Oldenburger and Commissioner of Taxation (Taxation)
[2024] AATA 635
•11 April 2024
Oldenburger and Commissioner of Taxation (Taxation) [2024] AATA 635 (11 April 2024)
Division:TAXATION AND COMMERCIAL DIVISION
File Number:2023/2169
Re:Gabriel Oldenburger
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Member D Mitchell
Date:11 April 2024
Place:Brisbane
The Tribunal affirms the decision under review.
....................................[SGD]..................................
Member D Mitchell
CATCHWORDS
TAXATION – superannuation – excess contribution tax – whether concessional contribution can be disregarded or allocated to another financial year – whether special circumstances – decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1997 (Cth)
Taxation Administration Act 1953 (Cth)
CASES
Aston v Commissioner of Taxation [2023] AATA 1848
Azer and Commissioner of Taxation (Taxation) [2016] AATA 472
Brady and Commissioner of Taxation [2016] AATA 97
Bernhardi and Commissioner of Taxation [2012] AATA 216
Chantrell v Commissioner of Taxation [2012] AATA 179
Davenport and Commissioner of Taxation (2012) 91 ATR 198; [2012] AATA 760
Federal Commissioner of Taxation v Dowling [2014] FCA 252
Hamad v FC of Taxation [2012] AATA 530
Kerr and Commissioner of Taxation [2007] AATA 1732
Liwiszyc v Commissioner of Taxation [2014] FCA 112
Lynton v Commissioner of Taxation (2012) 90 ATR 950; [2012] AATA 667
Mills and Federal Commissioner of Taxation (2017) 105 ATR 216; [2017] AATA 362
Pitts v Federal Commissioner of Taxation [2017] AATA 685
Re Naude and Federal Commissioner of Taxation [2012] 86 ATR 561
Re Verschuer and Commissioner of Taxation [2012] AATA 123
Tran v Commissioner of Taxation [2012] AATA 123; 2012 ATC 10-236
Ward v Commissioner of Taxation (2016) 246 FCAFC 372
SECONDARY MATERIAL
Practice Statement Law Administration PS LA 2008/1 – The Commissioner’s discretion to disregards or allocate to another period superannuation contributions for excess contributions purposes
REASONS FOR DECISION
Member D Mitchell
11 April 2024
INTRODUCTION
Mr Gabriel Oldenburger (the Applicant) sought review of an objection decision made by the Commissioner of Taxation (the Respondent) dated 22 March 2023.[1]
[1] Exhibit 1, T Documents, T2, pages 16-19, Reasons for decision and T16, page 65, Notice of Objection Decision.
The reviewable objection decision disallowed the Applicant’s objection to the Respondent’s decision not to exercise the discretion to reallocate excess concessional contributions of $6,737.77 made in the 2020-2021 financial year to a different financial year.[2]
[2] Exhibit 1, T Documents, T2, pages 16-19, Reasons for decision.
BACKGROUND
In the 2020-2021 financial year the Applicant’s employer made concessional superannuation contributions, to his superannuation fund, SunSuper, totalling $31,737.77.[3]
[3] Exhibit 1, T Documents, T1, page13, SunSuper statement for the 2021 financial year.
The contributions, made over five dates[4] were derived from both employer compulsory superannuation guarantee contributions and personal salary sacrifice contributions[5] relating to working weeks between 2 April 2020 and 17 June 2021.[6]
[4] Exhibit 1, T Documents, T1, page13, SunSuper statement for the 2021 financial year.
[5] Exhibit 1, T Documents, T1, page13, SunSuper statement for the 2021 financial year; T10, pages 46-52, Summary of Applicant’s employer contributions to his superannuation fund, for the 2021 financial year; and Exhibit 2, Summary of Applicant’s employer contributions to his superannuation fund, for the 2020 financial year.
[6] Exhibit 1, T Documents, T1, page13, SunSuper statement for the 2021 financial year; T10, pages 46-52, Summary of Applicant’s employer contributions to his superannuation fund, for the 2021 financial year; and Exhibit 2, Summary of Applicant’s employer contributions to his superannuation fund, for the 2020 financial year.
The contributions were made to SunSuper as follows:[7]
[7] Summarised by the Respondent at Exhibit 5, Respondent’s Outline of Submissions, paragraph 6.
Employer Contributions – Date Paid
Contributions before tax
10 August 2020
$1,843.66
2 November 2020
$1,843.50
2 February 2021
$2,010.28
28 April 2021
$1,726.64
28 June 2021
$1,721.69
Total
$9,145.77
Salary Sacrifice Contributions – Date Paid
Contributions before tax
10 August 2020
$4,589.00
2 November 2020
$4,589.00
2 February 2021
$4,942.00
28 April 2021
$4,236.00
28 June 2021
$4,236.00
Total
$22,592.00
Total contributions for the
2020-2021 income year$31,737.77
The superannuation contribution payments made by the Applicant’s employer on
28 April 2021 resulted in him exceeding his concessional contributions cap of $25,000 by $780.08.[8][8] Exhibit 5, Respondent’s Outline of Submissions, paragraphs 6 and 8.
The superannuation contribution payments made by the Applicant’s employer on
28 June 2021, further increased the amount that he had exceeded his concessional cap for the 2020-2021 financial year to $6,737.77.[9][9] Exhibit 5, Respondent’s Outline of Submissions, paragraphs 6 and 9.
In an undated letter sent from the Applicant’s employer, they provided the following explanation regarding why they made 5 superannuation contributions in relation to the Applicant in the 2020-2021 financial year:[10]
Under the advice and guidance of our accountant, it was recommended that we make our superannuation contributions before the end of the financial year 2021 in order to be eligible for a tax deduction. We were informed that the tax deduction could only be claimed once the superannuation payments were made. Additionally, we believed that it would be beneficial for our employees to have their funds deposited into their superannuation accounts early, allowing for compounding growth towards their retirement.
Unfortunately, during this process, we inadvertently overlooked the possibility that some employees, including [the Applicant] may have exceeded the contributions cap. We deeply regret any inconvenience or complications this may have caused.
[10] Exhibit 6, Letter from the Applicant’s employer.
On 17 September 2021, the Respondent advised the Applicant that he had excess concessional contributions for the 2020-2021 financial year, totalling $6,737.77.[11] On the same day, the Respondent issued a Notice of Amended Assessment to the Applicant including the excess concessional contribution amount in his assessable income for the 2020-2021 financial year.[12]
[11] Exhibit 1, T Documents, T7, pages 32-25, Excess concessional contribution determination.
[12] Exhibit 1, T Documents, T6, pages 28-31, Notice of amended assessment for the year ending 30 June 2021.
On 2 November 2021, the Applicant applied to the Respondent seeking exercise of the discretion to reallocate the excess concessional contribution amount of $6,737.77 for the 2020-2021 financial year to another year.[13]
[13] Exhibit 1, T Documents, T8, Applicant’s request for discretion to be exercised.
On 29 September 2022, the Respondent decided not to exercise the discretion to reallocate the Applicant’s excess concessional contribution of $6,737.77 to another year.[14]
[14] Exhibit 1, T Documents, T11, pages 53-54, Notice of decision in respect to the Applicant’s request for discretion.
On 1 November 2022, the Applicant filed an objection.[15]
[15] Exhibit 1, T Documents, T12, pages 55-59, Applicant’s objection.
On 22 March 2023, the Respondent disallowed the Applicant’s objection.[16]
[16] Exhibit 1, T Documents, T16, page 65, Notice of objection decision.
The Applicant sought review of the Respondent’s objection decision by way of an application made on 28 March 2023 to this Tribunal.[17] The Applicant provided the following in relation to why he claimed that the reviewable objection decision was wrong:[18]
I am objecting to additional tax of $1,379.29 I was required to pay for the 2020-21 FY linked to salary sacrificed superannuation payments that exceeded the $25,000 cap.
Basically my employer made 5 quarterly payments to my superannuation fund in the 2020-21 financial year and with the tax office taking payments from the superannuation fund as payments made. I have been penalised due to my employer making the last payment of the 2019-20 year in the 2020-21 year.
As background, I had requested my employer to make additional salary sacrifice superannuation payments for the 2020-21 FY, up to the permitted yearly limit of $25,000. I was advised that employer provided his accountant with these instructions. I monitored these payments through my payslips and was satisfied that the additional superannuation payments came in around the $25,000 cap. However, in the 2020-21 period my employer’s accountant made five payments to my super fund (rather than four quarterly payments), which had the result of putting him over the yearly $25,000 cap in that FY.
I lodged an objection with the ATO in relation to the additional tax charge and provided information, as outlined above. I have since received advice that the ATO has not made a determination in my favour regarding the taxation of these excess super contributions. I was advised that in making the decision the ATO said that I had control over the making of the contributions and should have foreseen that there would be excess contributions. I dispute this, noting I did check my payslip and calculated that I would not breach the cap as was my intention, I wasn’t aware that I also needed to monitor my superannuation account and make inquiries with my employer’s accountant about the payment schedule.
I note the new information provided to me by the ATO that I should have asked for a salary sacrifice agreement. I say that at the time I was not offered one by my employer, was not aware that I should have requested one, and that I trusted that my employer would make payments to the super fund that complied with my request and did not exceed the cap.
It does appear that the ATO has assumed a level of knowledge and understanding of superannuation processes and how employers handle payments that is beyond the understanding of the average employee. If there have been communications campaigns about this, and particularly about the need to ask for a salary sacrifice agreement, I would be grateful to receive this information and links to relevant information sources.
……
[17] Exhibit 1, T Documents, T1, pages 1-5, Application for Review.
[18] Exhibit 1, T Documents, T1, page 5, Application for Review.
On 21 March 2024, a Hearing was conducted using Microsoft Teams. At the Hearing, the Applicant was self-represented and gave evidence under affirmation.
THE LAW
The relevant law in this matter includes the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and the Taxation Administration Act 1953 (Cth) (TAA 1953).
Where a taxpayer is dissatisfied with an assessment, determination, notice or decision they may object against it in accordance with the requirements set out in Part IVC of the TAA 1953.[19]
[19] Section 14ZLof the TAA 1953.
The Respondent must decide whether to allow, wholly or in part, or disallow the taxpayer’s objection.[20]
[20] Section 14ZY of the TAA 1953.
A taxpayer who is dissatisfied with the Respondent’s objection decision may apply to the Tribunal for a review of the decision or appeal to the Federal Court against it.[21]
[21] Section 14ZZ of the TAA 1953.
Section 14ZZK(b)(ii) of the TAA 1953 provides that on application for review of a reviewable objection decision, the Applicant has the burden of proving that the taxation decision should not have been made or should have been made differently.
Section 280-15(1) of the ITAA 1997 provides that there is a limit to superannuation contributions that can be made in respect of an individual in a year that receive favourable tax treatment.
Division 291 of the ITAA 1997 deals with excess contributions. It states that there is a cap on the amount of superannuation contributions that may receive concessional tax treatment for an individual in a financial year.[22]
[22] Section 291-1 of the ITAA 1997.
The object of Division 291 of the ITAA 1997 is expressed in section 291-5 as follows:[23]
The object of this Division 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.
Note: Division 292 has the same object, in relation to non-concessional contributions.
[23] The Tribunal notes that the unused carry forward rule does not apply to the Applicant as his superannuation balance was greater than the required threshold at the end of the 2019-2020 financial year. As such Division 292 of the ITAA 1997 is not applicable in this matter.
The concessional contributions cap for the 2020-2021 financial year was $25,000.[24] Both personal superannuation contributions deductible from an individual’s assessable income and deductible employer superannuation guarantee contributions that are made to a complying superannuation fund are considered to be concessional contributions.[25]
[24] Section 291-20(2)(b) of the ITAA 1997.
[25] Section 291-25 of the ITAA 1997.
Pursuant to section 291-20(1) of the ITAA 1997, an individual has an excess concessional contribution for a financial year where the amount of their concessional contributions for the year exceeds their concessional contribution cap for the year.
Section 97-5 of Schedule 1 to the TAA 1953 provides that if an individual has an excess concessional contribution for a financial year, the Respondent must issue an excess concessional contributions determination stating the amount of the excess concessional contributions.
The Respondent has a discretion to disregard concessional contributions or allocate them to a different financial year.[26]
[26] Section 291-460 of the ITAA 1997.
Section 291-465 of the ITAA 1997 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.
Conditions for making of determination
(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.
(2A) Paragraph (2)(a) does not apply if:
(a) the determination relates to a contribution that is an amount the Commissioner pays for your benefit under Part 8 of the Superannuation Guarantee (Administration) Act 1992; and
(b) the amount represents an amount of a charge payment (within the meaning of section 63A of that Act) paid as a result of a disclosure to which paragraph 74(1)(a) of that Act applies; and
(c) the entity making the disclosure qualified, under section 74 of that Act, for an amnesty in relation to the *superannuation guarantee shortfall to which the charge payment relates.
Matters to which regard may be had
(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:
(i) 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
(ii) the extent to which you had control over the making of the contribution;
(c) any other relevant matters.
Requirements for application
(4) The application:
(a) must be in the *approved form; and
(b) can only be made after all of the contributions sought to be disregarded or reallocated have been made; and
(c) if you receive an *excess concessional contributions determination for the *financial year—must be given to the Commissioner within:
(i) 60 days after receiving the determination; or
(ii) a further period allowed by the Commissioner.
Notification
(5) The Commissioner must give you:
(a) a copy of the determination; or
(b) if the Commissioner decides not to make a determination—notice of that decision.
Review
(7) If you are dissatisfied with:
(a) a determination made under this section in relation to you; or
(b) a decision the Commissioner makes not to make such a determination; you may object against the determination, or the decision, as the case requires, in the manner set out in Part IVC of the Taxation Administration Act 1953.
The ITAA 1997 does not define what constitutes special circumstances. A number of Federal Court and Tribunal decisions have considered special circumstances in relation to taxation matters. It is accepted that the term “special circumstances” has its ordinary meaning.
In Pitts v Federal Commissioner of Taxation [2017] AATA 685, Senior Member Walsh provided helpful commentary on the meaning of special circumstances that have arisen from the social security perspective and for the purposes of section 292-465 of the ITAA 1997.[27]
[27] Section 292-465 of the ITAA 1997 contains the same special circumstances discretion as found in section 291-465 of the ITAA 1997, however, refers to non-concessional contributions rather than concessional contributions.
Senior Member Walsh provided at [107-109]:
107. However, the meaning of “special circumstances” has been considered extensively by the Federal Court and the Tribunal in the context of social security and family assistance law. In summary, it has been held that for circumstances to constitute “special circumstances” they must be circumstances which are “unusual, uncommon or exceptional,” “markedly different from the usual run of cases,” “special” or “out of the ordinary” and they include events which would render the strict application of the rule in question unfair, inappropriate or unjust: see for example, Re Ivocic and Director General of Social Services [1981] AATA 57 at [45]; Re Beadle and Director-General of Social Security (1984) 6 ALD 1 (Re Beadle) at 3 per Toohey J; Beadle and Director General of Social Security (1985) 60 ALR 225 at 228 as per Bowen CJ, Fisher and Lockhart JJ; Groth and Secretary, Department of Social Security (1995) 40 ALD 541 (Groth) at 545 per Kiefel J; Dranichnikov v Centrelink [2003] 75 ALD 134 at [66] per Hill J; Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25 (Angelakos) at [33]; Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114; (2007) 94 ALD 693 (Davy) at [80] and Re Topp and Secretary, Department of Families, Housing, Community Service and Indigenous Affairs [2010] AATA 99 at [39]. Circumstances might be “special”, although they apply to more than one person or class of persons, provided they are not of universal application: see Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52 at [65]. However, ultimately, whether circumstances answer any of these descriptions depends on the context in which they occur: Re Beadle; Groth; Angelakos; Davy.
108.From the cases which have considered what constitute “special circumstances” for the purpose of s 292-465 of the ITAA 1997, the following general principles emerge:
· Ignorance of the existence or effect of the law does not, by itself, amount to “special circumstances”: Liwszyc at [77] per McKerracher J; Schuurmans-Stekhoven and Commissioner of Taxation [2012] AATA 62; Tran and Commissioner of Taxation [2012] AATA 123 (Tran) at [15] per Dr Hughes, Member; Brady and Commissioner of Taxation [2016] AATA 97 (Brady) at [44] per Senior Member Lazanas;
· “Special circumstances” does not extend to an error on the taxpayer’s part, even if the error was innocent and made in good faith: Liwiszyc at [77]; Tran at [15];
· An error on the part of a third party will not, of its own force, amount to “special circumstances”: Liwiszyc at [77];
· Incorrect or deficient financial advice from a third party professional will not, on its own, satisfy the requirement for “special circumstances”: Kerr and Commissioner of Taxation [2007] AATA 1732 at [34] and [35] per Senior Member Ettinger; Mills and Commissioner of Taxation [2017] AATA 362 at [44] and [45] per Senior Member Lazanas; Davenport and Commissioner of Taxation [2012] AATA 760 at [79] per Senior Member Walsh and Re Lynton and Commissioner of Taxation [2012] AATA 667 at [17] per Dr Hughes, Member; Brady at [44];
· While the effect of the circumstances on a taxpayer may be described as unfortunate and unforeseen, this is insufficient to render the imposition of the excess contributions tax unjust, unreasonable or inappropriate and to constitute “special circumstances: Chantrell and Commissioner of Taxation [2012] AATA 179 (Chantrell) at [32] per Dr Hughes, Member; and
· It is the circumstances that must be “special”, not the individual’s experience of them: Tran at [15].
109.In Brady, Senior Member Lazanas commented (at [45]):
The cases where special circumstances have been found for the purposes of Division 292 and, therefore, the discretion enlivened, are very few. In Re Hamad and Commissioner of Taxation [2012] AATA 530, Senior Member Allen found that there were special circumstances as the taxpayer had been misled by his employer as to the timing of the employer’s contributions. In Re Bornstein and Commissioner of Taxation [2012] AATA 424, Senior Member McCabe was satisfied that there were special circumstances as there was ambiguity on the ATO’s website about the timing for the making of contributions because the time permitted for contributions by employers is different to that for employees which led to confusion. Also influential was the fact that the taxpayer “was denied the opportunity to avoid compounding the earlier error he had made because the Commissioner did not alert him to the true position before the further payment was made” (at [11]). In Re Longcake and Commissioner of Taxation [2012] AATA 576, Deputy President Groom referenced the facts that the taxpayer did not know that his employer had not made the contributions in a timely manner and that there was confusion arising from the fact that employers have additional leeway for making contributions whereas there are stricter time limits for employees and, additionally, the fact that the employer had difficulties with cash flow that may have been a cause of the delay in making the contributions.
ISSUES
The issue before the Tribunal is whether the Applicant has discharged his burden to prove that the Respondent’s decision not to make a determination to reallocate the excess concessional contribution of $6,737.77 made in the 2020-2021 financial year to another financial year should not have been made or should have been made differently.
In determining that issue, the Tribunal must consider:
(a)Whether the discretion in section 291-465(1) of the ITAA 1997 is enlivened having regard to the considerations in section 291-465(2) of the ITAA 1997, specifically whether:
(i)there are special circumstances; and
(ii)exercising the discretion is consistent with the objects of Division 291 of the ITAA 1997.
(b)If yes to (a)(i) and (ii) above, whether the discretion in section 291-465(1) of the ITAA 1997 ought to be exercised, where regard may be had to the matters set out in section 291-465(3) of the ITAA 1997.
APPLICANT’S EVIDENCE AND CONTENTIONS
The Applicant submitted a statement of facts, issues and contentions in response to that provided by the Respondent.[28] The Applicant’s evidence at the Hearing was consistent with his written contentions.
[28] Exhibit 4, Applicant’s Statement of Facts, Issues and Contentions.
The Applicant contended that he met the special circumstances requirements such that the excess concessional contributions made in the 2020-2021 financial year could be assigned to another year on the basis the contributions in question related to 15 months worth of contributions, not 12 months worth of contributions. Despite his salary sacrifice contributions being debited from his pay each week, the Applicant contended that his circumstances were out of the ordinary because he had no control over when his employer paid superannuation contributions into his fund.
At the Hearing, the Applicant told the Tribunal that:
·He had entered a verbal agreement with his employer such that he would salary sacrifice into superannuation an amount that constituted the difference between the $25,000 cap and the employer compulsory superannuation guarantee amount. He said that amount was then deducted from his pay each week during the year.
·The verbal agreement had been in place since approximately the 2018 financial year and there had not been any issues previously.
·He agreed that it was not unusual for his employer to pay superannuation accrued in one financial year in the following year and that there was no consistency to when they paid the superannuation contributions into his super fund.
·The focus on when the superannuation was received by the fund is contrary to other taxation situations, for example taxation taken from his pay was effectively assigned to him then, not when it was received by the Respondent from the employer.
·Regard should be given to the period that the superannuation contributions related to.
·He did check his super fund every month or so to see if payments were being made in a timely fashion, however at that time it did not clearly show a running balance total of what had been deposited in that financial year. He would therefore have to add up each of the deposits to check what the total of contributions to date had been. He said that has now changed and he could see immediately what the present year contributions were.
·He had checked his payslips and knew that his salary sacrifice amounts were being debited each week and as such believed he would not breach the cap.
·It was out of his control when his superannuation would be received by his super fund.
·
He was seeking to have the superannuation contributions that were paid into his super fund on 10 August 2020 reallocated to the 2019-2020 financial year as they related to deductions from pay in the working weeks between 2 April 2020 and
25 June 2020.
·He agreed that those payments totalled $6,432.66 which was $305.11 less than the excess contributions in question.
·He said he was not contesting the excess contributions above the payments made on 10 August 2020.
·He agreed that it was not unusual for his employer not to pay the salary sacrificed superannuation taken from his pay until approximately 3 months later.
The Applicant contended that the actions of his employer should not adversely affect him in circumstances where he had no control over when they paid his superannuation contributions into his super fund and he had done due diligence to ensure that his voluntary superannuation contributions would not exceed the concessional contributions cap of $25,000.[29]
[29] Exhibit 4, Applicant’s statement of facts, issues and contentions in response to the Respondent’s Statement of Facts, Issues and Contentions, paragraphs 9-12.
RESPONDENT’S CONTENTIONS
Ahead of the Hearing, the Respondent provided an Outline of Submissions[30] of which their contentions at the Hearing were consistent.
[30] Exhibit 5, Respondent’s Outline of Submissions.
The Respondent contended that:[31]
[31] Exhibit 5, Respondent’s Outline of Submissions, paragraphs 33-60.
33.The Commissioner submits that the contribution that has caused the Applicant to exceed the concessional contributions cap is the fourth contribution made on
28 April 2021 and is further exceeded by a further fifth contribution made on
28 June 2021 made by the Applicant’s employer on 28 June 2021.34.The Applicant in his Statement of Facts, Issues and Contentions (Applicant’s SFIC) contends that:[32]
[32] Exhibit 4, Applicant’s Statement of Facts, Issues and Contentions, paragraph 12.
The funds for the 2 April to 25 of June were not sent to SunSuper until the
10 August 2020, causing $6432.66 to be misallocated to the 2021 financial year…35. The Applicant’s employer confirmed that upon their accountant’s advice they made the fifth contribution in June 2021 early to receive a deduction, which consequently had a negative impact on a number of staff.[33] Therefore, the Commissioner submits that it is not the timing of the contribution made on 10 August 2020 that is in contention but rather the fourth and fifth contributions made by the Applicant’s employer on 28 June 2021.
[33] Exhibit 6, Letter from the Applicant’s employer.
Special Circumstances
36.Overall, the question of whether ‘special circumstances’ exists is what, if anything, takes the present case out of the usual or ordinary case.
37.The Courts have considered what ‘special circumstances’ mean in many different contexts.[34] It is clear that special circumstances are those which are unusual or out of the ordinary which result in an unfair, unintended, or unjust outcome.[35]
[34] Ward v Commissioner of Taxation [2016] FCAFC 132; Re Verschuer and Commissioner of Taxation [2012] AATA 123; Azer and Commissioner of Taxation (Taxation) [2016] AATA 472 and Aston v Commissioner of Taxation [2023] AATA 1848.
[35] Ward v Commissioner of Taxation [2016] FCAFC 132 at [39] to [41].
38.The Commissioner submits that there are no ‘special circumstances’, within the meaning of paragraph 291-465(2)(b)(i) of the ITAA 1997 as it has consistently been interpreted by the Courts and Tribunal, existing in the Applicant’s case.
39.The inclusion of the ECC in the Applicant’s assessable income does not produce an unfair, unjust, unintended or unforeseeable outcome for the Applicant. The object of Division 291 of the ITAA 1997 is to ensure that the amount of concessionally taxed superannuation benefits results from contributions that have been made gradually over the course of an individual’s life.[36]
[36] Section 291-5 of the ITAA 1997.
40.The Commissioner submits the taxation of ECC at the Applicant’s marginal rate is designed to discourage the making of contributions in excess of the cap and the fiscal consequences that flow from an excessive contribution do not, of themselves make for special circumstances.[37] Any such consequences are intended for a breach of the contribution cap rules, and do not qualify as ‘special circumstances’ even if the tax liability incurred may be considered excessive.
[37] Re Verschuer and Commissioner of Taxation [2013] AATA 12 at [61].
41.Importantly, the Commissioner notes that the Applicant had exceeded the concessional contributions cap before the final contribution on 28 June 2021 was made. The Commissioner submits that should the Applicant have monitored his superannuation contributions regularly he would have been aware that he was over the $25,000 limit after the contribution on 28 April 2021 and should have notified his employer not to make any more salary sacrifice payments in the 2021 financial year.
42. As stated in Naude v Commissioner of Taxation [2012] AATA 130 (Naude):[38]
[38] Re Naude and Federal Commissioner of Taxation [2012] 86 ATR 561 at [93].
Even if it was accepted that the applicant was ignorant of when RSG/Coffey Mining made the concessional contributions to the Super Fund the applicant’s excess concessional contributions appear to have arisen principally from this ignorance and his own inadvertence, rather than from factors or circumstances beyond his control. In any event, his ignorance of the timing of the payment of the contributions could not make the applicant’s circumstances unusual, exceptional or uncommon.
43.Ultimately, the Commissioner submits that it was the Applicant’s responsibility to monitor the payments made and notify their employer when the cap was approaching, and any ignorance or uncertainty of timing does not characterise the Applicant’s circumstances as special.
44.The Applicant contends that there was a verbal salary sacrifice agreement in place with his employer and that his employer failed to follow this agreement. The Applicant stated:
…I had requested my employer to make additional salary sacrifice superannuation payments for the 2020-21 FY, up to the permitted yearly limit of $25,000. I was advised that employer provided his accountant with these instruction s… [39]
[39] Exhibit 1, T Documents, T1, pages 1-6, Application for Review.
45.The Commissioner submits that the Applicant’s reliance on a verbal agreement increases the expectation that they should be checking their superannuation balance regularly, in contrast to if the Applicant had a written contract which would create more predictability when salary sacrifice contributions would be made.
46.In Bernhardi v Commissioner of Taxation,[40] the Tribunal confirmed that the responsibility rests on the Applicant to supervise and be aware that their concessional contribution remains under the cap.
[40] Bernhardi v Commissioner of Taxation [2012] AATA 216.
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.
47.Therefore, the Commissioner submits that the Applicant had a responsibility to regularly check his superannuation balance and be aware of when he would exceed the cap.
48.While there was a verbal salary sacrifice arrangement, the Applicant trusted the employer to contribute as instructed by the Applicant. However, without a written agreement, the onus remains on the taxpayer to ensure the correct contributions are made.[41]
[41] Azer and Commissioner of Taxation (Taxation) [2016] AATA 472 at [19] and [20].
49.The Commissioner further submits that, not knowing the law, or the fact that a person is mistaken or unaware of the consequences does not, on its own, amount to special circumstances.[42] As highlighted in Naude, “ignorance of the timing of the payment of the contributions could not make the applicant's circumstances unusual, exceptional or uncommon.”[43]
[42] Practice Statement Law Administration PS LA 2008/1, Paragraph 6.
[43] Re Naude and Federal Commissioner of Taxation [2012] 86 ATR 561 at [93].
50.The Applicant states that they should not be “adversely impacted by the incorrect allocation of the contributions”.[44] However, case law such as Bernhardi[45] establishes that it was not within the Applicant’s doing where he had responsibility for the late payments made to SunSuper, however it was his responsibility to supervise his superannuation account and be aware of the cap.
[44] Applicant’s Statement of Facts, Issues and Contentions at [12].
[45] Bernhardi v Commissioner of Taxation [2012] AATA 216.
51.The Commissioner distinguishes this case to Hamad v FC of Taxation [2012] AATA 530[46] (Hamad) where the Tribunal ruled in favour of the Applicant. Firstly, unlike in the present case, in Hamad the taxpayer was positively misled by their employer and improperly retained amounts. The taxpayer had an intention to make a superannuation contribution earlier however this was withheld by his employer for unknown reasons. In the current case, the Applicant was not misled by their employer, but rather, the Applicant’s employer upon their accountant’s advice made the fifth contribution in June 2021 early to be eligible for a tax deduction.[47]
[46] Hamad v FC of Taxation [2012] AATA 530.
[47] Exhibit 6, Letter from the Applicant’s employer.
52.Another difference between this case and Hamad is that the Applicant in Hamad made more of a conscious effort to ensure he was within his concessional contributions cap. The Applicant in this current case has not as he did not monitor his superannuation account or make inquiries his employer’s accountant.[48] The Commissioner submits that should the Applicant have monitored his superannuation contributions regularly he would have been aware that he was over the $25,000 limit after the contribution on 28 April 2021 and should have told his employer to not make any more salary sacrifice payments in the 2021 financial year.
[48] Exhibit 1, T Documents, T1, pages 1-6, Application for Review.
53.Further, in the current case there were periodic superannuation payments[49] unlike in Hamad where the employer withheld amounts for 3 months that fell in a prior financial year and made a single contribution in the next financial year causing them to exceed the cap.
The extent to which the person had control over the making of the contribution
54.Subsection 291-465(3) of the ITAA 1997 states that the Commissioner may have regard to whether it was reasonably foreseeable, when a relevant contribution was made, that an individual would have ECC for the relevant financial year, particularly the extent to which the individual had control over the making of the contribution.
55.Although the Applicant stated that he reviewed his payslips,[50] there is insufficient evidence to substantiate this as the Commissioner has not been provided with payslips. The Applicant states that he trusted his employer to make superannuation contributions within the $25,000 cap.[51] However, the Applicant did not “monitor [his] superannuation account and make inquiries (sic)…”[52] The Commissioner submits that there was no identifiable pattern or consistency with the payment pattern of the Applicant’s employer. Consequently, the Commissioner submits that the Applicant should have been checking his accounts to keep track of the contributions made to his superannuation and thus does not count as a special circumstance.[53]
56.The Commissioner submits that the contributions by the Applicant’s employer were periodic but with varying intervals between contributions and regularly late and consequently there was no established pattern on when to expect salary sacrifice payments. Given these factors, it was the responsibility of the Applicant to check their super regularly to ensure the cap was not exceeded.
57.It was within the Applicant’s responsibility to exercise adequate supervision of his superannuation fund.[54] Although there were factors out of the Applicant’s control, such as his employer making the salary sacrifice contribution, the Tribunal has found that this is insufficient to warrant special circumstances and that there were actions a taxpayer could have taken to identify that payments were being made in excess of a taxpayer’s cap.[55] For example:
a. It was open to the Applicant and there were documents available to the Applicant, to identify that the super contributions for the April, May and June 2020 months were not made in the 2020 financial year and inquire as to the status of the payment or reviewed the documents which would have alerted him to the fact that the contributions towards the 2021 financial year had already begun.
58.Consequently, the Commissioner submits that while the Applicant’s intention may have been clear, he failed to take necessary steps to ensure the desired outcome was reached. This in itself does not give rise to any special circumstances.
59.The Commissioner submits that the case law has categorically established that not having knowledge or an innocent mistake does not in itself constitute a special circumstance, even if it was unintended, or the error was made in good faith.[56]
60.Therefore, the Commissioner contends that there are no special circumstances that would apply to the Applicant that would allow the Commissioner to exercise his discretion and make a determination under subsection 291-465(1) of the ITAA 1997.[57]
[49] Exhibit 3, Respondent’s Statement of Facts, Issues and Contentions, paragraph 6.
[50] Exhibit 1, T Documents, T1, pages 1-6, Application for Review.
[51] Exhibit 1, T Documents, T1, pages 1-6, Application for Review.
[52] Exhibit 1, T Documents, T1, pages 1-6, Application for Review.
[53] Bernhardi v Commissioner of Taxation [2012] AATA 216.
[54] Azer and Commissioner of Taxation [2016] AATA 472 and Bernhardi v Commissioner of Taxation [2012] AATA 216.
[55] Bernhardi v Commissioner of Taxation [2012] AATA 216.
[56] Azer and Commissioner of Taxation (Taxation) [2016] AATA 472 and Aston v Commissioner of Taxation [2023] AATA 1848.
[57] Section 291-465 of the ITAA 1997.
The Respondent contended that the Applicant failed to discharge his burden under section 14ZZK(b)(ii) of the TAA 1953 to prove that the objection decision should not have been made or should have been made differently and as such the objection decision dated
22 March 2023 should be affirmed.[58]
[58] Exhibit 5, Respondent’s Outline of Submissions, paragraphs 61-62.
CONSIDERATION
It is not in dispute that the Applicant’s employer made excess concessional contributions to his superannuation fund in the 2020-2021 financial year. The dispute relates to whether the discretion provided by section 291-465 of the ITAA 1997 should be exercised to reallocate the excess concessional contributions of $6,737.77 to another financial year.
The discretion provided by section 291-465(1) of the ITAA 1997 is not unfettered. In Federal Commissioner of Taxation v Dowling [2014] FCA 252, Greenwood J provided:[59]
93. The Commissioner’s power to exercise the discretion is constrained, at the threshold, by the mandatory requirement that he or she “considers” that there are “special circumstances” warranting a constructive change to the actuality of the contributions either be disregarding or reallocating some or all of those contributions giving rise to the liability and that he or she considers that doing so is consistent with the object of Div 292.
94. These 292-465(3)(a) and (b) considerations are absolute pre-conditions to the exercise of the discretion.
[59] While Greenwood J was specifically referring to the discretion provided by section 292-465 of the ITAA 1997, that discretion is the same discretion as under section 291-465 of the ITAA and as such is equally applicable to the current matter.
As such, in determining whether the discretion provided by section 291-465(1) of the ITAA 1997 should be exercised, the Tribunal, standing in the shoes of the Commissioner, must be satisfied that special circumstances exist and that making a determination is consistent with the objects of Division 291 of the ITAA 1997.
As outlined above, the ITAA 1997 does not provide a definition of what constitutes special circumstances, however that concept has been considered in a number of Federal Court and Tribunal decisions. The Tribunal agrees with the precedents set out above that for circumstances to constitute special circumstances, they must be circumstances that are unusual, uncommon or exceptional, markedly different from the usual run of cases, special or out of the ordinary and include events which would render the strict application of the rule in questions unfair, inappropriate or unjust.
The Applicant’s case is that special circumstances apply in his case as:
(a)he had trusted that his employer would ensure in accordance with their agreement, that his total annual concessional superannuation contributions would not exceed the $25,000 cap; and
(b)the payments made into his super fund during the 2020-2021 financial year represented 15 months rather than 12 months of contributions.
The Applicant also contended that he should not be disadvantaged in circumstances where he had no control over when his employer would pay his concessional superannuation contributions into his super fund.
The difficulty for the Applicant is that he accepts that there was never any certainty around when his employer would pay contributions into his super fund and that there was no written agreement or even a verbal agreement that set out the timing of the payments into his super fund. As such it was not unusual for his employer to pay the Applicant’s concessional contributions into his super fund at differing times.
The Applicant also told the Tribunal that he did check his super fund regularly, possibly even on a monthly basis to ensure that his superannuation was being deposited. In such circumstances and given the irregularity in his employer’s payment schedule of depositing his concessional contributions into his super fund, the Tribunal consider that it is reasonable to expect that the Applicant would have kept track of the contributions that were deposited.
The Tribunal accepts that the Applicant did not have total control over when his employer deposited concessional contributions into his super fund, even though his salary sacrifice amounts were withheld from his pay each week. The Tribunal, however, agrees with the contentions of the Respondent. The Applicant had the ability to monitor his super fund account and to request that his employer cease making further salary sacrifice payments into his account. In this instance the Applicant did not do this.
The Applicant contended that it was difficult to keep track of his running superannuation balance as his super fund account did not display year to date contributions. That may be the case however while a little more cumbersome, the Applicant was not prevented from keeping track of the contributions himself. The total number of payments made into his super fund during the 2020-2021 financial year was five, which is not excessive, especially in a situation where the cap was reached after the April 2021 payment.
The Tribunal accepts that the Applicant genuinely intended not to make excess concessional superannuation contributions above the cap during the 2020-2021 financial year and that he trusted his employer. Following financial advice, the Applicant’s employer made a conscious decision to make five superannuation contributions payments into his super fund.
An error on the part of an employer, third party or incorrect or deficient financial advice from a third-party professional will not on its own satisfy the requirements for special circumstances.[60]
[60] Liwiszyc v Commissioner of Taxation [2014] FCA 112 at [77]; Kerr and Commissioner of Taxation [2007] AATA 1732 at [34]-[35]; Mills and Commissioner of Taxation [2017] AATA 362 at [44]-[45]; Davenport and Commissioner of Taxation [2012] AATA 760 at [79]; Re Lynton and Commissioner of Taxation [2012] AATA 667 at [17] and Brady and Commissioner of Taxation [2016] AATA 97 at [44].
Having reviewed the material before it, the Tribunal agrees with the Respondent’s contentions that while the Applicant’s intention may have been clear, he failed to take necessary steps to ensure the desired outcome was reached. This in of itself does not give rise to special circumstances.
Further, a genuine mistake or ignorance of the law or procedures does not amount to special circumstances.[61]
[61] Liwiszyc v Commissioner of Taxation [2014] FCA 112 at [77] and Tran and Commissioner of Taxation [2012] AATA 123 at [15].
The Tribunal accepts that the effect of the circumstances on the Applicant are unfortunate however, that is insufficient to render the imposition of the excess contributions tax as unjust, unreasonable, or inappropriate to constitute special circumstances.[62]
[62] Chantrell and Commissioner of Taxation [2012] AATA 179 at [32].
The Tribunal is not satisfied that special circumstances exist in relation to the Applicant making excess concessional contributions in the 2020-2021 financial year. As such, consistently with the previous decisions of the Tribunal outlined above,[63] the Tribunal finds that having regard to section 291-465(2) of the ITAA Act, the discretion in section 291-465(1) of the ITAA 1997 is not enlivened.
[63] Re Naude and Federal Commissioner of Taxation [2012] 86 ATR 561, Bernhardi and Commissioner of Taxation [2012] AATA 216; Azer and Commissioner of Taxation (Taxation) [2016] AATA 472 and Aston v Commissioner of Taxation [2023] AATA 1848.
Having made this finding, the Tribunal does not need to consider the other factors that must or may be considered in determining whether the discretion is enlivened and if so should be exercised. For completeness, the Tribunal accepts and agrees with the contentions set out by the Respondent above, that making the sought-after determination would not be consistent with the objects of Division 291 of the ITAA 1997.
Consequently, the Tribunal refuses to exercise the discretion in section 291-465(1) of the ITAA 1997 to make a written determination reallocating the Applicant’s excess concessional contributions from the 2020-2021 financial year to the 2019-2020 financial year or any other financial year.
CONCLUSION
For the reasons set out above, the Tribunal is not satisfied that the criteria to exercise the discretion provided by section 291-465 of the ITAA 1997 to reallocate the Applicant’s excess concessional contributions from the 2020-2021 financial year are met.
Consequently, the Tribunal is not satisfied that the Applicant has discharged his onus of proof to establish that the objection decision should not have been made or should have been made differently.
Accordingly, the decision under review is affirmed.
I certify that the preceding 61 (sixty-one) paragraphs are a true copy of the reasons for the decision herein of Member D Mitchell
..............................[SGD].....................................
Associate
Dated: 11 April 2024
Date of Hearing 21 March 2024 Applicant: By MS Teams Solicitors for the Respondent: Ms Lauryn Petropoulos
Australian Taxation Office
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