McCarthy and Commissioner of Taxation

[2002] AATA 885

DECISION AND REASONS FOR DECISION [2002] AATA 885

ADMINISTRATIVE APPEALS TRIBUNAL  )

)       No QS2002/13

sitting as SMALL TAXATION CLAIMS TRIBUNAL   )          
           Re      PAUL McCARTHY            
  Applicant
           And    COMMISSIONER OF TAXATION          
  Respondent

DECISION

Tribunal       Mr B J McCabe, Member  

Date4 October 2002

PlaceBrisbane

Decision      The Tribunal affirms the decision under review.      

(Sgd) B J McCabe
  Member
CATCHWORDS
TAXATION – Small Taxation Claims Tribunal – Medicare levy – whether Commissioner has any discretion in relation to the imposition of the levy

Medicare Levy Act 1986
Income Tax Assessment Act 1997

REASONS FOR DECISION

4 October 2002       Mr B J McCabe, Member              

Introduction

1. Paul McCarthy seeks review of a decision by the Commissioner of Taxation to collect from him the amount of the Medicare levy. The Commissioner says he has no choice but to impose and collect the Medicare levy under the terms of the Medicare Levy Act 1986.
   The Material Before the Tribunal

2. The Tribunal was provided with the relevant documents from the respondent's file under s 37 of the Administrative Appeals Tribunal Act 1975. There was no hearing as the parties had consented to a determination on the papers. There was no real dispute on the facts. The result in this case depends on the interpretation of the law.
   The Facts

3. The applicant resigned from his employment with Mackay Sugar on 26 June 2000. He had admitted to stealing from his employer. He applied for and received Newstart allowance. He went to Court in connection with the theft from his employer and was sentenced to five years imprisonment on 31 August 2000. He was still in prison on 30 June 2001.

4. Mr McCarthy's taxable income during the year ended 30 June 2001 was $138,067. That amount was comprised of amounts derived from Newstart payments ($1,524), salary ($25,975), a lump sum payment apparently received from his former employer ($14,758), and an eligible termination payment received from Mackay Sugar ($95829). The applicant also received $3.00 in interest, and had $22 in deductions.

5. The parties accept that the whole of the applicant's income apart from the Newstart payments was inaccessible to him. It appears the lump sum payment and the termination payment, in particular, were held by the applicant's solicitors on trust to be disbursed amongst creditors and others. The applicant's only disposable income was derived from Newstart payments. After the applicant commenced his gaol sentence, of course, he was unable to work and derive further income, and he was ineligible for social security assistance.

6. The applicant is unmarried. He has no dependent children. He did not have private health insurance during the relevant period. He says he has no savings or other assets.
   The Legislation

7. Section 5 of the Medicare Levy Act 1986 provides for the imposition of a levy on taxpayers. The funds collected under the levy are destined for consolidated revenue, but they are collected in order to fund the operation of the Medicare system. Other provisions of the Act increase the rate of the levy in certain circumstances. One of those provisions is s 8B, which is particularly relevant for the purposes of this case. Section 8B(1) provides:

   "This section applies to a person during a period if during the whole of the period:

   (a) the person is not a married person; and

   (b) the person does not have any dependants; and

   (c) the person is not covered by an insurance policy that provides private patient hospital cover; and

   (d) the person is not a prescribed person."

1. The section goes on to provide in s 8(2) for the amount of the levy to be increased by an amount equal to 1% of the person's taxable income if the person's taxable income during the relevant year exceeded $50,000.

2. Mr McCarthy says the imposition of the levy on him is unfair. He points out (and the respondent accepts) he only had access to $1,524 during the relevant period. The applicant objects to being treated as a high-income earner when his taxable income was inflated by a settlement that was made in unusual circumstances. 

3. The reference in the section to "taxable income" would ordinarily include all of the amounts identified in this case by the Commissioner, including the termination payment. But could one argue Mr McCarthy has not received the amounts (apart from the Newstart payments) since they were not accessible to him? The Commissioner says not. He points out one is taken to have received or derived income as soon as it is applied or dealt with in any way on your behalf: ss 6-5(4) and 6-10(3) of the Income Tax Assessment Act 1997. I do not think the applicant can succeed in an argument that he has not derived the income merely because his solicitors paid it to others in discharge of his obligations.

4. The Commissioner says the legislation ties his hands. He has no choice, he says, but to impose the levy. He is right. The clear wording of the Act requires the extra 1% levy to be imposed on anyone with a taxable income exceeding $50,000 where they satisfy the other criteria laid down in s 8B(1). There is no dispute that Mr McCarthy satisfies those criteria. Since the legislation does not include the discretion to waive or modify the levy in cases of hardship or other special circumstances, the levy must be paid.
   Conclusion

5. The objection decision under review is affirmed.

   I certify that the 12 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member

   Signed:         .....................................................................................
     Associate

   The Matter was Heard on the Papers
   Date of Decision  4 October 2002

   The Applicant Represented Himself
   Solicitor for the Respondent    Mr Anderson, Australian Taxation Office