Geelong Turf Company Pty Ltd and Commissioner of Taxation (Taxation)

[2023] AATA 1718

Geelong Turf Company Pty Ltd and Commissioner of Taxation (Taxation) [2023] AATA 1718 (20 June 2023)

Division:                  SMALL BUSINESS TAXATION DIVISION

File Number(s):      2021/8652

Re:Geelong Turf Company Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Senior Member G Lazanas

Date:20 June 2023

Place:Melbourne

The Commissioner’s objection decision dated 22 September 2021 as it relates to Part 7 penalties is varied, as follows:

(a) in respect of the quarters ending 30 June 2018, 30 September 2018, 31 December 2018 and 31 March 2019 (the non-amnesty quarters), the Part 7 penalties are remitted in full; and

(b) in respect of the quarters ending 30 September 2016, 31 December 2016, 30 March 2017, 30 June 2017, 30 September 2017, 31 December 2017 and 31 March 2018 (the Amnesty Quarters), no further remission of Part 7 penalties is allowed.

.....................[SGD].......................

Senior Member G Lazanas

CATCHWORDS

SUPERANNUATION GUARANTEE CHARGE – Part 7 penalties assessments – one-off amnesty period – whether further remission of Part 7 penalties allowed where statute imposes maximum allowable remission – whether Tribunal satisfied exceptional circumstances existed preventing the taxpayer from disclosing superannuation guarantee shortfall during amnesty period – objection decision varied

LEGISLATION

Superannuation Guarantee (Administration) Act 1992 (Cth) ss 16, 19, 33, 36, 59, 62, 74
Taxation Administration Act 1953 (Cth) s 14ZZK

CASES

Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue

(2009) 239 CLR 27

Baker v The Queen (2004) 223 CLR 513
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Etmekdjian and Commissioner of Taxation

[2020] AATA 3821

Mourched and Commissioner of Taxation

[2014] AATA 223

R v Kelly

(Edward) [1999] UKHL 4; [2000] QB 198, 208

Roy Morgan Research Pty Ltd v Commissioner of Taxation

(2011) 244 CLR 97; [2011] HCA 35

VBS v Commissioner of Taxation 

[2005] AATA 1303

SECONDARY MATERIALS

Explanatory Memorandum to Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 (Cth)

REASONS FOR DECISION

Senior Member G Lazanas

20 June 2023

INTRODUCTION

1. The applicant, Geelong Turf Company Pty Ltd (Company), runs a landscaping business. The Company has applied to the Administrative Appeals Tribunal for review of a decision by the respondent, the Commissioner of Taxation (Commissioner), dated 22 September 2021 (Objection Decision) to disallow further remission of certain penalties imposed under the superannuation guarantee charge (SGC) rules. Specifically, the Commissioner refused to further remit the Part 7 penalties imposed under s 59(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGAA) in respect of certain historical quarters (Amnesty Quarters).

2. The Commissioner claims that the Part 7 penalties in respect of the Amnesty Quarters have been appropriately remitted to 100% of the SGC in accordance with s 62(4) of the SGAA, and that that is the maximum allowable remission in the absence of finding “exceptional circumstances”: see s 62(5) of the SGAA. This case is, therefore, about whether the Tribunal, standing in the shoes of the Commissioner, is satisfied that there were exceptional circumstances that prevented the Company, as the employer, from disclosing to the Commissioner the information relevant to the amount of the Company’s superannuation guarantee (SG) shortfall.

3. The Commissioner submits that the Company has not discharged its burden of proof to show that exceptional circumstances continuously existed pursuant to s 62(5) of the SGAA, which prevented the Company from disclosing that information for the Amnesty Quarters either during the period from 24 May 2018 to 7 September 2020 (Amnesty Period),[1] or prior to the Company being notified of the examination of the Company’s SG compliance (whichever is earlier). Accordingly, the Commissioner states that the assessments of the Part 7 penalties for the Amnesty Quarters are not excessive (as that term is used in the Taxation Administration Act 1953 (Cth)) (TAA) and are also not otherwise incorrect.

   [1] Section 74(3 of the SGAA defines the amnesty period as the period that started on 24 May 2018 [the date the Treasury Laws Amendment (2018 Superannuation Measures No. 1 Bill 2018 (Cth) was introduced into the House of Representatives) and ends 6 months after the Treasury Laws Amendment (Recovering Unpaid Superannuation) Act 2019 (Cth) received Royal Assent [6 March 2020].

4. The Company sees the matter differently. Mr Luke Belleville, who has at all relevant times been the director of the Company, argued that the Part 7 penalties are excessive because they are an overreach by the government and not justified as they are unacceptably high. He also argued that there were exceptional circumstances which prevented the Company from disclosing the information during the Amnesty Period, thus allowing the further remission of the Part 7 penalties pursuant to the discretionary power: s 62(5) of the SGAA.

5. As these reasons will explain, I have concluded that the Company has not persuaded me that the Part 7 penalties are excessive as there were no exceptional circumstances which prevented the Company from disclosing its SG shortfall during the Amnesty Period. Therefore, no further remission of the Part 7 penalties is allowed under the terms of the SGAA in relation to the Amnesty Quarters. However, the objection decision is varied to allow for the Commissioner’s concession during the proceedings to further remit the Part 7 penalties in respect of non-amnesty quarters.

ISSUE

1. The sole issue for determination by the Tribunal is whether, for the purposes of s 62(5) of the SGAA, exceptional circumstances existed which prevented the Company from disclosing information relevant to the amount of the Company’s SG shortfall for each of the Amnesty Quarters either during the Amnesty Period or before the Company was notified that the Commissioner was examining or intending to examine the Company’s SG compliance for any Amnesty Quarters.

FACTUAL BACKGROUND 

1. The following findings of fact are based on the Commissioner’s Statement of Facts Issues and Contentions and T-Documents including Supplementary T-Documents filed with the Tribunal. The Company also provided evidence, including numerous letters from witnesses. In addition, Mr Belleville provided oral evidence and was cross-examined.

2. On 3 October 2019, the Commissioner sent the Company a letter relevantly requesting evidence that the Company had paid the SG for its employees for the quarters ending 31 December 2016 to 31 March 2019.[2] The letter was addressed to the Company care of the Company’s accountants and their postal address listed on the systems of the Australian Taxation Office (ATO) at that time.

   [2] ST2, pp. 645-646.

3. On 26 February 2020 and 27 February 2020, an ATO officer attempted to contact Mr Belleville in relation to the abovementioned letter but was unsuccessful.[3]

   [3] ST3 and ST4, pp. 647-648.

4. On 27 February 2020, an ATO officer contacted the Company’s accountant, Ms Erika Fischer at Accountable Business Solutions and was advised that the letter dated 3 October 2019 had not been received. A copy of the letter was then sent via email to the accountant on the same day.[4] The latest date of notification of the ATO’s examination or audit of the Company’s SG compliance is 27 February 2020 while the earliest possible date – premised on the presumption that it was received in the ordinary course - is shortly after 3 October 2019, being the date of the ATO’s letter. Either way, no response was provided by the Company to the Commissioner regarding the letter dated 3 October 2019. Moreover, as set out below, the Company co-operated with the Commissioner by providing information in relation to its employees and payroll in mid-August 2021, after the Amnesty Period ended.

   [4] T3, p. 28

5. On 12 March 2020, the Commissioner commenced an audit in respect of the quarters ended 31 December 2016 to 31 December 2019.[5] Subsequently, by letter dated 13 January 2021, the Commissioner advised the Company that the audit was being extended to cover the quarters ending 31 March 2020 to 30 September 2020, after the Amnesty Period.[6] Additionally, although the quarter ended 30 September 2016 was not identified as forming part of the audit in the Commissioner’s letters, the Commissioner later imposed Part 7 penalties in respect of that historical quarter as well.

   [5] T4, pp. 32-34.

   [6] T6, p. 44.

6. Accordingly, the Amnesty Quarters in respect of which the parties were arguing as to whether Part 7 penalties were excessive are 30 September 2016, 31 December 2016, 30 March 2017, 30 June 2017, 30 September 2017, 31 December 2017 and 31 March 2018.

7. Following the audit, on 3 March 2021, the Commissioner notified the Company that it would issue default SGC assessments under s 36 of the SGAA for numerous quarters including the Amnesty Quarters using information the Commissioner held on ATO systems (Default assessments). The Commissioner noted that the Company’s income tax lodgements were up to date but that the Company separately owed an amount of approximately $30,000 tax.[7]

   [7] T8, pp. 59-68.

8. The Commissioner also advised the Company that it was liable for Part 7 penalties under the SGAA. Relevantly, in respect of the Amnesty Quarters, the Company was liable for Part 7 penalties at 200% of the SGC in the amount of $60,023.42, but this amount was remitted by the Commissioner to 150% of the SGC, namely, $45,017.55. As foreshadowed, the Commissioner then issued Notices of Assessment of SGC and Part 7 penalties.

9. On 14 April 2021, Mr Belleville on behalf of the Company sent a letter to the Commissioner “objecting” to the superannuation charges generally, and relevantly included an email that he had earlier sent to the ATO on 7 April 2021 in which he stated, as follows:

   When I started Geelong Turf Company I had no experience and minimal knowledge on the accounting side of a business, and would rely on my accounts for that. (sic)

   Unfortunately the amazing accountant (Peter…) who helped start my company and was going to help me run it fell terminally ill…

   I then got onto a bookkeeper who was helping me set up Xero and she put me onto Kelly Howard from ABS (Accountable Business Solutions).

   I informed her … that I want nothing to do with the accounting/ superannuation/payroll etc side of things, just tell me what to pay and when to pay it and charge me for your time.

   While Peter was great at this Kelly wasn’t as proactive and it turns out has caused the current situation I’m in now.

   At the end of 2018 my employees at the time unfortunately made some major errors on a large job I was constructing, and it ended up costing me a significant amount, therefore, putting me into debt with the ATO.

   Then not long after that Kelly my accountant informed me that I had to pay about 20,000 plus in Superannuation.

   At this point I was so financially unstable I had to let my workers go, pay their Super and start working on my own.   …

   Around 10 months later I still wasn’t happy with Kelly and changed accountant to Elyse… from Advisory Partners.  …

   All I am trying to say is, I have always been willing to pay what is owed, however due to some incompetence on my accountants end, I seemed to have missed some or haven’t followed the correct procedure. (sic)

10. Between 5 August 2021 and 8 September 2021 there was extensive correspondence between ATO officers and the Company’s accountant, Mr Dylan Davis from Advisory Partners, to clarify and formalise the objection that was lodged by the Company. The Company also co-operated and provided voluminous information to the Commissioner.[8]  

    [8] T11 – T18, pp. 75-587.

11. On 22 September 2021, the Commissioner made the objection decision.[9] Relevantly, for present purposes, the Commissioner advised that the objection was allowed, in part, for the SGC assessments, and that the Part 7 penalties for the Amnesty Quarters were reduced from 150% of the SGC to 100% of the SGC for each quarter totalling $29,761. The Commissioner proceeded to issue the Company with letters dated 27 September 2021 together with Notices of Amended Assessments of SGC also dated 27 September 2021 for the Amnesty Quarters and, additionally, the non-amnesty quarters.[10]

    [9] T19, p. 588.

    [10] T 20 – T21, pp. 598-643.

12. The Part 7 penalties for non-amnesty quarters were reduced from 150% of the SGC to 56% of the SGC for each quarter. Subsequently, during these proceedings, the Commissioner exercised his discretion and remitted the Part 7 penalties in full in relation to the non-amnesty quarters and they are, therefore, no longer in issue.

13. On 16 November 2021, the Company applied to the Tribunal for a review of the Commissioner’s objection decision on the basis that it is wrong as the Commissioner should have further remitted the Part 7 penalties for all quarters. As stated above, the only live issue for determination by the Tribunal concerns the Part 7 penalties in respect of the Amnesty Quarters. The Company did not, at any stage, dispute the SGC.

14. The Company filed with the Tribunal the following letters, the relevant parts of which are extracted below, in support of its position. I accept they are broadly reliable witness statements, except where I have indicated below some limitations.  

    (a)A letter from Mr Adrian Stone from Living Holistic Health – Geelong dated 19 May 2022 in which Mr Stone states he “assisted Mr Belleville with a chronic health condition in 2018. This issue related to chronic fatigue and stress, and had been ongoing for six years previously.”[11]

    (b)A letter from Mr Robert Claridge from Claridge Naturopathics dated 1 June 2022 regarding the health of Mr Belleville. Mr Claridge states he has been seeing Mr Belleville as a client since 2013; up until then his presentations were of a minor nature but which changed in 2016 when Mr Belleville “communicated he was struggling with bouts of dizziness, tachycardia and lowered endurance, all symptoms of anxiety and stress coping. Mr Claridge states he did not see Mr Belleville during the next few years but in early 2022 they met again and Mr Belleville explained to him that his struggle had continued for a number of years until he was able to prioritise greater rest and recovery. Mr Claridge states “I do believe that his circumstances and state of health during 2016 and 2019 would have compromised his concentration, judgement and ability during such time.”[12]

    (c) A letter from Mr Stuart Hinds from Barwon Soft Tissue Therapies, being specialists in muscle pain management, dated 21 May 2022 in which Mr Hinds states he had treated Mr Belleville from early 2016-2019 in relation to his ongoing chronic fatigue and mental health condition. Mr Hinds also states Mr Belleville “had developed a physical and mental overload condition which saw extensive physical fatigue issues while lead to a mental health issues, which made it almost impossible to manage his landscaping business, which relied on him coming in for weekly treatments to help him deal with the muscular overload issues… to the point of complete fatigue and cramping” (sic).[13]

    (d)A letter from Dr Belinda Young, a chiropractor working at Heartchiropractic, dated 12 July 2022 in which Dr Young states that Mr Belleville has been attending her clinic semi-regularly since 2012. Dr Young further states that “toward the end of 2015 [Mr Belleville] started presenting with more stress related problems rather than his previous physical injury related mechanical issues… he started mentioning issues with his breathing, neck pain and chest pain. He became a more regular patient during this time because of these different complaints. It is my understanding that over this time he found someone he trusted to take over the “books side” of his business… to someone he felt was better qualified so he could get on top of his health at this stressful time in his life. Because of this decision, he was able to continue with the business and keep his employees in work even while dealing with his own issues.[14]

    (e)A letter from the Company’s current accountant, Mr Nicholas Bethune from Advisory Partners Pty Ltd, dated 29 June 2022 in which he provides background information regarding the accounting advice given to the Company. He notes the Company had been advised by Ms Kelly Howard up until 28 April 2020. Mr Bethune references the fact that Ms Howard was herself investigated and suspended by Chartered Accountants Australia and New Zealand (CAANZ) in March 2017 in relation to “breach of trust and professional obligations” which he says may have been indicative of the lack of the attention to the Company’s accounting matters.[15] It emerged from other documents filed by Mr Belleville that the CAANZ’s Disciplinary Tribunal accepted on 6 December 2018 Ms Howard had been charged with and pleaded guilty to stealing money from a client.[16] Mr Bethune separately references the fact that Mr Belleville had seen various medical practitioners for the period during which the Part 7 penalties were imposed. Mr Bethune states that Mr Belleville is seeking remission of penalties on account of, amongst other things, (1) poor and uninformed advice from his previous agent; (2) the fact the Company will likely have to go into liquidation; and (3) Mr Belleville’s personal finances are also in a poor state.[17]

    [11] ST17, p. 676.

    [12] ST17, p. 677.

    [13] ST17, p. 678.

    [14] ST18, p. 693.

    [15] T18, p.690.  

    [16] ST19, p.703.

    [17] ST18, pp. 690-692

15. On 14 September 2022, Mr Belleville on behalf of the Company, sent the Tribunal further documents in support of the Company’s position, including a letter titled “Reasons for Objection” in which he relevantly stated, amongst other things, that he “was suffering physically and mentally throughout the whole period; the business made a loss or minimal profit throughout the years in question due to illness”. Curiously, this appeared to be the first time that Mr Belleville referred to his health conditions as he had not previously mentioned these issues in his correspondence and “objection” sent to the Commissioner on 7 and 14 April 2021 (see [15] above). Mr Belleville also stated “I don’t see how anyone could think that a fine of around $30,000 is not an overreach of power, money and strength from government…”[18] Mr Belleville also attached an email dated 31 August 2016 instructing his then bookkeeper and accountant to prepare the Company’s Business Activity Statement (BAS) and to also “get [his] personal tax and company tax sorted out asap” as he had “made an offer to purchase a house”.[19]

    [18] ST19, pp.696-697.

    [19] ST19, p.700.

16. At the hearing, Mr Belleville’s oral evidence was mostly focused on his symptoms of chronic fatigue that he claimed to have suffered, for a very long time. Although he was not able to be specific about the period, he thought it lasted between 2 to 3 years and started in or around 2016, after he came back from travelling when he said he also began binge drinking. Mr Belleville said that some days he had trouble getting out of bed as he had very low motivation, and mental health issues. He stated he had seen medical practitioners about his conditions and done numerous blood tests but to no avail.  Mr Belleville stated he found the naturopaths that he visited to be of greater help in his recovery, as they assisted him with his diet and lifestyle issues (see [20(a)-(b)]) above).

17. The physical nature of the landscaping work undertaken by Mr Belleville meant that he also needed regular muscular treatments as referred to above (see [20](c)-(d)]). However, Mr Belleville also stated he did not regularly work while he was suffering from chronic fatigue and only managed to continue to run the Company’s landscaping business during this period by relying on his employees and apparently promoting one of them to undertake a supervisory role in relation to the construction work. There was no independent evidence (including amongst the health practitioners) to corroborate Mr Belleville’s glib assertions that he did not regularly work and I am unable to accept his mere assertion. Besides, his own evidence was that he was undertaking physically demanding work throughout that period and needed regular muscular treatments as also supported by Mr Hinds and Dr Young (see [20(c)-(d)]).  

1. Notwithstanding some minor shortcomings, I accept that Mr Belleville was a straightforward witness and I find that he likely suffered some fatigue and stress related health conditions from overextending himself in his work and lifestyle in or around 2016, although the precise duration of that period was unclear. The letters from the health practitioners provide broad context to Mr Belleville’s conditions and corroborate the fact he had visited a number and variety of health practitioners including naturopaths, a chiropractor and soft tissue specialists (see [20(a)-(d)] above). I accept Mr Belleville’s explanation that he did not mention these health conditions in his early correspondence and “objection” with the Commissioner in April 2021, as he had not wanted to openly discuss personal issues. However, like Mr Belleville’s own limited evidence as to the duration of his conditions, the health practitioners also provided only very general information. For example, Mr Stone stated he assisted Mr Belleville with a chronic health condition in 2018 and referenced this condition as having been apparently ongoing for 6 years previously without providing any foundation (see [20(a)]). Mr Hinds, a specialist in muscle pain management, stated he treated Mr Belleville from early 2016 to 2019, and claimed that Mr Belleville had extensive physical fatigue and mental health issues, although it wasn’t clear what expertise he had to diagnose mental health issues. Significantly, none of the health practitioners suggested that Mr Belleville was unable to work due to his health issues. Only Mr Hinds stated that his conditions “made it almost impossible to manage his landscaping business, which relied on him coming in for weekly treatments” (see [20(c)]). In summary, the evidence is that while Mr Belleville suffered from health conditions, he still managed to work. Significantly, it also transpired from Mr Belleville’s own evidence that he still managed to file his and the Company’s income tax returns and BASs with the assistance of his accountant throughout the relevant period.

RELEVANT STATUTORY PROVISIONS AND PRINCIPLES

The Onus of Proof

1. The Company, as the taxpayer, bears the onus of showing that the Part 7 penalties assessments in respect of the Amnesty Quarters are excessive or otherwise incorrect and what they should have been: see s 14ZZK(b)(i) of the TAA.

2. It is important to note that the use of the word “excessive” is as per its meaning in tax legislation. In other words, the term “excessive” in s 14ZZK(b)(i) relates to the taxpayer’s substantive liability for the tax assessed and, to discharge the onus of proof, the taxpayer must prove that the assessed amount is greater than the liability of the taxpayer under the relevant tax Act: see Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614. Accordingly, Mr Belleville’s arguments that the Part 7 penalties were unacceptably high both as to the rate (100% of the SGC, as already remitted) and as to the amount (approximately $30,000) are rejected. This is because the SGAA specifically provides for the maximum allowable remission restriction for Part 7 penalties under s 62(4) of the SGAA.

3. In order to discharge the burden of proof in the present matter, the Company must prove, on the balance of probabilities that exceptional circumstances existed that prevented the Company from disclosing information relevant to the amount of the Company’s SG shortfall for the Amnesty Quarters (see [10] above).

The SG scheme

1. It is necessary to briefly set out some context regarding the SG scheme and the incentives in the statutory provisions that encourage employers to comply with the SGAA.

2. The legislative scheme requires employers to make appropriate superannuation contributions for their employees. The purpose of the SG scheme is to incentivise employers to make contributions to superannuation for their employees to avoid a liability to the Commissioner for the SGC. See Roy Morgan Research Pty Ltd v Commissioner of Taxation (2011) 244 CLR 97; [2011] HCA 35, [3] French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ.

3. The SGC is payable by an employer as a debt to the Commissioner under s 16 of the SGAA, if the SG contribution is not made, however, the employer may reduce the charge percentage payable with respect to an employee in a quarter, including to nil, by voluntarily making contributions to a superannuation fund for the benefit of the employee within 28 days of the end of a quarter (s 19 of the SGAA). The SGC includes the SG shortfall plus a nominal interest component and an administration component.

4. Pursuant to s 33 of the SGAA, where an employer has a shortfall for a quarter, the SGAA requires the employer to self-report the shortfall and lodge an SG statement on or before the due date for that quarter. Under s 59 of the SGAA, if an employer refuses or fails to provide an SG statement or information relevant to assessing the employer’s liability to pay SGC for a quarter, the employer is liable to pay, by way of penalty, additional SGC (that is, the Part 7 penalties). The Part 7 penalties are equal to 200% of the SGC. Clearly, the object of Part 7 penalties is to encourage the timely self-assessment of SGC liabilities by an employer via lodgement of an SG statement.

5. Subsection 62(3) of the SGAA gives the Commissioner a broad discretion to remit, all or part of the Part 7 penalties. It is well established that a discretionary power can be exercised only for the purposes for which it is granted and subject to the restrictions in the legislation: see Commissioner of Taxation v Ross (2021) 174 ALD 77; [2021] FCA 766 [206] (per Derrington J). Additionally, the matters relevant to the exercise of the discretion are determined by the subject matter, scope and purpose of the statutory provisions.

The one-off amnesty period

1. Section 74 of the SGAA provides for a one-off Amnesty Period from 24 May 2018 until 7 September 2020. If a qualifying employer lodged SG statements for historical periods and quarters (i.e., periods and quarters from 1 July 1992 to 31 March 2018) within the Amnesty Period, no Part 7 penalties are imposed. For SGC assessments relating to historical periods made after the end of the Amnesty Period on 7 September 2020, the Commissioner’s discretion to remit Part 7 penalties below 100% of the amount of SGC liability for the relevant period or quarter is restricted under ss 62(4) and 62(5) of the SGAA.

2. Subsections 62(4) and 62(5) of the SGAA state, as follows:

   (4) If: 

   (a)an employer is liable under section 59 to additional superannuation guarantee charge for a quarter that started on or before 1 January 2018; and 

   (b)there is particular information that is relevant to the amount of the employer’s superannuation guarantee shortfall for the quarter; and 

   (c)since the start of the amnesty period, either: 

   (i)the employer has not disclosed that information to the Commissioner; or 

   (ii)the      employer       has      disclosed      that information to    the Commissioner, but only after the Commissioner informed the employer that the Commissioner was examining, or intended to examine, the employer’s compliance with an obligation to pay the superannuation guarantee charge for the quarter; and 

   (d)by taking that information into account, the employer’s superannuation guarantee shortfall for the quarter exceeds what it would be if that information were not taken into account; 

   to the extent that the additional superannuation guarantee charge relates to that excess, the Commissioner’s power under subsection (3) of this section to remit the additional superannuation guarantee charge is limited to remitting no more than half of the charge.

   (5)  However, subsection (4) does not apply if the Commissioner is satisfied that there were exceptional circumstances that prevented the employer from: 

   (a)disclosing that information to the Commissioner; or 

   (b)disclosing that information to the Commissioner before the Commissioner informed the employer as mentioned in subparagraph (4)(c)(ii); 

   as the case requires.  (Bolding is emphasis added)

WERE THERE EXCEPTIONAL CIRCUMSTANCES?

1. The phrase “exceptional circumstances” is not defined in the SGAA and its meaning must, therefore, be construed as a matter of ordinary statutory interpretation. This necessitates consideration of the text through interpreting the ordinary words while considering their context and the legislative purpose. See, for example, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 31.

2. The phrase “exceptional circumstances” is defined in The Australian Concise Oxford Dictionary, to mean “unusual or not typical”.[20] The Macquarie Dictionary relevantly defines the word “exceptional”, as follows: “1. forming an exception or unusual instance; unusual; extraordinary...”.[21]

   [20] 4^th ed, Oxford University Press, 2006.

   [21] Revised 3^rd ed, The Macquarie Library Pty Ltd, 2003.

3. In Baker v The Queen (2004) 223 CLR 513, Callinan J referred to the following extract in the judgment in R v Kelly (Edward) [1999] UKHL 4; [2000] QB 198, 208 by Lord Bingham of Cornhill CJ who relevantly stated:

   [W]e must construe ‘exceptional’ as an ordinary, familiar English adjective, and not as a term of art. It describes a circumstance which is such as to form an exception, which is out of the ordinary course, or unusual, or special, or uncommon. To be exceptional a circumstance need not be unique, or unprecedented, or very rare; but it cannot be one that is regularly, or routinely, or normally encountered.

4. In Mourched and Commissioner of Taxation [2014] AATA 223 at [33], Deputy President Deutsch observed when considering s 126B(4) of the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act), that “exceptional” as an adjective is used “[t]o qualify the type of circumstances required to exist, and sets a very high threshold which cannot be easily satisfied. It is more than unusual or out of the ordinary – it seems to require circumstances that rarely occur and perhaps are “outside reasonable anticipation or expectation”, citing VBS v Commissioner of Taxation [2005] AATA 1303 at [18].

5. In Etmekdjian and Commissioner of Taxation [2020] AATA 3821 at [8], in the context of considering s 126B(4) of SIS Act, Deputy President McCabe stated that “[t]he use of the word “exceptional” as a qualifier underlines the legislative intention that the circumstances in question must be genuinely unusual or rare so there is a good reason for treating this case differently from other cases”.

6. Turning to the statutory context of ss 62(4) and 62(5) of the SGAA, Parliament intended a more restrictive criterion to apply to remission in quarters covered by the Amnesty Period, after its conclusion as it was a one-off amnesty. Accordingly, the SGAA imposes a higher test for the ability to give full or further remission, namely, the existence of “exceptional circumstances”, for remissions relevant to the Amnesty Period. In doing so, Parliament clearly intended to strengthen the attractiveness for employers disclosing by providing a significant disincentive to those that do not disclose historical shortfalls during the Amnesty Period. That is achieved by ensuring Part 7 penalties for employers who did not take advantage of the amnesty may not be reduced beyond 50% (equivalent to 100% of the SGC) unless there are “exceptional circumstances”. See also Explanatory Memorandum for the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 at [1.11 – 1.12].

7. The Commissioner submitted that the jurisprudence in relation to the meaning of “special circumstances” should also be considered, in part, because the abovementioned Explanatory Memorandum at [1.92] equated the principles applicable to “exceptional circumstances” as those broadly applicable to “special circumstances” in other statutory frameworks. However, it is unnecessary to further explore that line of cases where the ordinary meaning of the phrase, having regard also to the statutory context of the SG scheme, is tolerably clear. To constitute “exceptional circumstances” there needs to be something especially unusual or uncommon or unprecedented that distinguishes the circumstances from ordinary or common situations. This is because, read in context, the circumstances must be so unusual or uncommon as to justify different treatment from usual cases.

8. The Company did not persuade me that it had exceptional circumstances during the Amnesty Period of its SG compliance because I was not satisfied that the physical and mental health issues suffered by Mr Belleville were especially unusual or uncommon or unprecedented. However, even if they were, they did not stop the Company from disclosing its SG shortfalls to the Commissioner at any stage during the Amnesty Period or before the Commissioner’s notification of the examination of the Company’s SG shortfall. This is because while Mr Belleville had some health conditions, those conditions did not appear to afflict him in a way that he was not able to work or continue to attend to the Company’s matters. For example, Mr Belleville continued to arrange for the Company to lodge its income tax returns and BASs throughout the period (see [13] and [21] above).

9. The suggestion that the Company’s former accountants were incompetent and did not attend to the Company’s SG obligations as instructed by Mr Belleville, even if it were true, is also not an exceptional circumstance on its own or in combination, as Mr Belleville did not explain how the Company was prevented from disclosing information relevant to its SG shortfall to the Commissioner while other tax lodgements occurred. Besides, there was no evidence the former accountant’s conviction and subsequent suspension impacted the Company. Moreover, the Company continued to have a SG shortfall post the former accountant’s suspension up to the period ended 31 March 2019 in respect of the other (non-amnesty) quarters, thereby indicating that the Company’s failure to disclose the relevant information was a systemic failure.

10. Furthermore, the limited knowledge of the Company and Mr Belleville as to accounting and tax matters and, in addition, the precarious financial positions of the Company and Mr Belleville are also not exceptional circumstances. None of these matters constitute exceptional circumstances either on their own or in any combination as they are not especially unusual or uncommon or unprecedented. In any event, the arguments do not address how any of those matters prevented the Company from lodging SG statements or otherwise disclosing information relevant to the amount of the Company’s SG shortfall to the Commissioner, particularly as only disclosure of the SG shortfall was required and not payment of the SG shortfall.

11. Finally, it is noteworthy that the Commissioner further argued that the exceptional circumstances must be in relation to a failure, “since the start of the amnesty period”, pursuant to ss 62(4) and 62(5) of the SGAA and that, therefore, the exceptional circumstances must have continuously existed. This issue did not arise for determination in the present matter and, therefore, should be considered in a case where it is squarely raised.

DECISION

1. For the reasons given, in respect of the Amnesty Quarters, no further remission of Part 7 penalties is allowed under the terms of s 62(5) of the SGAA as the Company has not discharged the burden of proving that the assessments are excessive.

I certify that the preceding 46 (forty-six) paragraphs are a true copy of the reasons for the decision herein of Senior Member G Lazanas

...................................[SGD].....................................

Associate

Dated: 20 June 2023

Date(s) of hearing:	18 May 2023
Date final submissions received:	25 May 2023
Advocate for the Applicant:	Mr L Belleville
Solicitor for the Respondent:	Mr S Jamieson, ATO Litigation and Legal Services