Emery and Comcare
[2007] AATA 1695
•24 August 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1695
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/563
GENERAL ADMINISTRATIVE DIVISION ) Re IAN EMERY Applicant
And
COMCARE
Respondent
DECISION
Tribunal Dr K S Levy RFD, Senior Member Date24 August 2007
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
...............[Sgd]...............................
Senior Member
CATCHWORDS
COMPENSATION – anxiety disorder and receipt of workers’ compensation benefits – retrenchment package and superannuation entitlements – lump sum with no pension payments – tax payable on superannuation component – application of s21 in terms of compensation of employees receiving lump sum benefits whether the “gross amount” of superannuation was calculated using correct application of formula in determining compensation – whether the “net amount” of superannuation should have been used instead – the formula in s21(3) is intended to use the “gross amount” – the decision under review is affirmed
Safety, Rehabilitation and Compensation Act 1988 – ss 8, 14, 19, 21(1), (3), 24, 30
Income Tax Assessment Act 1936
Acts Interpretation Act 1901 – ss 15AA, 15AB
Audit Act 1901Emery and Comcare [2001] AATA 510
Emery and Comcare [2007] AATA 48
Archer v Comcare (2000) 101 FCR 30
Victims Compensation Fund Corporation v Brown [2003] HCA 54
Re Davina & Defence Force Retirement and Death Benefit Authority (1996) 43 ALD 761Comcare Australia v Lees (1997) 151 ALR 647
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249
Anderson v Commission of Taxes (Vict) (1937) 57 CLR 233REASONS FOR DECISION
24 August 2007 Dr K S Levy RFD, Senior Member Introduction
1. The applicant, Ian Emery, has sought a review of the respondent’s decision to use the “gross amount” of superannuation received by him in determining his compensation in the formula set out in s 21 of the Safety, Rehabilitation and Compensation Act 1988 (“the Act”).
2. The applicant has sought review of his entitlements for some time. He has previously sought review of entitlements under the formulae set out in sections 19 and 21 of the Act.[1] His current application emanates from an application dated 15 June 2006 which seeks five determinations – a review of the interpretation of s 21 of the Act, the application of the use of “gross amount” of a voluntary redundancy package in the application to the formula in s 21, and three other questions in relation to Comcare’s decision not to support an Act of Grace payment for him. The five determinations sought are comprehensive in that they particularise the applicant’s grievance (over 10 pages in length) and allude to various policy interpretations of the relevant legislative provisions and what the applicant regards as a fair outcome. Included in these claims is an Act of Grace payment totalling $134,284.00 (approximately) based on a claimed unfairness in the interpretation and application of these provisions.
[1] Emery and Comcare [2001] AATA 510
Issue
3. The original application was subject to a preliminary determination as to whether the Tribunal had jurisdiction to deal with the matter or whether the applicant’s rights had been exhausted. The Tribunal determined that it had jurisdiction to review the decision of Comcare dated 20 July 2006.[2]
[2] Emery and Comcare [2007] AATA 48
4. However, when the matter came on for hearing before the Tribunal on this occasion, the only issue for determination was whether the “gross amount” of superannuation received by the applicant was calculated using the correct application of the formula outlined in section 21 of the Act.
Evidence
5. The following documentary evidence was admitted into evidence:
Exhibit 1T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975
Exhibit 2 Statement of the applicant dated 1 May 2007
Exhibit 3 Statement by Sharan Burrow dated 8 May 2007
Exhibit 4 Statement by Professor Brian Howe dated 8 May 2007
6. The applicant was a former employee of the Australian Taxation Office. He suffered an anxiety disorder in March 1989 as a result of a grievance lodged against him in mid-1988. He was on extended sick leave from March 1989 until October 1990 and has received workers’ compensation benefits since that time. Liability was accepted in respect of the applicant’s condition in August 1989.
7. On 20 May 1994 the applicant was offered, and accepted, a bona fide retrenchment package. He elected to take his full superannuation entitlements as a lump sum with no pension payments. That lump sum entitlement was $204,687.10 comprised as follows:
(a)The employer funded component $141,132.56
(b)Productivity component $7,186.82
(c)Member component $56,367.72
(d) TOTAL $204, 687.10
8. From that amount, tax of $21,169.88 was payable in respect of the superannuation component together with other adjustments. The evidence presented to the Tribunal was that Mr Emery received an amount of $176,000.00 (approximately) as a result of a voluntary retrenchment package.
9. The applicant gave sworn evidence. He stated that he now receives $1,217.00 per fortnight[3]. He said as a result of the way the calculations are made, he and his wife now receive $100 less per fortnight than they previously did. In effect, he said this equates to his not receiving parenting allowance. In evidence the applicant stated that his primary complaint was about the use of the “gross amount” in the calculation of the formula in s 21. He argued the “net amount” should be used instead of the “gross amount”. In providing the amount of his retrenchment package in 1994, he stated in evidence the net amount was $120,062.88. This was subsequently shown to be a net amount of $176,000.
[3] See paragraph 5 of the Statement of Ian Emery.
10. The Tribunal requested better evidence on this aspect of the material. On 6 August 2007, the Tribunal was provided with an advice from the Public Sector Superannuation Scheme, which showed the total benefit paid was $204,687.10, as shown in paragraph 7. The Superannuation Fund total is the same as that shown above, but breaks up the amount according to superannuation law concepts. It shows –
Total lump sum $111,687.10
Roll over $ 93,000.00
TOTAL BENEFIT PAID $204,687.10
That advice also shows tax was payable of $11,339.56 on the total lump sum amount only.
11. The applicant, after ceasing work with the Australian Taxation Office, spent four years in the Philippines and was situated there when he agreed to the voluntary redundancy. He returned to Australia in 1998 and at that time had a two year old daughter.
12. His evidence was that the s 21 payments started in 1994 and continued in the same way upon his return to Australia from the Philippines. The applicant referred to the deeming rate being 10% in 1988. This refers to the formula in s 21(3) of the Act. In the course of the hearing, the applicant referred to a letter of 1 November 2001 from the Chief Executive of Comcare and indicated that the letter implied that the use of the “gross amount” was a grey area. The applicant referred to page 2 of that letter which stated: “the application of those provisions has not led to any anomaly or disadvantage in comparison with other people in your circumstances. Comcare would advise the Department of Finance accordingly”.
13. The applicant agreed that at the time of his redundancy, there were a number of options open to him. He could have left his superannuation payments in the fund until he turned 55 years of age or he could have taken a pension and a smaller lump sum. In the end, he chose to take a full lump sum which was three and a half times the member contributions. He agreed that when he took the lump sum, what he did with that money was his choice.
Submissions
14. Mr Clutterbuck, counsel for the applicant, referred the Tribunal to the Full Court decision in Archer v Comcare[4] and particularly to paragraph 12 of that decision where it refers to the meaning of “receives” in s 21. The Tribunal was also referred to paragraph 8 of that decision where it was said that the lump sum is the lump sum benefit and not the gross amount. The Tribunal was also referred to paragraphs 11, 12 and paragraph 14 of that decision in the same context.
[4] (2000) 101 FCR 30.
15. Mr Dubé, for the respondent, also referred to Archer v Comcare.[5] He argued a different interpretation to paragraph 12 of that decision than that of Mr Clutterbuck. Also, Mr Clutterbuck’s submission that an interpretation of s 21 should be beneficial given the nature of the legislation was contradicted by Mr Dubé’s submission that s 21 can only apply if there is an uncertainty.[6] He referred the Tribunal to Pearce’s book on statutory interpretation. He said the interpretation of the legislation put by the applicant was “tortuous” and was inconsistent with other provisions in the Act which refer to gross amounts (e.g. ss 8, 19, 24 and 30). The respondent argued that taxation is a separate issue dealt with in the Income Tax Assessment Act 1936; to treat the lump sum superannuation amount in a different manner to other amounts would be contrary to the Act. It was argued by the respondent that if Parliament had intended a separate tax treatment for superannuation payments, it would have made specific provisions for that.
[5] See note 4 above.
[6] Victims Compensation Fund Corporation v Brown [2003] HCA 54.
16. Section 14 of the Act makes Comcare liable to pay compensation where an employee is incapacitated in some respect. Section 19 deals with compensation for injuries which result in incapacity. That was common ground amongst the parties in this application.
17. However, s 21 of the Act is in contention. It provides for compensation of employees in receipt of lump sum benefits. Section 21(1) of the Act applies to a person who was incapacitated for work as a result of injury, and then voluntarily retires. That is the case with the applicant, notwithstanding that he accepted a voluntary redundancy package. He then received a lump sum benefit under a superannuation scheme as required by that section.
18. Section 21(3) of the Act provides that the amount of compensation to be paid is calculated using the following formula:
AC – (SA ¸ 520 + SC) where:
(i)AC is the amount of compensation that would have been payable to the employee for a week, had s 19 applied to the employee;
(ii)SA is the superannuation amount; and
(iii)SC is the amount of superannuation contributions that would have been required to be paid by the employee in that week if he or she was still contributing to the superannuation scheme.
19. “Superannuation amount” is defined in s 4 of the Act as follows:
“superannuation amount , in relation to a pension received by an employee in respect of a week, or a lump sum benefit received by an employee, being a pension or benefit under a superannuation scheme, means an amount equal to:
(a) if the scheme identifies a part of the pension or lump sum as attributable to the contributions made under the scheme by the Commonwealth, Commonwealth authority or licensed corporation--the amount of that part; or
(b) in any other case--the amount assessed by the relevant authority to be the part of the pension or lump sum that is so attributable or, if such an assessment cannot be made, the amount of the pension received by the employee in respect of that week or the amount of the lump sum, as the case requires.”
20. Apart from the definition of “superannuation amount”, the other definitional terms are not in dispute.
21. I now turn to the issues raised by the applicant. While it was not mentioned at the hearing nor in counsel’s submissions as to whether an Act of Grace payment was still in contention, I would not regard that as being reviewable by this Tribunal. Act of Grace payments are not dealt with in the Act; it is a matter which falls within the Audit Act 1901 (Cth). That is not a statute in which this Tribunal is authorised to review decisions. Also, it has been rejected previously by Deputy President Forgie in Re Davina & Defence Force Retirement and Death Benefit Authority[7] at paragraph 30. It has also been found similarly as not being a determination under the Act in Comcare Australia v Lees.[8]
[7] (1996) 43 ALD 761.
[8] (1997) 151 ALR 647.
22. In relation to whether the gross or net amount should be used in interpreting s 21 of the Act, using ordinary principles of statutory interpretation I am inclined to the view that without specific mention of an intention to rely upon the “net amount”, then such an intention does not exist. If Parliament had intended to use the “net amount” then it could have explicitly stated as such.
23. Consistent with that interpretation is the fact that the Income Tax Assessment Act1936 is to be regarded as a gloss on other statutory requirements. As a matter of law and public policy, taxation is regarded as an important and universal principle to be applied and any exemption from normal principles set out in the Income Tax Assessment Act 1936 would be specifically stated. This is so that the taxation laws have equal application to all citizens in Australia, regardless of an individual’s personal views about whether they are harsh or fair.
24. The imposition of taxation laws must be adopted only where there is “…clear and unambiguous language…”[9] Taxation law is clearly integral to the superannuation laws in Australia. Where necessary, extrinsic material may be used to clarify the proper construction.[10] But the purposive approach adopted by the High Court[11] reflects s 15AA of the Acts Interpretation Act 1901, where a construction that promotes the purpose of the Act is to be preferred. It may be that Parliament omitted reference to the “gross” or “net” amount because of the principle of statutory construction which has been consistently applied for some time by the High Court in espousing that a purposive approach is the correct approach to statutory construction and not a literal method of interpretation.[12]
[9] Anderson v Commission of Taxes (Vict.) (1937) 57 CLR 233 at 243.
[10] See s 15AB of the Acts Interpretation Act 1901.
[11] See, for example, note 9 above.
[12] Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] and 384 [78]; Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249 at 264 [35].
25. To determine the issues before the Tribunal, some contextual understanding of the interface between the superannuation laws and the taxation laws is important. Superannuation contributions are generally required to be “preserved” in a superannuation fund until a person retires or is incapacitated. At that point, the person entitled to such superannuation monies may elect to either take an eligible termination payment (ETP) or to take a superannuation pension or annuity. The purpose of the latter option is to provide a balanced flow of income for the remainder of the person’s life in retirement.
26. The scheme and the superannuation contributions by the employer, the employee and the Trustees of the Superannuation Fund are, putting it minimally, quite complex. Relevantly here, the taxation treatment of the preserved funds, consistent with the purposive approach to statutory interpretation, is also detailed and complex.
27. For an ETP, some lump sum payments are considered under the ETP rules. However, others (for example, long service leave, undrawn annual, recreation leave and compensation payments for injuries) are not dealt with under the ETP rules. These latter provisions are taxed under different, non-superannuation related taxation laws.
28. A taxpayer can defer paying tax on an ETP by “rolling over” those amounts i.e. they may defer taxation on them until they are withdrawn. The pragmatic aspects illustrate the complexity. It also illustrates the purposive approach. For example:
· Pre 1983 contributions – only 5% of the amount is taxed at marginal rate.
· Post 1983 contributions - 100% is taxed when the person is under 55 years of age (tax at 20% on taxed contributions and 30% on untaxed contributions).
29. Other complexities are apparent. For example, concessional payments (i.e. bona fide redundancy payments) involve only 5% of those payments needing to be assessed, although the marginal rate is applicable to the amount assessed. In respect of undeducted contributions (i.e. those for which no taxation deduction has been previously allowed) then no tax is payable on those contributions.
30. As a general rule, more generous taxation treatment is available where some annuity-type arrangement is in force; whereas a higher level of taxation is imposed on lump sum payments where there is no pension or annuity drawn. This more generous taxation treatment is consistent with encouraging taxpayers to maintain a preserved superannuation component and thus reduce the likelihood of becoming dependent on Social Security benefits in the future.
31. Clearly therefore, the intention of taxation of superannuation contributions, particularly those payable as lump sums, are not intended to be treated differently in the application to the Safety, Compensation and Rehabilitation Act as those provided for under the taxation of superannuation amounts in the Income Tax Assessment Act. To treat it otherwise could be regarded as undermining the construction of taxation laws and would otherwise be inconsistent with those laws. That could result in discrimination against other persons on similar levels of income but who are not in receipt of compensation benefits.
Conclusion
32. I find that while the provisions of the Act are designed to be compassionate for those to whom the provisions of that Act apply, they are clearly not intended to contradict the purpose of taxation laws enacted. Indeed, the taxation laws are quite complex and specialised and must be regarded as being applicable generally and consistently to all persons obliged to pay tax in Australia. There is therefore no ambiguity in the purpose of the application of the provisions in s 21 of the Act. Consequently, the formula in s 21(3) is intended to refer to the “gross amount” before tax.
33. In the circumstances, the decision under review is affirmed.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy RFD, Senior Member
Signed: .....................................................................................
Eleanor O’Gorman, AssociateDate/s of Hearing 12 June 2007
Date of Decision 24 August 2007
For the Applicant Mr R Clutterbuck of Counsel
Sciaccas Lawyers and Consultants
For the Respondent Mr B Dubé, Sparke Helmore Solicitors
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