Jordyn Properties Pty Ltd and Commissioner of Taxation (Taxation)

[2020] AATA 3805

Jordyn Properties Pty Ltd and Commissioner of Taxation (Taxation) [2020] AATA 3805 (10 July 2020)

Division:SMALL BUSINESS TAXATION DIVISION

File Number(s):      2019/6550

Re:Jordyn Properties Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:10 July 2020

Place:Sydney

The decision under review is affirmed.

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Deputy President Bernard J McCabe

CATCHWORDS

TAXATION – superannuation guarantee charge – whether the Commissioner is required to amend notices of assessments to allow offsets to the charge for late contributions – late contributions unable to be offset – election has no effect – decision affirmed

LEGISLATION

Administrative Appeals Tribunal Act 1975 s 37

Superannuation Guarantee Charge Act 1992

Superannuation Guarantee (Administration) Act 1992 section 23A, 37

REASONS FOR DECISION

Deputy President Bernard J McCabe

10 July 2020

1. The Superannuation Guarantee Charge Act 1992 (the Charge Act) obliges employers to make superannuation contributions on behalf of employees. Where an employer fails to make the required payments within the time provided, the shortfall amount – being the difference between any amount that was paid in accordance with the rules and the amount that should have been paid together with shortfall interest and an administration fee – becomes a superannuation guarantee charge. The charge is a debt due to the Commonwealth. The Commissioner of Taxation is empowered to issue notices of assessment that identify the charge payable in respect of a quarterly period. Those assessments are issued under the Superannuation Guarantee (Administration) Act 1992 (the Administration Act).

2. This case arises out of a dispute over the Commissioner’s powers to amend notices of assessment under the Administration Act. The parties agreed the Tribunal could dispense with an oral hearing and decide the matter on the papers.

   WHAT HAPPENED?

3. The Commissioner became aware the applicant company may not have made the correct superannuation contributions in a timely way in respect of a number of its employees during the period 1 April 2016 through 31 December 2016. After engaging with the applicant and asking for proof, the Commissioner issued notices of assessment on 10 November 2017 identifying the amount of the superannuation guarantee charge payable in respect of each quarter.

4. The applicant disagreed with some of the Commissioner’s calculations in that assessment. As I understand the story, the applicant accepts there were, in fact, underpayments or mistimed payments that resulted in shortfalls.

5. The Commissioner wrote to the applicant on 13 November 2017. The letter referred to the notices of assessment issued on 10 November 2017 identifying the amount of the charge payable in each quarter. The letter also included reasons for the decision which discussed the audit which led to the assessments. The letter and the audit reasons for decision are reproduced in the documents provided by the Commissioner pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 at pp 70ff. The letter included the usual advice about appeal rights. It also included the following instruction:

   As assessments have now been raised, for the period of this audit, do not make catch up payments to the employees’ super funds.

6. Notwithstanding this instruction, the applicant made 11 separate superannuation contributions to the employees’ superannuation funds on 14 June 2018. The applicant then lodged an objection to the notices of assessment. The objection form is reproduced in the s 37 documents at pp 86ff. (The objection was out of time but the Commissioner consented to the extension.) The applicant stated in the objection that the assessments issued on 10 November 2017 were incorrect. It said the amounts of the charges were not calculated correctly and referred to at least one instance where a charge was calculated in respect of an employee who had already ceased employment. The company’s director also described special circumstances which explained the delays in making the payments as required. The form added (s 37 documents at p 90):

   Please note all super owing according to my records has now been paid for the assessed period…

7. The applicant and the Commissioner thereafter corresponded in relation to the objection. On 10 September 2018, the applicant elected to offset some late contributions against the charge. The contributions in question were made prior to the assessment being issued on 10 November 2017. In the objection decision issued on 26 September 2018, the Commissioner offset the eligible late contributions (ie those made before the assessment dated 10 November 2017) but declined to offset other contributions made on 14 June 2018. Notices of amended assessment were issued on 1 October 2018 reflecting the objection decision. The applicant lodged a further objection to those notices of amended assessment on 17 April 2019. That objection was also lodged out of time but the Commissioner again consented to the extension of time.

8. The Commissioner’s objection decision on the further objection is dated 13 August 2019. The decision – the reviewable decision for the purposes of these proceedings – is reproduced in the s 37 documents at pp 7ff. The objection was disallowed in full.

   THE RELEVANT LAW

9. Section 23A(3) of the Administration Act permits an employer to offset late contributions in certain circumstances:

   …at the time the employer's original assessment for the quarter is made, against the employer's liability to pay superannuation guarantee charge…

10. Section 23A(1)(a)(ii) says the contribution (ie the late contribution which is the subject of the election) must be made “before the employer's original assessment for that quarter is made”.

11. Section 23A(4A) goes on to provide:

    If the election happens after the employer's assessment for the quarter is made, then, for the offset to take effect, the assessment must be amended accordingly under section 37.

12. Section 37(1) provides:

    The Commissioner may, subject to this section, at any time amend any assessment by making any alterations or additions that the Commissioner thinks necessary, whether or not superannuation guarantee charge has been paid in relation to the assessment.

    THE ARGUMENT

13. The applicant argues s 23A(4A) contemplates the Commissioner exercising the power in s 37 of the Administration Act to amend the notices of assessment to take account of the contributions made on 14 June 2018. Indeed, the applicant argues the Commissioner must amend the assessments under s 37 to take account of payments made after the due date if the applicant makes a valid election under s 23A.

14. The applicant’s argument in its statement of facts, issues and contentions requires careful analysis. At [20], the applicant says:

    The wording of s 23A(4A) is concise and unambiguous – an employer can make an election after the original assessment is made, and for an offset to take effect, the assessment must be amended accordingly under s 37. [Emphasis in original]

15. The Commissioner said the timing of the election is not the issue. He argues the effect of s 23A(1)(a) is clear. The contributions in question occurred after the date of the original assessment. In those circumstances, the temporal requirements for offset have not been met – and that is the end of the matter. An election thereafter is ineffective regardless of when the election is made. As the Commissioner explained in his statement in reply (at [9]):

    …as there can be no contributions that are capable of being considered as offsets for the purposes of section 23A, there are no contributions that can properly be the subject of any election.

16. The Commissioner pointed out in his statement in reply that the reference to temporal requirements in s 23A(2) governed the timing of the election, not the contribution. He said ss 23A(3) and (4) – which provide for the offset – only apply to validly elected and eligible contributions which were made prior to the assessment. The reference in s 23(4A) to the possibility of amending the assessment only relates to late elections, not late contributions. Section 23(4A) does not open the door to amended assessments to take account of late contributions, which is what occurred here.

17. The Commissioner is right. The language of the Administration Act is dense and detailed, but its effect is clear enough. Section 23A does not assist the applicant. The late contributions cannot be offset and cannot be the subject of a valid election. It is not appropriate to issue amended assessments under s 37 to take account of the contributions made on 14 June 2018.

    CONCLUSION

18. The objection decision is affirmed.

I certify that the preceding 18 (eightteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

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Associate

Dated: 10 July 2020

Date(s) of hearing:	On the papers
Date final submissions received:	1 May 2020
Advocate for the Applicant:	Mr D Fassina
Solicitors for the Respondent:	Ms S Godden