MARK BERNHARDI and COMMISSIONER OF TAXATION
[2012] AATA 216
•4 April 2012
[2012] AATA 216
Division SMALL TAXATION CLAIMS TRIBUNAL File Number(s)
2012/0079
Re
MARK BERNHARDI
APPLICANT
And
COMMISSIONER OF TAXATION
RESPONDENT
DECISION
Tribunal M D Allen, Senior Member
Date 4 April 2012 Date of written reasons 16 April 2012 Place Sydney For the reasons given orally at the conclusion of the hearing of this matter, the Tribunal affirms the decision under review.
...........[sgd].............................................................
M D Allen, Senior Member
CATCHWORDS
TAXATION AND REVENUE – superannuation – excess concessional contributions tax – administrative delay in processing contribution authorised in previous financial year – whether special circumstances exist – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1997 ss 292-15, 292-465
CASES
Dranichnikov v Centrelink (2003) 75 ALD 134
Secretary, Department of Social Security v Ellis (1997) 24 AAR 535
REASONS FOR DECISION
M D Allen, Senior Member
4 April 2012
At the conclusion of the hearing of this matter the terms of the decision intended to be made and the reasons therefore were stated orally. After service upon the Applicant and the Respondent of a copy of the decision that was in fact made, the Respondent, pursuant to subsection 43(2A) of the Administrative Appeals Tribunal Act 1975 (“AAT Act”), requested that the Tribunal furnish to them a statement in writing of the reasons of the Tribunal for the decision.
The oral reasons for the decision have been transcribed by Auscript, the Commonwealth Reporting Service. Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reason for the said decision.
The said transcript is annexed hereunto and furnished to the Applicant and to the Respondent as it is the reason for the Tribunal’s decision.
I certify that the preceding 3 (three) paragraphs and the following are a true copy of the reasons for the decision herein of M D Allen, Senior Member.
......[sgd]..................................................................
Associate
Dated 16 April 2012
Date of hearing 4 April 2012 Applicant In person Advocate for the Respondent Mr S Gordon, Legal Services Branch, ATO EXTRACT OF TRANSCRIPT PROCEEDINGS
MR ALLEN: In this matter, the Applicant has sought review of the decision by the Respondent, rejecting an objection by him to impose additional tax on the basis that he had made excess concessional contributions to a superannuation fund in the sum of $10,430.02 in the 2009/10 financial year. The circumstances are within a relatively small compass. In the 2008/09 tax year, the Applicant asked his employer to make a salary sacrifice contribution into his superannuation. It seems abundantly clear that the employer processed the deduction from salary in May 2009 and forwarded that to the superannuation entity, which was Colonial First State. However, although as stated, the contribution was deducted from the employer’s bank account on or about 29 June 2009, it did not find itself into the account of the superannuation entity Vanguard until some time in July. The Applicant then made a further salary sacrifice into his superannuation fund in the 2009/10 tax year, which resulted as, being aged under 50 he was only entitled to make a contribution of $25,000 per annum, in an excess of the said $10,430.02.
The circumstances are set out quite clearly in a series of emails, which are found at document T10 of the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. The first of those appears to be dated 21 July 2009, which is from a Cheryl McMahon of Colonial First State and addressed to a person at the Applicant’s employer. The email reads:
I can certainly understand that these employees would not be happy with the situation and the potential tax implication it may create with the contributions reaching their choice of funds after 30 June 2009.
To guarantee allocation of contributions before 30 June when using the clearing house facility, all funds and files would need to be processed no later than 22 June 2009 through FirstNet Employer. As we spoke about today, unfortunately this wasn’t the case and 2 of your employees may have an excess cont[ribution] for 09/10 financial year in the future.
After some investigations with the business the best solution I can assist you with is – the opportunity exists for the employees to request a determination from the ATO for them to assess the contribution as being received in the 2008/09 year and that they have a number of relevant factors that would appear favourable.
Those factors being, if relevant: show the employees have been contributing maximum MDC’s consistently over the past few years, they can also demonstrate that the contribution allocation in July was caused by an administrative delay that was beyond their control and not their fault…
It seems to be accepted, for the purpose of these proceedings, that those circumstances are indeed correct. There was an administrative delay and it was beyond the control of the Applicant. However, that email, as I said, first raised itself in July 2009. The Applicant was apparently unaware of his excess contributions in the 2009/2010 year until met with the notice of assessment in 2011. The particular legislation reads, in the Income Tax Assessment Act 1997 (the Assessment Act), s 292-15:
You are liable to pay excess concessional contributions tax imposed by the Superannuation (Excess Concessional Contributions Tax) Act 2007 if you have excess concessional contributions for a financial year.
And that’s what occurred here. Subsection 292-465(1) of the Assessment Act then reads:
If you make an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of this Division:
(a) all or part of your concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination; and
(b) all or part of your non-concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination.
Subsection (3) of section 292-465 then goes on to provide:
The Commissioner may make the determination only if he or she considers that:
(a) there are special circumstances; and
(b) making the determination is consistent with the object of this Division.
That clearly raises, in these proceedings, what might be regarded as special circumstances. The test what might constitute special circumstances has been discussed in many decisions, both of the Administrative Appeals Tribunal and the Federal Court. In Secretary, Department of Social Security v Ellis (1997) 24 AAR 535 at 539, his honour Mr Justice Carr said:
In Beadle v Director General of Social Security (1985) 7 ALD 670, a Full Court of this Court had to consider whether the Administrative Appeals Tribunal had erred in its interpretation of s 102(1)(a) of the [Social Security] Act which provided for an extension of time in which to claim a family allowance “… in special circumstances”. At 673-674, the Full Court said:
“Presumably in this context special circumstances must include events which would render the six months unfair or inappropriate... It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it possible to lay down precise limits or precise rules. The matter is one for the Director-General, bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.”
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Kiefel J [as she then was], after referring to Beadle, said:
“… 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 inquiry 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 inquiry 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.”
In Dranichnikov v Centrelink (2003) 75 ALD 134, Mr Justice Hill, with whom Kiefel and Hely JJ agreed said at 148:
… Other cases which have considered analogous words such as ‘special reasons’ has tended to conclude, albeit in different contexts, that what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary…
In this matter, the Applicant was cross-examined as to what he knew regarding the circumstances in which the payment was made and which the overpayment occurred. I find it particularly relevant that the Applicant said, indeed in evidence-in-chief:
I don’t generally follow superannuation. I trust the institutions that these happened correctly. The statements don’t present any materiality to me.
I note that it’s clear from the section 37 document that the Applicant did receive statements from his superannuation fund. Cross-examined he said:
I was aware there would be a limitation for the year, but I was not necessarily aware of the amount of the cap. I knew roughly what the amount of the cap was.
He then said:
Vanguard – being the superannuation provider – provided member statements regularly.
It seems clear from his evidence that although Vanguard did provide superannuation statements regularly, he was not particular attentive to them. Although he did say:
I knew there was a risk.
He concluded his evidence by saying:
I exercised what I thought was sufficient time to consider my superannuation matters and to my mind this, being the overpayment, was an administrative issue.
That may be well and good but it seems to me that the Applicant should have been aware, if he was not, that there was a cap on the amounts which he could contribute as a concessional contribution in any one financial year. It seems clear that even in late 2009 he was aware that there was a problem in the sense that the payment, by way of salary sacrifice, had not reached the account of the superannuation provider until the following tax year. It seems to me as well that anybody who is making concessional contributions has a responsibility to make themselves aware: (1) of the cap on those contributions, and (2) to assiduously have regard to their superannuation fund to see that that cap is not exceeded in any one financial year.
The circumstances, although not within the Applicant’s doing in that he had no responsibility for the late payment, was still within the Applicant’s responsibility in that he failed to exercise, in my opinion, an adequate supervision of his superannuation fund and to be aware of the particular cap and what payments had been made and when. In these circumstances, I am satisfied that special circumstances have not been demonstrated and that the decision under review should be affirmed.
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