Jendahl Investments Pty Ltd as Trustee for the Jensen Superannuation Fund and Commissioner of Taxation

[2009] AATA 881

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 881

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/5702-5704

TAXATION APPEALS DIVISION		)
Re		JENDAHL INVESTMENTS PTY LTD AS TRUSTEE FOR THE JENSEN SUPERANNUATION FUND

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr S E Frost, Senior Member

Date16 November, 2009

PlaceSydney

Decision The objection decisions under review are affirmed.

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

S E Frost
  Senior Member

CATCHWORDS

TAXATION - Income Tax – contributions to a superannuation fund – whether taxable contributions – whether assessment excessive - taxpayer failed to discharge burden of proof.

Legislation:

Income Tax Assessment Act 1936

Taxation Administration Act 1953 s14ZZK(b)(i)

REASONS FOR DECISION

Mr S E Frost, Senior Member       

Introduction

1.      The Jensen Superannuation Fund is a self-managed superannuation fund (“SMSF”), of which there are only two members:  Mr David Jensen and his wife Mrs Lindsie Jensen. 

2.      Mr Jensen has formed the view that the income tax assessments for the fund for those years were incorrect.  He thinks that certain amounts that were assessed to the fund as “taxable contributions” (and in particular, as employer contributions) should not have been treated that way.  Mr Jensen believes the relevant amounts contributed to the fund during those years were made as personal contributions either by him or by his wife, in circumstances where they should not be treated as taxable contributions.

3.      Originally Mr Jensen disputed the following amounts:

·     For the year ended 30 June 1999: $73,821;

·     For the year ended 30 June 2000: $330,804; and

·     For the year ended 30 June 2001: $25,500.

4.      However, Mr Jensen has since accepted that the 1999 assessment was correct.  What made him change his mind was that a corresponding deduction was claimed (as “Employee superannuation”) in the 1999 tax return of Jendahl Consulting Pty Ltd, a company under his control which was his employer during that year.  He has also accepted, in respect of the 2000 year, that there was in fact an “employer contribution” to the fund, but of a lower amount, namely $151,249.  Again, he bases his acceptance on the fact that Jendahl Consulting Pty Ltd claimed an “Employee superannuation” deduction for that amount in its tax return for that year.  But he is still concerned about the remaining amount for the year 2000 ($179,555) and the entire amount of $25,500 for the year 2001.

5.      In respect of these amounts, Mr Jensen says the only plausible explanation as to how they came into the fund is that he or his wife paid them in as personal contributions.  The Commissioner, on the other hand, says there are other possible explanations.  He says that the taxpayer has not displaced the logical assumption that the information originally provided to the Commissioner is correct, or, at least, more reliable than explanations put forward by Mr Jensen so many years after the event.

The issue

6.      There is only one issue involved, and that is whether the assessments made by the Commissioner, reflecting taxable contributions to the fund as listed in [3] above, are excessive.

Consideration

7. Under s 14ZZK(b)(i) of the Taxation Administration Act 1953, the burden of proving that the assessments are excessive is on the taxpayer. 

8. As a starting point, it should be noted that the assessments were made on the basis of the information provided by the fund in its tax returns. A copy of the tax return for each income year is included in the documents lodged with the Tribunal by the Commissioner, under s 37 of the Administrative Appeals Tribunal Act1975.

9.      The notice of assessment for the 2001 income year is dated 8 August 2002, a little over a year after the end of the income year.  The notice of assessment could not have been issued before the return was lodged.  That indicates the return was lodged no more than about twelve months after the end of the income year.  Although the notices of assessment for the 1999 and the 2000 income years are not before the Tribunal, it seems clear from the fact that they were both lodged by the fund’s previous tax agent (that agent being different from the agent specified in the 2001 return) that they were lodged before the 2001 return was lodged, and also, I infer, reasonably soon after the end of each income year.

10. Other documents, created at about the same time as the tax returns, disclose information in categories similar to those contained in the tax returns. One such document is the so-called “regulatory return”, an annual return which a SMSF is required by s 36A of the Superannuation Industry (Supervision) Act 1993 (“SIS Act”) to lodge with the Commissioner. For the 2000 income year, the fund’s regulatory return disclosed “Employer (Accumulation) Contributions” totalling $148,500. That figure does not sit well with the amount of $330,804 disclosed in the fund’s tax return for the same year as “Gross taxable employer contributions”. For the 2001 income year, however, the amounts disclosed for the corresponding categories were exactly the same for each return, at $25,500.

11.     It seems from that simple comparison that, in relation to the 2000 income year, one of the returns must be wrong (or, perhaps, both of them are).  As for the 2001 year, either both of the returns are right, or both of them are wrong.   The question is, which, if any, of the returns are right?

12.     In response to that question, Mr Jensen contends that the previous tax agent made a mistake in the tax returns.  Written submissions filed on his behalf after the hearing state:

The Tax Agent’s staff employed to complete the Tax Returns erred in not confirming in both 2000 and 2001 that the total monies banked into the Fund were not necessarily from Jendahl Consultants Pty Ltd.  This was an incorrect assumption as additional monies were in fact contributed by Mr Jensen and therefore wrongly included as an employer contribution resulting in the overpayment of tax by the Fund.

13.     It is now some eight and a half years since the end of the most recent of the income years involved.  Mr Jensen has tried to obtain information from his bank to confirm that payments into the fund were made from one of his personal bank accounts, but the bank no longer has records for the relevant period.  What that means is the contention in his written submissions that “additional monies were in fact contributed by Mr Jensen” cannot be supported by contemporaneous, independent documentation.

14.     The Commissioner has put forward an alternative possible explanation of the disputed amount of $179,555 for the 2000 income year.  This alternative is explored in the Commissioner’s Supplementary Submissions, as follows (references omitted):

[27]     The Respondent submits that one possible explanation for the amount of $179,555 being reported as an employer contribution in the 2000 income year is that that amount represents the untaxed element of the post-June 83 component of an ETP which was rolled over into the Fund.  This would be assessable to the Fund as a taxable contribution.

[28]     There is no dispute that Mr David Jensen received an ETP during the 2000 income year.  He reported an ETP amount of $244,972 in his income tax return for the 2000 income year.  However, based on information on the Respondent’s system, this ETP was paid by a Superannuation Fund and only consisted of a pre July 83 component and taxed element of a post-June 83 component.

[29]     Although the ETP referred to in paragraph 28 contained no untaxed element of the post-June 83 component of an ETP, the Respondent is still of the view the amount in dispute may represent the untaxed element of a post-June 83 component that was rolled over into the Fund.  This is based on the regulatory return of the Fund for the income year ended 30 June 2000.

[30]     The regulatory return of the Fund for the income year ended 30 June 2000 states at Q.31 Contributions Information that there were inward rollovers and transfers amounting to $1,388,554.  Given that David Jensen ceased his employment in June 1999, the Respondent contends that it is very likely that he did receive an employer ETP early in the income year ended 30 June 2000 which would include an untaxed element of the post-June 83 component.  As David Jensen did not declare an employer ETP or a lump sum payment in his income tax returns for the income years ended 30 June 1999 and 30 June 2000, it is possible that this ETP may have been rolled over directly to the Fund.  This would account for the fact that the Fund reported an inward rollover or transfer of $1,388,554 in its regulatory return for the year ended 30 June 2000.

[31]     In his Statutory Declaration dated 26 August 2008 which was included in a letter dated 23 August 2008 from his accountant to the Respondent, Mr David Jensen states:

I retired from AAP Information Services (Australian Associated Press) in 1999 after 29 years service and on my retirement was paid by outstanding holiday pay and a lump sum payment based on my years of service to the company.  All payments were subject to tax which was deducted at the time.

…

After settling some private commitments, the balance of my retirement package from AAP was paid into the Jensen Superfund at the recommendation of [my then accountants] and obviously I accepted their advice as our accountant.

15.     The Commissioner also points out, at paragraph 33 of his supplementary submissions, that the Jensen Superannuation Fund reported a nil amount for non-taxable contributions for the 2000 income year.  Taking that fact into account, the Commissioner’s suggested explanation is plausible.  It is also more consistent with the information that is available to me than is Mr Jensen’s contention that he or his wife made personal contributions to the fund in that year.

16.     At paragraph 52 of his supplementary submissions, the Commissioner states:

In relation to the income year ended 30 June 2001, the Respondent submits that the amount of $25,500 reported in the Fund’s income tax return for that year as an employer contribution could have been a contribution made under an effective salary sacrifice arrangement between Lindsie Jensen and her employer during that income year.  This is based on the fact that the Fund reported that an Employer (Accumulation) Contribution in the amount of [$25,500] was made by ASX Reuters Charity Foundation in respect of Lindsie Jensen for the 2001 income year.

17.     Once again, the Commissioner’s suggested explanation is plausible, and consistent with the documentation.

Conclusion

18.     I have already found that the income tax returns for the Jensen Superannuation Fund were lodged reasonably soon after the end of each of the income years involved.  They were lodged by the fund’s tax agents, and will have contained information provided to the agents by Mr and Mrs Jensen.  While the possibility that they contain errors cannot be excluded, there would need to be some reliable basis on which to make a finding that some of the figures included in them are wrong and should be substituted by alternative figures.  To take such action would require something more than Mr Jensen’s assertions – although honestly made – that he or his wife made personal contributions to the fund during those years.

19.     In reality, his assertions were made not on the basis of a genuine recollection of the facts, but on a belief that this is what must have happened.  However, he has not been able to provide any reliable information or documentation to ground an argument that the belief is well founded.  On the other hand, the Commissioner has provided well-reasoned (although hypothetical) alternative scenarios that are consistent with the information declared in the returns. 

20.     In the circumstances the taxpayer has not discharged the burden of proving that the assessments are excessive.  The objection decisions must be affirmed.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S E Frost, Senior Member

Signed:         ......................[sgd]...............................................................
Kate Lynch, Associate

Date of Hearing  4 August 2009
Final submissions received             15 September 2009
Appearance for the Applicant         Mr J A Shirlaw
Appearance for the Respondent    Ms Wei-Li Su, ATO Legal Services