Mackie and Commissioner of Taxation (Taxation) - [2024] AATA 619

Mackie and Commissioner of Taxation (Taxation) [2024] AATA 619 (3 April 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s):2022/9417; 2022/9418
Re:Paul David Mackie
APPLICANT

Commissioner of TaxationAnd
RESPONDENT

DECISION
Tribunal:Mr Rob Reitano, Member
Date:3 April 2024
Place:Sydney

I affirm the Commissioner’s decision of 20 September 2022.
........................[SGD]..........................
Mr Rob Reitano, Member
CATCHWORDS
TAXATION – whether to disregard or relocate all or part of Applicant’s non-concessional superannuation contributions – whether discretion to disregard non-concessional contributions should be applied – whether ‘special circumstances’ exist to justify discretion being applied – circumstances do not justify discretion being exercised – decision affirmed.
LEGISLATION
Income Tax Assessment Act 1997 (Cth)
Taxation Administration Act 1953 (Cth)
CASES
AAT Case 11,379 (1996) 34 ATR 1175
Brian Lewis Groth v Secretary Department of Social Security [1995] FCA 1708
Liwszyc v Commissioner of Taxation [2014] FCA 112
SECONDARY MATERIALS
Australian Super, QuickSuper: A how-to guide (2022)
REASONS FOR DECISION
Mr Rob Reitano, Member
3 April 2024

This case concerns an application for a review of a decision of the Commissioner of Taxation (Commissioner) by which the Commissioner declined to exercise the discretion in s.291-465(1) of the Income Tax Assessment Act 1997 (Cth) (ITAA) to disregard or allocate to another year Paul David Mackie’s (Mr Mackie) concessional superannuation contributions for the tax years ending 30 June 2019 and 30 June 2020.
FACTS
The facts are not in dispute. In June 2011 Mr Mackie started his own business after having ended a period of employment where he had been contributing to the First State Superannuation Fund (Fund). The business did not make much money between 2011 and 2018. He paid himself some directors’ fees over that period, but the returns on the business were not sufficient to allow him to make any superannuation contributions. Mr Mackie said that in 2018 things picked up and he was able to make superannuation contributions in what he described as a ‘bolus’ sum of $15,000 ‘following the usual pattern of annual reconciliation’. The same was done the following year although the amount of superannuation contributions for that year was $30,000.
The contributions and two others were made to the Fund using the QuickSuper clearing house. As I have said the first contribution was in the amount of $15,000. It was initiated by Mr Mackie on 30 June 2018 who transferred the amount from his bank account. The contribution was reported to the Commissioner by a Member Account Transaction Statement (MATS) that recorded it as being received by the Fund on 4 July 2018. Likewise, the second contribution in the amount of $30,000 was initiated by Mr Mackie on 30 June 2019 in the same way. It was reported to the Commissioner by a MATS that recorded it as being received by the Fund on 11 July 2019.
There are two other contributions during the 2019 and 2020 tax years in the amounts of $10,000 and $15,000 respectively. They were received by the Fund in March and June 2020. The date of the transactions that preceded receipt by the Fund is unknown.
The Australian Super ‘A how-to guide’ for QuickSuper (How to Guide) expressly records that ‘if you make a payment before 4pm AEST on a business day, the money will be transferred the next business day.’ Although 30 June 2018 and 30 June 2019 were not business days a person making a transfer on those days could not reasonably have concluded that the transfers would happen more quickly than in accordance with that estimate and would, most likely, transfer less quickly because of that fact.
Next, it is necessary to note that Mr Mackie’s concessional contributions cap in the 2018- 2019 tax year was $25,000. So long as Mr Mackie’s superannuation balance was below $500,000, he was entitled to carry forward any unused concessional contribution for a period of five years. In the 2018-2019 tax year Mr Mackie made $15,000 of concessional contributions and so was able to carry forward his unused concessional contributions cap of $10,000 so that for 2019-2020 his concessional contributions cap was $35,000.
On 2 June 2021 the Commissioner determined that Mr Mackie had made excess concessional contributions of $20,000. This was because his concessional contributions cap was $35,000 and Mr Mackie had made $55,000 of concessional contributions. The consequence was that the excess of $20,000 would be included in Mr Mackie’s assessable income for the 2019-2020 tax year and that would be taxed at his marginal rate with a 15% offset applied to account for the tax paid on the contributions by the Fund. Mr Mackie could elect to pay the tax liability by releasing up to 85% of his excess contributions. Mr Mackie was also charged an excess concessional contribution charge of $263.50.
On 11 June 2021 Mr Mackie asked the Commissioner to exercise his discretion to allocate part or all of his concessional contribution for the 2019-2020 tax year to another year.
On 30 November 2921 the Commissioner decided not to exercise his discretion to allocate Mr Mackie’s concessional contribution for the 2019-2020 tax year to another year.
On 20 January 2022 Mr Mackie lodged an objection to the Commissioner’s decision not to exercise the discretion to allocate part or all of his concessional contribution for the 2019-2020 year to another year.
On 20 September 2022 the Commissioner disallowed Mr Mackie’s objection. And, so, on 17 November 2022 Mr Mackie applied to the Tribunal to have the Commissioner’s decision reviewed.
REGULATORY PROVISIONS
The object of Division 291 is ‘to ensure, in relation to concessional contributions to superannuation, that the amount of concessionally taxed superannuation benefits that an individual receives results from contributions that have been made gradually over the course of the individual's life’.
Section 291-25 of the ITAA provides that:
(1)The amount of your concessional contributions for a *financial year is the sum of:
(a)each contribution covered under subsection (2); and
(b)each amount covered under subsection (3).
(2)A contribution is covered under this subsection if:
(a)it is made in the *financial year to a *complying superannuation plan in respect of you; and
(b)it is included in the assessable income of the *superannuation provider in relation to the plan, or, by way of a *roll - over superannuation benefit, in the assessable income of a *complying superannuation fund or *RSA provider in the circumstances mentioned in subsection 290-170(5) (about successor funds); and
(c)it is not an amount mentioned in subsection 295-200(2); and
(d)it is not an amount mentioned in item 2 of the table in subsection 295-190(1); and
(e)it is not an amount mentioned in subsection 99G(6) of the Superannuation Industry (Supervision) Act 1993 that is refunded in accordance with that subsection.
(3)An amount in a *complying superannuation plan is covered under this subsection if it is allocated by the * superannuation provider in relation to the plan for you for the year in accordance with conditions specified in the regulations.
(4)For the purposes of paragraph (2)(b), disregard:
(a)table item 5.3 in section 50-25 (about income tax exemption for constitutionally protected funds); and
(b)Subdivision 295-D (about excluded contributions).
Section 291-465(1) of the ITAA provides:
(1)The Commissioner may make a written determination that, for the purposes of working out the amount of your *excess concessional contributions for a *financial year, all or part of your *concessional contributions for a financial year is to be:
(a)disregarded; or
(b)allocated instead for the purposes of another financial year specified in the determination.
Section 291-465(2) of the ITAA provides:
(2)The Commissioner may make the determination only if:
(a)you apply for the determination in accordance with this section; and
(b)the Commissioner considers that:
(i)there are special circumstances; and
(ii)making the determination is consistent with the object of this Division and Division 292.
The phrase ‘special circumstances’ is not one to which much mystique attaches and simply means ‘unusual circumstances’ or ‘circumstances that are out of the ordinary’. In general, those circumstances must make it unjust or unreasonable or inappropriate for things to be treated in the usual way. In Brian LewisGroth v Secretary, Department of Social Security [1995] FCA 1708 Kiefel J (as her Honour then was) observed:
The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (229), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied.
It is also convenient here to deal with the question of ‘innocent mistake or ignorance of the law’ here because as will be seen it assumes some importance later. In Liwszyc v Commissioner of Taxation [2014] FCA 112 (Liwszyc) McKerracher J dealt with that issue and said at [77]:
As submitted by the Commissioner, simple errors of this nature do not constitute special circumstances: see Re Tran and Federal Commissioner of Taxation (2012) 87 ATR 322 at [15]. An innocent mistake or ignorance of the law does not in itself constitute a “special circumstance” nor do simple errors, albeit innocent errors or other mistakes which are made in good faith. Equally, the fact that an error was made by another person does not in itself constitute “special circumstances”. Although Mr Liwszyc was unaware of the precise details and timings of the payment, he had left it to the bookkeeper to arrange the payments. However, she was his subordinate, susceptible to his discretion and control as a matter of law and reality. He did not take steps sufficient to ensure that the payments she made were the right amounts at the right times.
In Liwszyc McKerracher J at [75] cited with approval AAT Case 11,379 (1996) 34 ATR 1175 at [5]-[6] where Senior Member Muller observed:
The term “special circumstances” has been the subject of numerous judgments and decisions in courts and tribunals. The ways in which people conduct their affairs are so numerous that legislators cannot predict, and hence allow for, every possible set of circumstances. Therefore, it is not possible, nor desirable, to attempt to codify the circumstances to be regarded as special. Each case is different to every other case and has to be treated on its merits. The point of legislation which allows for a discretion to be exercised in “special circumstances” is recognition of the fact that strict application of the legislation may in some unusual or unforeseen cases result in an unjust, unreasonable or inappropriate result; a result that the legislation did not intend.
There is no doubt that the applicant is unlucky to have fallen over the wrong side of the boundary line by such a small margin. I do not regard this fact as being special enough to invoke the desired discretion. In every piece of legislation where rights or entitlements are created there will be a division between those who qualify and those who do not. Those people whose cases fall marginally one side or the other may regard themselves as either lucky or unlucky as the case may be. So be it.
Finally, I should add that to my mind it is axiomatic that ‘special circumstances’ generally will be informed by the particular facts of the case under consideration.
Section 291-465(3) of the ITAA provides:
(3)In making the determination the Commissioner may have regard to the following:
(a)whether a contribution made in the relevant *financial year would more appropriately be allocated towards another financial year instead;
(b)whether it was reasonably foreseeable, when a relevant contribution was made, that you would have *excess concessional contributions or *excess non‑concessional contributions for the relevant financial year, and in particular:
(iii)if the relevant contribution is made in respect of you by another individual—the terms of any agreement or arrangement between you and that individual as to the amount and timing of the contribution; and
(iv)the extent to which you had control over the making of the contribution;
(c)any other relevant matters.
ISSUES
There were two issues that were addressed in argument: first, whether the contributions of $15,000 and $30,000 that were transferred by electronic funds transfers were ‘made’ at the time Mr Mackie undertook the transaction or whether they were ‘made’ when the Fund received the contributions; and second, whether the requirements of s.291-465(2)(b)(i) and (ii) are met such that the discretion to make a determination under the section is engaged.
I should note that it was not entirely clear how the first of the two issues could be agitated in this review given that the review is of a decision refusing to exercise the discretion to disregard or allocate contributions to another year. That decision presumes that the contributions were made in the years that the Commissioner determined they were made. Nonetheless I have treated the matter of when the contributions were made as an ‘other relevant matter’ for the purpose of s.291-465(3)(c) so that the issue may be determined. That is, if the Commissioner had wrongly considered the contributions as having been made in a year other than the year in which they were made that would be a significant factor that would amount to a ‘special circumstance’.
WHEN WERE THE CONTRIBUTIONS MADE?
Mr Mackie submitted that the contributions that were the subject of the transactions he undertook on 30 June 2018 and 30 June 2019 were contributions that he made to the Fund in the tax years ending 30 June 2018 and 30 June 2019 respectively.
In Liwszyc the issue that Mr Mackie raises, namely whether a contribution was made at the time the transaction was completed by the taxpayer or alternatively when the contribution was received by the Fund was considered. McKerracher J held that ‘the better view is that that the contribution was made on the date the funds were actually received’. I am bound by the judgment in Liwszyc and so will follow it.
It follows that Mr Mackie’s contributions were made in each case on the date they were received by the Fund and credited to the relevant account, namely the dates on which the statements from the Fund show as the date that happened.
‘SPECIAL CIRCUMSTANCES’
Mr Mackie submitted that there was a combination of circumstances that were special to his case. First, he submitted that he was always acting genuinely and none of his actions were intended ‘to exploit the tax concessions to avoid fair payment of tax’. Mr Mackie submitted that the object of the concessional superannuation cap ‘is to limit the amount of tax concessions that are available to contributions made to superannuation funds, so that the tax system is not used to provide excessive benefits to individuals who are already financially secure and ‘to discourage individuals from using superannuation as tax avoidance mechanism’.
Second, he submitted that he had made an error in good faith and that in circumstances where good faith is demonstrated there should be ‘a reasonable expectation for an allowance to correct such errors.’ Mr Mackie submitted he understood what he was doing when he undertook the transaction was ‘straightforward, intuitive and required no special knowledge.’
Third, Mr Mackie submitted that there was ‘a natural arbitrariness in both the nature of the timing of electronic finds transactions, and the interpretation of the language of when a payment is made.’ To this end it was submitted that cases that had dealt with these issues ‘skews strongly in favour of the Commissioner’ and reliance on them in his circumstances is an inappropriate and unfair application of those precedents.
These matters included the facts that: Mr Mackie made both contributions by a single large payment to avoid more frequent wage and tax related accounting transactions, so he dealt with them once a year only; he was unaware of the ‘rules concerning annual concessional caps and the timing of transactions’; he was not a high income earner, he has not been shown to be in a position of financial security and he is not nearing retirement age (he is 58 years of age); he acted without professional or other advice in transferring the money to the Fund; he was unaware of the concessional cap at the time he undertook the transactions; and that when the contributions were made they followed a period of about six or seven years when he was unable to make contributions due to the state of his new business and he was, in effect, catching up on his superannuation contributions. Mr Mackie also relied on the fact that the second contribution took 11 days to find its way to the Fund.
Before dealing with Mr Mackie’s submissions about special circumstances it is necessary to say something, albeit briefly, about his submissions concerning the object or purpose of the relevant statutory provisions. It may be that one object of the cap on concessional contributions is to discourage individuals from using superannuation as a tax avoidance means, but whatever the object of the scheme the legislature has laid down the rules that are to be applied. One such rule that applies to all taxpayers is that in each tax year there is a cap on concessional contributions that if exceeded carries with it certain known and intended consequences, one of which is the withdrawal of concessional treatment for contributions which exceed the cap. Again, that is a rule of general application that applies usually and there is nothing unusual or special about its application to Mr Mackie.
A convenient starting point for a consideration of Mr Mackie’s circumstances and whether they are ‘special circumstances’ is to observe that there was, and is, no suggestion that Mr Mackie was acting other than honestly in relation to the disputed contributions. There is not much unusual about that, there is nothing unusual or out of the ordinary about people acting genuinely and honestly in their business and tax affairs.
It also may be accepted that Mr Mackie intended for the transfers of money to be concessional superannuation contributions for the 2018 and 2019 tax years respectively. That, of course, misfired because the Fund did not receive the money until the following tax year such that the contributions were not ‘made’ in the years that they were intended by Mr Mackie to have been made. In some respects that is hardly surprising given that each transaction was initiated on a Saturday or a Sunday, days which are not ordinarily regarded as business days. Again, as the transactions were undertaken on a weekend there is not much unusual about the transaction happening on one day and the contributions being received a day or days later. The number of cases that have considered the issue including Liwszyc and the authorities to which it refers demonstrate so much.
That Mr Mackie regarded the process as straightforward and requiring no special knowledge is also nothing less than usual. In fact, his own submission belies the suggestion that there was anything out of the ordinary because he submits what he did not go beyond what ‘someone of reasonable intelligence and basic understanding, methods, goals and intentions of superannuation schemes and payments’ would have done.

Mr Mackie’s reliance upon his ‘naïve misunderstanding’ and his ‘error in relation to annual caps and the timing of transactions’ is redolent of the reasoning I referred to earlier in Liwszyc, so far as mistakes and ignorance of the law are concerned. Mr Mackie suggested that his case was not an appeal to ignorance of the law as an excuse but that at the time of the transaction he had ‘reasonable and intuitive understanding of how the transactions were considered and amounts assessed’. His submission was that the difference was important. For my part it is also illusive. Mr Mackie considered, perhaps even reasonably, that the contributions would be made when he undertook the transactions. He was wrong about that irrespective of how honestly he held that view. I have used the words ‘perhaps even reasonably’ for two reasons: first, his view is at odds with the QuickSuper How to Guide, and second because it appears that he made no inquiries and undertook no research to back up his view about how things would turn out.
A matter that strongly counts against Mr Mackie is that which is found in s.295-465(3)(b)(ii) concerning whether it was reasonably foreseeable when the contribution was made that Mr Mackie would have an excess concessional contribution for the relevant year having regard to the fact that he had control over when the contribution was made. Objectively the How to Guide which indicated business day transactions made before 4pm would not be transferred until the next business day and the fact that Mr Mackie was responsible for all aspects of his business. He had complete control over when and how much would be made by way of concessional contributions. He had access to his superannuation statements that would permit him, objectively, to keep track of his concessional contributions.
I should observe that the fact that second transactions took 11 days to find its way to the Fund does not at all change things because even if it had been processed the next business day, the contribution would have been made in the same financial year. The position may have been much different if, for example, Mr Mackie had undertaken the transaction two or three business days before the end of the financial year relying upon the advice in the How to Guide, only to find that it took 11 days to find its way to the Fund. That is a circumstance far removed from what happened here. The fact that the transaction took 11 days after 30 June 2019 does not on its own or in combination with other circumstances satisfy me that there are special circumstances
I do not consider that Mr Mackie not having made superannuation contributions for six or seven years to be unusual or out of the ordinary such as to give rise to special circumstances. This is largely because Mr Mackie was able to control the time and amount of any contributions, he made so that even if he were trying to ‘catch up’, the fact was that he did not need to do that so as to exceed his concessional cap.
The one matter that has troubled me is whether the effect of Mr Mackie’s ‘mistake’ or ‘naïve misunderstanding’ is such that it produced an unfairness to Mr Mackie so far as the fact that he was required to pay tax on his contributions and was required to pay the excess contributions charge. But the application of the legislation will in all cases that do not involve special circumstances result in those things happening. In the end, borrowing the words of Senior Member Muller, the circumstances here are not so unusual or unforeseen such that the strict application of the legislation results ‘in an unjust, unreasonable or inappropriate result; a result that the legislation did not intend’.
I am not satisfied that there are special circumstances such that the discretion in s.291-465 of the ITTA is engaged.
INCONSISTENCY WITH THE OBJECT OF DIVISION 291
It is strictly speaking not necessary to consider whether the making of a determination would be consistent with the object of Division 291, but I should do so for completeness.
The object of Division 291 is ‘to ensure, in relation to concessional contributions to superannuation, that the amount of concessionally taxed superannuation benefits that an individual receives results from contributions that have been made gradually over the course of the individual's life’.
Mr Mackie sought a determination that would see the $30,000 contribution made on 11 July 2019 disregarded for the 2019-2020 year or alternatively would have the contribution of $15,000 made on 4 July 2018 be allocated to the 2017-2018 tax year and the $30,000 contribution made on 11 July 2019 as having been made in the 2018-2019 tax year.
The effect of a determination disregarding the $30,000 contribution entirely would be inconsistent with the object of Division 291 as it would mean that the amount of Mr Mackie’s concessionally taxed superannuation benefits would exceed the concessional contributions cap and, so it would seem, go untaxed. The effect of a determination that allocates the first- and second-year contributions would mean that Mr Mackie would have $30,000 of concessional contributions for the 2018-2019 tax year, which would exceed his concessional contributions cap. It would not be consistent with the objects of Division 291 to move contributions in such a manner to exceed the concessional contributions cap.
I am not satisfied that the making of a determination would be consistent with the object of Division 291.
DECISION
I affirm the Commissioner’s decision of 20 September 2020.

I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for the decision herein of Mr Rob Reitano, Member

...................................[SGD]....................................
Associate
Dated: 3 April 2024

Date(s) of hearing: 12 February 2024

Solicitor for the Respondent: Mr M Qin, Commissioner of Taxation

Date(s) of hearing:	12 February 2024
Solicitor for the Respondent:	Mr M Qin, Commissioner of Taxation