Harste and Commissioner of Taxation
[2013] AATA 544
•2 August 2013
[2013] AATA 544
Division TAXATION APPEALS DIVISION File Number
2013/0216
Re
ALAN HARSTE
APPLICANT
And
COMMISSIONER OF TAXATION
RESPONDENT
DECISION
Tribunal Ms G Ettinger, Senior Member
Date 2 August 2013 Place Perth The Tribunal affirms the objection decision under review.
...(Sgd) G Ettinger...............
Ms G Ettinger, Senior Member
CATCHWORDS
TAXATION - Employment Termination Payment (ETP) – applicability of tax concession – whether redundancy – Applicant’s claim of discrimination due to age over 65 years at time of receipt of ETP – no discrimination found in application of the tax law – objection decision under review affirmed.
LEGISLATION
Taxation Administration Act 1953 (Cth)
Income Tax Assessment Act 1997 (Cth) s 83-175
Age Discrimination Act 2004 (Cth) ss 39, 40
CASES
Coker v Commissioner of Taxation [2010] AATA 367
REASONS FOR DECISION
Ms G Ettinger, Senior Member
2 August 2013
SUMMARY
Mr Alan Harste who worked as a power generation plant operator at Verve Energy Australia Pty Ltd, (Verve), was made redundant, and his employment terminated during the 2012 financial year. He received an Employment Termination Payment (ETP) in September 2011 when he was 67 years old. An ETP is a lump sum payment made in consequence of the termination of employment of a person.
The Commissioner of Taxation (Commissioner) has imposed tax on the receipt of the payment on the basis that due to Mr Harste’s age at the time of the termination of employment, it was not a genuine redundancy pursuant to the Income Tax Assessment Act 1997 (ITAA 97). The amount of the ETP was therefore included in Mr Harste’s assessable income for the 2012 year.
Mr Harste has exercised his rights to appeal that decision at this Tribunal. He bears the onus of establishing that the assessment is excessive, and to prove what the correct assessment should be. He has not satisfied me that the assessment is excessive, and I have affirmed the objection decision under review. My reasons follow.
ISSUES BEFORE THE TRIBUNAL
The primary issue for the Tribunal’s determination is whether the ETP received by the Applicant was a genuine redundancy payment within the meaning of section 83-175 of the ITAA 97.
I must also decide whether the assessment of the Applicant unlawfully discriminates against him on the basis of age.
I am mindful that Mr Harste agreed that if the Tribunal accepted the argument of the Respondent, and he was not successful at the Tribunal, then he accepted that the Commissioner has correctly calculated the tax payable on the ETP.
Whether the ETP Mr Harste received was a genuine redundancy payment payment
Mr Harste represented himself at the Tribunal, and gave evidence and made submissions. He told me that the circumstances of leaving Verve were that his employer was changing the method of conducting operations, and that his services were therefore no longer required. He understood that to be a genuine redundancy, and submitted emphatically that he had been discriminated against by the Commissioner in the way his ETP was assessed. He mentioned in detail his interpretation of the Age Discrimination Act 2004, (ADA 2004), how it was passed by Parliament to protect citizens’ rights in relation to race, religion and minority groups such as those over a certain age e.g. 65 in his case. Mr Harste submitted that he wanted to be treated like other citizens, and considered that the Commissioner had discriminated against him, with the Commissioner applying a section of the ITAA 97 to override the intent of the ADA 2004.
I shall deal first with whether Mr Harste’s departure from Verve can be characterised as a genuine redundancy in terms of the tax law. Mr Harste’s submission is that it was of course, because of the restructure at Verve, and he feels that the ETPs obtained by some of his colleagues were treated differently from his by the Commissioner.
The Respondent Commissioner submits that the ETP received by Mr Harste on the termination of his employment was not a genuine redundancy payment pursuant to section 83-175 of the ITAA 97, and that he is therefore liable to income tax on the full amount received. The Commissioner holds that no tax free amount is applicable in terms of section 83-170 of the ITAA 97.
I am mindful that genuine redundancy payment is defined in section 83-175(1) of the ITAA 97 as:
(1) A genuine redundancy payment is so much of a payment received by an employee who is dismissed from employment because the employee’s position is genuinely redundant as exceeds the amount that could reasonably be expected to be received by the employee in consequence of the voluntary termination of his or her employment at the time of the dismissal.
Section 83-175(2) of the ITAA 97 sets out further criteria which must be satisfied for a payment to be regarded as a genuine redundancy payment, as follows:
(a)the employee is dismissed before the earlier of the following:
(i) the day he or she turned 65;
(ii) if the employee’s employment would have terminated when he or she reached a particular age or completed a particular period of service – the day he or she would reach the age or complete the period of service (as the case may be);
(b)if the dismissal was not at *arm’s length – the payment does not exceed the amount that could reasonably be expected to be made if the dismissal were at arm’s length;
(c)at the time of the dismissal, there was no *arrangement between the employee and the employer, or between the employer and another person, to employ the employee after the dismissal.
In considering Mr Harste’s situation, I am mindful that there is no dispute about the fact he was dismissed after he turned 65. That brings into play section 83-175 of the ITAA, and in particular subsection 83-175(2)(a)(i), which deals with issues of his age, and which Mr Harste cannot meet. Therefore the ETP cannot be characterised as a genuine redundancy payment. I discuss that further below.
Ms Coates and Ms Beckett-Cooper who appeared for the Commissioner at the hearing, drew my attention to the case of Coker and Commissioner of Taxation [2010] AATA 367, on which the Respondent relies. I noted Mr Harste’s argument that Coker was in a different position from his own, i.e. Coker had been a director of his organisation and not an employee as Mr Harste was.
The Respondent submitted that in Coker the applicant received a redundancy payment at the age of 76, and noted that the Tribunal in that case, found that the redundancy was not a genuine redundancy as Coker did not meet the requirements of section 83-175(1) and section 83-175(2). The Commissioner submitted that the Tribunal stated that he “must...satisfy s83-175(2)(a)(i), which requires that his dismissal must have occurred before he turned 65 years of age. That subsection also is not satisfied” (paragraph 12) (emphasis added).
The Respondent submitted that this Tribunal should reach the same conclusion as the Tribunal in Coker on the basis that as the Applicant was dismissed after he turned 65, the decision to disallow the amount as a genuine redundancy payment is correct because the statutory requirements have not been met.
I have preferred the argument of the Respondent on the basis that notwithstanding Mr Harste’s services were no longer required by Verve because of a restructure, he was aged more than 65 when he received the ETP (as Coker was), and could not therefore meet the legislative requirements of section 83-175(2)(a)(i), of the ITAA97. Accordingly Mr Harste’s application will not be successful. However, before making a final decision, I must also address the issue of discrimination.
Whether Mr Harste has been discriminated against by the Commissioner due to his age
Mr Harste is unhappy about what he perceives as discrimination against him, in a minority class of people over 65 who have received an ETP. He also told me about certain changes to Government policy and the effect on Centrelink’s actions. I do not make comment about those submissions on Centrelink, as they do not form part of the matters I need to consider in connection with the application before me.
Mr Harste submitted that the Commissioner’s assessment was excessive because it contravenes the ADA 2004. He pointed to the Commissioner applying a section of the ITAA 97 to override the intent of the ADA 2004, which he finds quite unfair in that a citizen must comply with the law, but he feels that in this case, the Commissioner has decided that he need not.
In that regard I have noted that Division 4 of the ADA 2004 sets out general exemptions with regard to discrimination in sections 14 and 15. Section 40 of the ADA 2004 states however, that anything done by a person in direct compliance with the ITAA 97 is not unlawful under the ADA 2004. Further, section 83-175 of the ITAA 97 specifically sets out the age requirement in the application of that section.
I am mindful that the Tribunal in Coker also addressed this issue, and stated at [14] and [15]:
14.The issue of discrimination is dealt with under the Age Discrimination Act 2004 (Cth) which is designed, inter alia, “… to eliminate, as far as possible, discrimination against persons on the ground of age and the areas of work, education, … the administration of commonwealth laws and programs…” (s3). It is re-emphasised in s 17 of that Act. However, Division 4 of Part 4 deals with general exemptions. Specific exemptions include areas such as charities, religious bodies, superannuation and taxation. Section 40 deals with “taxation laws” and provides, “this part does not make unlawful anything done by a person in direct compliance with a taxation law (within the meaning of the Income Assessment Act 1997).”
15.I am satisfied that s 40 does not have any overriding power in relation to s 83‑75 of the ITAA 1997.
I am satisfied that the situation in Mr Harste’s case is very similar to that of Coker, notwithstanding the differences in their terms of employment. I am also satisfied that section 40 of the ADA 2004 acts to provide that the age qualification in section 83-175 of the ITAA 97 can be held to prevail and not be discriminatory in Mr Harste’s case. He has not discharged the onus and satisfied me that his claim can succeed. Accordingly the objection decision will be affirmed.
Calculation of the tax
The Commissioner made certain calculations in the objection decision and his submissions as to Mr Harste’s tax liability, taking into account the 2011 ETP received.
Mr Harste indicated that he had no queries about the accuracy of the Commissioner’s calculations if indeed he did not succeed at hearing. There was no evidence led, and no further submissions were made about the calculations as they appear in the objection decision, and the Respondent’s written submissions prepared for the hearing. I accept that they are correct in the circumstances.
Mr Harste’s further concerns
Mr Harste raised the issue of Parliament passing legislation which he feels is discriminatory. I explained to him that we in this Tribunal are part of the administrative arm of Government, and that the legislative arm is quite separate. If he wants to take his thoughts further, he should contact his local Member, and also investigate how to lobby for legislative change.
Mr Harste also raised with me what he thought were anomalies in the list of authorities which consisted of sections of relevant legislation and case law provided by the Respondent. He thought for example that the authorities provided predated the ADA 2004, in particular because the ITAA was passed in 1997. I explained the way in which amendments are made and recorded by the Parliament, and how they can be searched electronically, and informed him that the name and substance of the main legislative enactment, e.g. the ITAA 97 remains thus, notwithstanding many amendments to the Act over the years. Ms Coates informed Mr Harste that the condition in regard to age in section 83-175 of the ITAA 97 was inserted in 2007.
DECISION
The Tribunal affirms the objection decision under review.
I certify that the preceding 26 (twenty six) paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member.
...(Sgd) T Freeman..............
Associate
Dated 2 August 2013
Date(s) of hearing 26 July 2013 Applicant In person Advocate for the Respondent Ms J Coates and Ms F Beckett-Cooper Solicitors for the Respondent Australian Taxation Office
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