income year is $22,398.
52.      Consequently, the Applicant became liable for a Medicare levy of $605.88,            which is 2%of the Applicant’s taxable income for the 2019 income year.
[30]    Exhibit 3, Respondent’s Statement of Issues, Facts and Contentions, pages 8-9, paragraphs 49-52.
At Hearing the representative of the Respondent told the Tribunal that the Respondent had not focused on the requirements of section 160AAAA(2)(c) of the ITAA 1936 as it had focused on the grounds outlined by the Applicant in her objection.
The Respondent told the Tribunal that the tax payable amount arising from the Amended Notice of Assessment had been deducted from a credit in the Applicant’s tax account and as such there was no option for release of debt.
CONSIDERATION
The facts in this case are clear. During the 2019 year the Applicant received a tax exempt carers payment, was under the age pension age and did not received a pension pursuant to the VE Act. These facts are not in dispute.
In this case the Applicant expressed frustration about the way in which the Respondent made the Objection Decision and continued throughout the Tribunal process to make her age a primary issue, when she at no time asserted that she was of age pension age.
The Tribunal considers the Applicant’s frustration to be warranted as while the Respondent found that the Applicant did not meet the tests set out in section 160AAAA(2) of the ITAA 1936, the Respondent has focused the discussion of its reasons in relation to the requirements of section 160AAAA(2)(b) of the ITAA 1936.
The Applicant outlined that she is seeking a decision that considers her eligibility to the SAPTO in accordance with section 160AAAA(2)(c) of the ITAA 1936 and has requested that the Tribunal remit the matter to the Respondent to do just that. The Tribunal is tasked to undertake a de novo review of the matter which requires it to have regard to the evidence as at the time of the Tribunal’s decision[31] while standing in the shoes of the Commissioner.[32] As such it is appropriate for the Tribunal to consider the matter afresh and make its own decision.
[31] As per Kiefel J in Shi v Migration Agents Registration Authority [2008] HCA 31; (2008) 235 CLR 286 at [142]-[143].
[32] Re Costello and Secretary, Department of Transport (1979) 2 ALD 934 at 943; Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 at 591.
In considering whether the Applicant is entitled to the SAPTO the Tribunal considers it is necessary to look at requirements of section 160AAAA of the ITAA 1936 as a whole. Based on the information before it the Tribunal finds that:
(a)the Applicant did not meet the requirement of section 160AAAA(2)(a) during the 2019 year as she was not entitled to a pension payment under the VE Act; and
(b)the Applicant did not meet the requirements of section 160AAAA(2)(b) during the 2019 year as while she has never been in gaol she was not entitled to receive the age pension for even one day of the income year;
(c)the Applicant did not meet the requirements of section 160AAAA(2)(c)(i) during the 2019 year as the only social security payment she received during the year was the carer payment which was considered for to be tax exempt. As such her assessible income for the year did not include an amount of social security pension;[33] and
(d)the Applicant did meet the requirements of section 160AAAA(3) during the 2019 year as her rebate income was less than the income cut-off threshold of $32,279.
[33] The Tribunal notes that the Applicant also did not meet the requirements of section 160AAAA(2)(c)(ii) as her assessible income did not include a pension under the VE Act or DFISA-like payment.
To be eligible for SAPTO the Applicant needed to satisfy sections 160AAAA(2) and (3) of the ITAA 1936. As the Applicant did not meet the requirements of section 160AAAA(2) of the ITAA 1936 the Tribunal finds that she was not entitled to the SAPTO during the 2019 year. The Applicant did not dispute the factual basis that underlies the Tribunals findings.
In finding that the Applicant was not entitled to the SAPTO during the 2019 year it follows that she was also not entitled to the increased income threshold or phase-in limits associated with SAPTO under the Medicare Levy Act.
In this matter while the Applicant may have a point in relation to the inputting of her income tax return by the Respondent, that does not change the fact that she did not meet the requirements of section 160AAAA of the ITAA 1936 and as such was not eligible to the SAPTO or the associated increase to the Medicare levy threshold or phase-in limits.
If the Applicant is dissatisfied with the Respondent’s conduct in relation to the inputting of her income tax return or its conduct in relation to her review process it is open to her to consider making a complaint to the Taxation Ombudsman or if she seeks compensation in relation to that conduct, making an application under the Compensation for Detriment caused by Defective Administration (the CDDA Scheme).
CONCLUSION
For the reasons set out above the Tribunal finds that the Applicant was not eligible to receive the Senior and Pensioner Tax Offset during the 2019 year, meaning that she was also not entitled to the associated Medicare Levy reduced threshold or phase-in limits.
The Tribunal, consequently, finds, that the Applicant has not discharged her onus to prove that the amended assessment for the 2019 year is excessive or otherwise incorrect.
Accordingly, the decision under review is affirmed.

I certify that the preceding 52 (fifty-two) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell

............[SGD].....................................................
Associate
Dated: 11 March 2021

Date of hearing: 19 February 2021

Applicant:

By telephone

Respondent: Ms E Huang

Australian Taxation Office

[2021] AATA 484

11 March 2021

Key Legal Topics

Areas of Law

Tax Law

Administrative Law

Legal Concepts

Appeal

Statutory Construction

Judicial Review

Procedural Fairness

Date of hearing:	19 February 2021
Applicant:	By telephone
Respondent:	Ms E Huang
Australian Taxation Office