PETER NAUDE and COMMISSIONER OF TAXATION - [2012] AATA 130

[2012] AATA 130

Division	TAXATION APPEALS DIVISION SMALL TAXATION CLAIMS TRIBUNAL
File Number(s)	2011/3388 and 2011/3389
Re	PETER NAUDE
APPLICANT
And	COMMISSIONER OF TAXATION
RESPONDENT

DECISION

Tribunal	Mr A Sweidan, Senior Member
Date	28 February 2012
Place	Perth

The Tribunal affirms the decisions under review.

..(sgd) Mr A Sweidan.......

Mr A Sweidan, Senior Member

Keywords

Income tax – Superannuation – Excess Contributions Tax – applications for determination allowing re-allocation of contributions made after financial year end to prior financial year – whether “special circumstances” exist- decisions under review affirmed.

Legislation
Income Tax Assessment Act 1977s 292-465

Cases

McMennemin and Commissioner of Taxation [2010] AATA 573

Groth v Secretary, Department of Social Security [1995] FCA 1708

Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Whitlock [2010] AATA 816

Re Ivovic and Director-General of Social Services [1981] AATA 57

Tefonu Pty Ltd v Insurance and Superannuation Commissioner [1993] FCA 412

Re Kerr and Federal Commissioner of Taxation [2007] AATA 1732

Thommeny v Federal Commissioner of Taxation [2006] AATA 840

Schuurmans-Stekhoven v Commissioner of Taxation[2012] AATA 62

REASONS FOR DECISION

Mr A Sweidan, Senior Member

28 February 2012

BACKGROUND AND ISSUES FOR TRIBUNAL’S DETERMINATION

The issue for the Tribunal’s determination is whether the excess contributions tax assessments issued to the applicant for the years ended 30 June 2008 and 30 June 2009 are excessive and in particular whether it is appropriate to make determinations, pursuant to subsection 292-465(1) of the Income Tax Assessment Act 1997 (ITAA97), that:
1.1 The concessional superannuation contribution of $10,511.30 made by the applicant’s employer to a superannuation fund on 2 July 2007, in respect of wages that accrued for the month of June 2007, be reallocated from the year ended 30 June 2008 to the year ended 30 June 2007; and
1.2 The concessional superannuation contribution of $8,333.33 made by the applicant’s employer to a superannuation fund on 16 July 2008, in respect of wages that accrued for the month of June 2008, be reallocated from the year ended 30 June 2009 to the year ended 30 June 2008.

JURISDICTION

The parties are in agreement that the Tribunal has jurisdiction to determine this matter. For the reasons set out in the closing submissions of the respondent, which it is unnecessary to set out here, the Tribunal finds that it has such jurisdiction.

RELEVANT FACTS

The applicant was a partner in RSG Global partnership until September 2006. The [partnership] incorporated as RSG Global Consulting Pty Ltd (RSG) which was taken over by Coffey International Ltd which subsequently became Coffey Mining Pty Ltd (Coffey Mining).
From September 2006 until January 2009 the applicant was employed by RSG/Coffey Mining.
In January 2009 the applicant terminated his employment with Coffey Mining and was employed by the Naudia Mirror Trust.
At all relevant times:
5.1 The applicant was a member of the Naude Superannuation Fund (the Super Fund)
5.2 The applicant was a trustee of the Super Fund; and
5.3 The applicant was a trustee of the Naudia Mirror Trust.
During the year ended 30 June 2009, the applicant was also a member of the Colonial Superannuation Retirement Fund (the Colonial Super Fund).
On 20 September 2006 the applicant entered into a “salary sacrifice” arrangement with RSG. The applicant emailed RSG stating as follows:
As from my first wage payment from RSG Global Consulting Pty Ltd at the end of September 2006, I hereby request that you pay my superannuation deduction on a monthly basis to my self-managed superannuation fund.
The name of the superannuation fund is the Naude Superannuation Fund.
I understand that my compulsory deduction is $12,686 per year, or $1,057.17 per month.
I hereby instruct RSG Global to contribute a total amount of $10,511.30 monthly (based on $105,113 per year), which represents a salary sacrifice of $9,454.13 a month.
Thereafter RSG/Coffey Mining made regular monthly contributions of $10,511.30 to the Super Fund from October 2006 until July 2007 (inclusive). These contributions were all made in the month following that in which they were accrued.
On 20 June 2007 the applicant emailed Vikki Cookson (Accounts/Payroll Officer at RSG/Coffey Mining) stating that he needed to adjust his salary sacrifice superannuation contributions for the next financial year. The monthly deduction (including the compulsory superannuation guarantee deduction) from July 2007 was $8,333. There followed further email communications in June 2007 between the applicant and Vikki Cookson confirming that the contribution from July 2007 would be $8,333.33.
From August 2007 until July 2008 (inclusive) RSG/Coffey Mining made regular monthly contributions of $8,333.33. These contributions were all made in the month following that in which they were accrued. There were email communications between the applicant and Vikki Cookson in June 2008 confirming the monthly contribution remained at $8,333.33. The final contribution for the year ended 30 June 2008, in respect of salary for the month of May 2008, was made on 24 June 2008.
There was no contribution from RSG/Coffey Mining in August 2008. On 12 September 2008 two contributions of $7.360.55 and $7,692.30 were made by RSG/Coffey Mining in respect of the months of July and August 2008.
From October 2008 until 27 January 2009 (inclusive) RSG/Coffey Mining continued to make contributions in the months following that in which they were accrued.
On 30 January 2009 the following contributions to the Super Fund were made:
14.1A final contribution of $29,824.21 from RSG/Coffey Mining (comprised of a contribution for January 2009 of $7,692.32 and a ‘roll-over/termination’ contribution of $22,131.91); and
14.2An employer contribution of $20,507.61 was made on behalf of the applicant by the trustee of the Naudia Mirror Trust .
It is apparent that the contributions that the applicant seeks to have reallocated (see1.1 and 1.2 above and 26.1 and 26.2 below) followed the general pattern under which the contribution for a particular month was paid to the Super Fund during the following month: i.e.
15.1The contribution of $10,511.30 from RSG/Coffey Mining for June 2007 was made by cheque, which was apparently sent to the Super Fund under cover of a letter dated 5 July 2007. The bank statement for the Super Fund shows this cheque was deposited on 2 July 2007; and
15.2The contribution from RSG/Coffey Mining of $8,333.33 for June 2008 was made on 16 July 2008 by EFT remittance.
On 7 January 2008 the Super Fund lodged an income tax return with the respondent for the year ended 30 June 2007 detailing gross taxable employer superannuation contributions of $183,022.
On 8 December 2008 the Super Fund lodged an annual return with the respondent for the year ended 30 June 2008 detailing concessional superannuation contributions for the applicant of $102,177.93.
On 15 September 2009 the Super Fund lodged an annual return with the respondent for the year ended 30 June 2009 detailing concessional superannuation contributions for the applicant of $108,333.35.
On 12 October 2009 the Colonial Super Fund lodged a member contributions statement with the respondent for the year ended 30 June 2009 detailing concessional superannuation contributions for the applicant of $1,847.26.
On 12 May 2009 the respondent notified the applicant that, based on information provided by his superannuation fund for the year ended 30 June 2008, he may have to pay excess contributions tax. The applicant’s concessional contributions were $102,177.93, which exceeded his concessional contributions cap of $100,000.
On 21 May 2009 the applicant’s tax agent, Mr Philip Hoff, replied to the respondent’s letter disagreeing that excess concessional contributions had been made.
On 19 June 2009 a taxation officer contacted Mr Hoff to acknowledge receipt of his letter. The officer advised that he was unable to consider the discretion to apply contributions to the previous year until an assessment had issued. Mr Hoff said that he would wait for the assessment and then object.
On 1 October 2010 the respondent again notified the applicant that he may have to pay excess contributions tax for the year ended 30 June 2008.
On 23 November 2010 the respondent notified the applicant that he may have to pay excess contributions tax for the year ended 30 June 2009. The applicant’s concessional contributions were $110,180.61, which exceeded his concessional contributions cap of $100,000.
On 8 December 2010 the respondent issued the applicant with an excess contributions tax assessment for the year ended 30 June 2008. The applicant was assessed on excess concessional contributions of $2,177.93 and the excess contributions tax was $686.
On 13 December 2010 the applicant made 2 applications to the respondent for determinations that concessional superannuation contributions be allocated to another financial year , as follows:
26.1The applicant requested that the contribution of $10,511.30 made on 2 July 2007 be allocated to the year ended 30 June 2007 because it was in respect of the 2007 income year. He provided the letter from RSG/Coffey Mining dated 5 July 2007 referred to above.
26.2The applicant requested that the contribution of $8,333.33 made on 16 July 2008 be allocated to the year ended 30 June 2008 because it was in respect of the 2008 income year. He provided the letter from RSG/Coffey Mining dated 16 July 2008 referred to above.
26.3Each application contained a schedule of what were said to be the contributions made for the years ended 30 June 2008 and 2009.
On 17 February 2011 the respondent issued notices of decision refusing to make written determinations under section 292-465 of the ITAA97 to reallocate or disregard all or part of the applicant’s concessional contributions for the 2008 and 2009 financial years.
On 16 March 2011 the applicant lodged a purported objection against the Excess Contributions Tax Determination decisions dated 17 February 2011.
On 1 April 2011 the respondent issued the applicant with an excess contributions tax assessment for the year ended 30 June 2009. The applicant was assessed on excess concessional contributions of $10,180.61 and the excess contributions tax was $3,206.85.
On 6 April 2011 the applicant lodged an objection against the excess contributions tax assessment for the year ended 30 June 2009 dated 1 April 2011.
The respondent disallowed the applicant’s objections.

ONUS OF PROOF

Under s14ZZK of the Taxation Administration Act 1953 the applicant bears the onus of proving that the assessments are excessive. To discharge this onus, the applicant must establish the necessary facts and explain why the assessments are excessive, and further, what the assessments should be.
The Tribunal finds, for the reasons which follow that the applicant has not discharged the onus of proving that the Commissioner should have made a determination pursuant to s. 292-465 of the ITAA97, in that:
33.1the applicant has failed to demonstrate the existence of any special circumstances; and
33.2accordingly the issuing of the assessments is consistent with the objects of Division 292 of the ITAA97 i.e. the making of the requested determinations would not be consistent with those objects.

CONSTRUCTION OF S. 292-465 ITAA97

Statutory framework

Part 3-30 of the ITAA97, concerns the taxation of superannuation benefits. Part 3-30 was introduced into the ITAA97, via the Tax Laws Amendment (Simplified Superannuation) Act 2007, in the 2007 financial year, as part of the Federal Government’s significant amendments to superannuation.
Of the three phases of the taxation of superannuation (being the contribution, investment, and benefit phases outlined in Division 280 of the ITAA97), this matter is concerned with a specific aspect of the contribution phase of the taxation of superannuation.
Generally speaking, most contributions that are made to a superannuation fund are either concessional contributions or non-concessional contributions.
In relation to the current matter, it is not in dispute that the contributions made to the Super Fund during the years ended 30 June 2008 and 2009 are concessional contributions.
Concessional contributions are, speaking generally, contributions that are made to a complying superannuation fund, and are included in the assessable income of the superannuation fund. A complying superannuation fund is assessed on its taxable income at a rate of 15%.
Division 292 imposes a further tax on superannuation contributions which are made in excess of a nominated level in a financial year. That tax is imposed on the individual tax and is known as excess contributions.
The object of this Division, as stated in s.292-5 of the ITAA97, provides:
“Object of this Division
The object of this Division is to ensure that the amount of concessionally taxed *superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of the person's life.” (emphasis added)
The guide to the Division, contained in s. 292-1 of the ITAA97, forms part of the ITAA97, but is separate from the operative provisions of the ITAA97. The use of this provision is limited to specific purposes, which includes “determining the purpose or object underlying the provisions.” Accordingly, for the limited purpose of determining the object of Division 292, s. 292-1 of the ITAA97 provides:
“This Division limits the superannuation contributions made in a financial year for a person that receives concessionally taxed treatment.”
Section 292-15 of the ITAA97 imposes a liability on the applicant to pay excess concessional contributions tax, if the applicant has excess concessional contributions, for a financial year.
The applicant’s excess concessional contributions for a relevant financial year, is the amount of applicant’s concessional contributions that exceed his concessional contributions cap for that financial year.
The applicant’s concessional contributions cap for each of the years ended 30 June 2008 and 2009, pursuant to s. 292-20(a) of the ITAA97, was $100,000.
The applicant has a concessional contribution for the relevant financial years, pursuant to s. 292-25 of the ITAA97, if the contribution is:
45.1made to a superannuation fund in the relevant financial year; and
45.2included in the superannuation fund’s assessable income; and
45.3not a transfer from a foreign superannuation fund, a rolled over untaxed benefit, or a contribution to a constitutionally protected fund.
Where the applicant has excess concessional contributions for a financial year, the Commissioner is required to make an excess contributions tax assessment. The Commissioner must give the applicant a notice of the excess contributions tax assessment, in writing and as soon as practicable, after making the assessment.

APPLICATION OF S. 292-465 ITAA97

Section 292-465 of the ITAA97 enables the Commissioner to make a determination to disregard or re-allocate all or part of the applicant’s concessional contributions, which have been made during the relevant years, if s. 292-465(3) is satisfied. Section 292-465 provides:
“292-465 Commissioner’s discretion to disregard contributions etc. in relation to a financial year
(1) 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.
(2) You may apply to the Commissioner in the *approved form for a determination under subsection (1). The application can only be made:
(a) after all of the contributions sought to be disregarded or reallocated have been made; and
(b) if you receive an *excess contributions tax assessment for the *financial year—before the end of:
(i) the period of 60 days starting on the day you receive the assessment; or
(ii) if the Commissioner allows a longer period—that longer period.
(3) 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.
(4) In making the determination the Commissioner may have regard to the matters in subsections (5) and (6) and any other relevant matters.
(5) The Commissioner may have regard to whether a contribution made in the relevant *financial year would more appropriately be allocated towards another financial year instead.
(6) The Commissioner may have regard to 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:
(a) if the relevant contribution is made in respect of you by another person—the terms of any agreement or arrangement between you and that person as to the amount and timing of the contribution; and
(b) the extent to which you had control over the making of the contribution.
(7) The Commissioner must give you a copy of the determination.
(8) A determination under this section may be included in a notice of assessment.
Review of determinations
(9) To avoid doubt:
(a) you may object under section 292-245 against an *excess contributions tax assessment made in relation to you on the ground that you are dissatisfied with a determination that you applied for under this section; and
(b) for the purposes of paragraph (e) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977, the making of a determination under this section is a decision forming part of the process of making an assessment of tax under this Act.”
Importantly, the requirements of subsection 292-465(3) are conjunctive, and necessitate that special circumstances exist in relation to the applicant, and that the making of the determination is consistent with the object of Division 292.
In considering factors relevant to the making of the determination, subsection 292-495(4) outlines specific considerations that may be taken into account, which may include matters outlined in subsections 292-465(5) & (6).
The use of the term “may” in subsection 292-465(4), clearly imparts a discretion to the decision maker to refer to circumstances described in subsections 292-465(5) & (6), where they are relevant.
However it is also clear that subsection 292-465(4) does not fetter the decision maker’s discretion to consider all relevant matters in determining if s.292-465(3) has been satisfied. This is set out in the concluding words of s. 292-465(4), which provide “and any other relevant matters.”

APPLICANT’S CONTENTIONS

The applicant contends, on the grounds more fully set out below, that he meets the requirements of s 292-465(3) and that on this basis the Commissioner should have exercised his statutory discretion in favour of the applicant.
However the Tribunal has, after careful consideration of the evidence before it, and the relevant provisions of the law concluded that for the reasons set out below, the applicant does not meet those requirements.

TRIBUNAL’S FINDINGS

Meaning of ‘special circumstances’

Although Deputy President Forgie in McMennemin and Commissioner of Taxation [2010] AATA 573 concluded that the Tribunal did not have jurisdiction to review the determination, Deputy President Forgie considered in the alternative, the meaning of ‘special circumstances’ in s. 292-465(3)(a), by reference to judicial consideration of the term in the context of the Social Security Act 1991 and the Occupational Superannuation Standards Act 1987.

The Tribunal agrees that the use of the term ‘special circumstances’, in that legislation affords appropriate guidance as to the interpretation of the same term as contained in s. 292-465(3).
In the context of the Social Security legislation, the following has been said of the term ‘special circumstances’:
56.1 in Re Beadle and Director-General of Social Security, the Tribunal per Toohey J, and Members Wilkins and Billings, stated at page 3:
“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. … This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”
56.2 Kiefel J in Groth v Secretary, Department of Social Security [1995] FCA 1708, stated at paragraph [12]:
“The phrase “special circumstances”, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (at ALR 229 ; ALD 674), 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.”
56.3 recently, Deputy President Dr B H McPherson CBE, and Senior Member Mr Carstairs in Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Whitlock [2010] AATA 816 noted at paragraphs [39] to [40]:
“[39] It is important to appreciate that the “special circumstances” discretion exists in a legislative setting intended to relieve hardship that might otherwise arise. Clearly some sensible balance needs to be struck between two — sometimes competing — legislative provisions.
[40] It is sufficient to note that whilst “special circumstances” are not capable of being defined, ordinarily what is looked for is whether something about the case takes it out of the usual and distinguishes it from other cases. In Groth v Secretary, Department of Social Security, Kiefel J observed that a matter would be so distinguished if it were concluded that something unfair, unintended or unjust had occurred.”
56.4 Senior Members Mr Hall, Members Dr Billings and Mr Tickle in Re Ivovic and Director-General of Social Services [1981] AATA 57 noted that in considering whether special circumstances exist, reference should be had to the effect that the provisions of the act seek to achieve, and stated at paragraph [45]:
“The reference to special circumstances … requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes. In the exercise of the discretion … the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the … Act.”
In the context of the Occupational Superannuation Standards Act 1987, Beazley J in Tefonu Pty Ltd v Insurance and Superannuation Commissioner [1993] FCA 412, referred with approval to the test applied in Re Beadle’s case.
Beazley J in Tefonu’s case also held that the mere fact that legislation is retrospective in effect or the applicant pleading ignorance of the law, does not, of itself, constitute “special circumstances”.
In relation to the applicant’s ignorance of the law, Beazley stated at paragraphs [61] to [63]:
“It was said that the tribunal cited no authority for such a proposition as a matter of law and that whilst it was true that ignorance of the law is not a defence, ignorance may well be taken into account in determining whether ``special circumstances‘’ existed.
It was submitted that:
The applicant should not be penalised for its ignorance by virtue of the fact that by reliance on an actuary and a firm of accountants, it went further in discharging its fiduciary obligations than if it had not done so. By the tribunal's reasonings, they would obtain more favourable treatment if they had been less diligent altogether.
….
I do not agree with either limb of this submission. The effect of the tribunal's finding was that the trustee's failure to either remember the information in Wyatt's newsletter, or to seek expert advice before it engaged in a major commercial project did not amount to ``special circumstances‘’. This was a finding which was open to it and no error of law is disclosed. The tribunal's finding that the trustee should have known or had an obligation to find out is no more than a corollary of the concept that ignorance is no defence, a maxim which the applicant did not contest. Further, the tribunal took the trustee's ignorance into account in determining whether there were ``special circumstances‘’ but was not satisfied that that factor gave rise to ``special circumstances‘’.”
The Tribunal also notes Case 23/96 96 ATC 278, where Deputy President Forgie, Members Brennan and Keane, after considering the test in Re Beadle, concluded that simple ignorance or disregard of the superannuation standards, was not sufficient to constitute special circumstances.
More recently, in Re Kerr and Federal Commissioner of Taxation [2007] AATA 1732, an applicant relied on incorrect advice of a financial planner in relation to the receipt of a number of eligible termination payments. The applicant in that case did make enquiries with the Commissioner’s website as to such treatment, but submitted that his lengthy service and high eligible termination payments, partly from an unusual employee share plan, and partly by reason of the fact that the payments were received over a four year period, when combined with complex legislation made his circumstances special.
Senior Member Ettinger cited the test of ‘special circumstances’ from Re Beadle’s case, and stated in her opening summary at [6]:
“In order for “special circumstances” to apply, I would have to be satisfied that the circumstances in which Mr Kerr finds himself are unusual, exceptional or uncommon, and that in the event the discretion to find “special circumstances” was not exercised in his favour, the result would be unjust, unreasonable or inappropriate.”
Senior Member Ettinger concluded in the applicant’s circumstances in that case were not “unusual, uncommon or exceptional as to constitute “special circumstances””.
In Thommeny v Federal Commissioner of Taxation [2006] AATA 840, an applicant retired from the NSW Police force in 2003, and received three payments on retirement. A superannuation fund erred in delaying the reporting of the benefit to the applicant. The Tribunal held the circumstances of the applicant were not characterised as special circumstances.
In Case64/96 96 ATC 583, the Taxpayer’s pension exceeded his Reasonable Benefits Limit by $5,049. The Tribunal concluded that the mere fact that the applicant marginally exceeded the Act’s limit was not, of itself, ‘special circumstances’, and stated at pages 584-585:
“5. 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 legislators did not intend.
6 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.”
The recent Tribunal decision in Schuurmans-Stekhoven v Commissioner of Taxation[2012] AATA 62 involved consideration of the discretion in subsection 292-465(1). The applicant in that case had requested that a contribution of $8,440 made by his employer into the superannuation fund on 10 July 2007, which related to commissions he earned and received in June 2007, be reallocated to the year ended 30 June 2007. The applicant in that case similarly to the applicant in this matter said that he not aware that the amount would be regarded as having been received in July and of the taxation consequences that would flow from that.
In affirming the objection decision, Senior Member McCabe found that the applicant had not been able to identify special circumstances, referring with approval to the respondent’s submissions that:

The consequences for the applicant were an unfortunate but inevitable result of the application of rules which, while detailed, are available for everyone to see.
The fact that many taxpayers might have experienced the same consequences tended to emphasise there was nothing special about the applicant’s position.
The employer was acting lawfully in making the payment in arrears, well before the deadline for making payments.
The employer had been making payments in arrears over a long period, which is unremarkable in the circumstances.
The applicant had not agreed with the employer that payments were to be made in a different way.
It appears the applicant retained some control over the amount and timing of the payments.

Although not binding on the Tribunal, the Commissioner’s practice statement PS LA 2008/1 is relevant in that it accords with judicial tests of ‘special circumstances’ referred to above. The practice statement, at paragraph 4, provides:
“4. It is not possible to anticipate all the circumstances in which the discretion may or may not be exercised. In each case the decision maker (that is, the Commissioner or a person delegated or authorised to exercise the Commissioner's discretion) must consider the particular circumstances of the case and the relevant individual. However, regard should be had to the principles and examples set out in the Explanation section of this practice statement and to guidance the ATO publishes to its website. In applying those principles to an individual's circumstances, a decision maker should be satisfied that the relevant circumstances are special in the sense that they are unusual or different that take the matter out of the ordinary course of events. In the context of this discretion, it is highly relevant whether imposing the excess contributions tax would therefore be unjust, unreasonable or otherwise inappropriate.”
In addition to s. 33(1)(c) of the Administrative Appeals Tribunal Act 1975, section 15AB(1)(a) of the Acts Interpretation Act 1901 enables the use of extrinsic material as an aid in the interpretation of a provision of s. 292-465(3) of the ITAA97, in circumstances where the use of such material confirms the meaning of the provision.
The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Act 2007 (“Explanatory Memorandum”), which amended the ITAA97 with the inclusion of s. 292-465, confirms such judicial interpretation of the term ‘special circumstances’ and provides at paragraph 1.117:
“1.117 The courts have considered what ‘special circumstances’ means in many different contexts. It is clear from the case law that special circumstances are unusual circumstances, or circumstances out of the ordinary. Whether circumstances are special will vary from case-to-case as the context requires, but in this context they must make it unjust, unreasonable or inappropriate to impose the liability for excess contributions tax.” (emphasis added)

OBJECTIVE OF DIVISION 292 ITAA97

As section 292-5 highlights, it was clearly the Legislature’s intention that contributions of concessionally taxed superannuation benefits are to be made gradually, over a person’s life.
The notion that a contribution be “gradual” indicates the contributions are to be made with a level of frequency, and the value of the contributions should not be excessive in nature.
It is also clear that to effectuate such an object, Parliament imposed limits on the amount of concessionally taxed superannuation contributions that a taxpayer can make to their superannuation fund, in a financial year.
The clear purpose of Division 292 is that the amount of superannuation contributions in excess of the annual limits, are taxed, via an excess contributions tax, so as to ensure that a taxpayer makes a gradual contribution that receives concessional taxation treatment to their superannuation fund over the course of their working life.

FACTORS THAT MAY FORM PART OF DETERMINATION

Subsections 292-465(5) and (6) outline some relevant matters that may be considered in considering whether a determination is appropriate.

REALLOCATION OF A CONTRIBUTION IS MORE APPROPRIATE

Whether a contribution may be more appropriately allocated to another financial year, in a suitable case, is a relevant factor in considering whether a determination should be made.
Such a factor is to be considered in light of s. 292-25 of the ITAA97, which determines when a concessional contribution is made.
A determination to reallocate a concessional contribution may arise where the contribution was made without the knowledge and control of the taxpayer, or that the contributions made by the taxpayer’s employer are erratic and unpredictable, and are the underlying cause of the excess contributions tax.

REASONABLY FORESEEABLE EXCESS CONCESSIONAL CONTRIBUTIONS

Deputy President Forgie in McMennemin’s case (supra) adopted Mansfield J’s comments in relation to ‘reasonable foreseeable’, in Secretary, Department of Employment, Education and Youth Affairs v Ferguson [1997] FCA 663, who stated at pages 13-14:
“The use of the expression "reasonably foreseeable" is commonplace. It imports an objective assessment about a set of facts as they apply to a particular circumstance or to a particular person. To say that, as here, they direct attention to the particular person does not import the need to determine the actual state of mind of that person. It is to direct the objective assessment on the relevant facts in relation to a particular person, with that person's health, knowledge and background. Some persons would be able to reasonably foresee circumstances more readily than others.”
Whether it was reasonably foreseeable that the applicant’s concessional contributions would have exceeded his concessional contributions cap, is considered at the time the contributions are made. Further, the objective assessment takes into account the agreements by which the contributions were made, and the level of control the applicant had in the making of the contributions.

SECTION 292-465(3) ITAA97 DOES NOT APPLY IN THE CURRENT CASE

Applicant’s contentions that there are special circumstances

The applicant has put forward the following reasons as the basis of his claim of ‘special circumstances’:
81.1The different accounting and taxation rules and legislation that apply to superannuation funds and employers:
i.Under the ITAA97 a contribution is made when received by the superannuation fund.
ii.Under subsection 23(6) of the Superannuation Guarantee (Administration) Act 1992 (SGAA), a contribution by an employer may be taken into account in a quarter if it is made within 28 days after the end of the quarter.
iii.Salary sacrifice contributions can be paid at any time at the discretion of the employer. It is general practice to pay these amounts at the same time as the employee’s superannuation guarantee contributions.
81.2This creates a timing difference between when an employee accrues a superannuation entitlement, when the employer is required to pay the superannuation contribution, and when the contribution is reported as received by the superannuation fund. This timing difference is a special circumstance even though it impacts on a large number of taxpayers. Special circumstances can apply to groups of people.
81.3The employee generally has no control over the employer and cannot force the payment to be on any particular date. Control is generally only achieved for the self-employed.
81.4The circumstance that the applicant’s contribution for June was paid by the employer in the next financial year created an excess contributions tax that is not reasonably foreseeable.
81.5Reallocation is in accordance with the object of Division 292 which is to ensure that contributions are made gradually over the course of a person’s life.
81.6Example 1.13 in the Explanatory Memorandum at paragraph 1.121 is relevant to the applicant. A similar example is contained in PS LA 2008/1 at paragraphs 60-64.
81.7The change to the employer’s internal processes from pre to post 30 June superannuation contributions would make it difficult for anyone to foresee when the June payment would be made.
81.8A layman is unlikely to understand that wages are paid at a different time to superannuation and it is difficult for a layman to perform the calculation required to maximise superannuation contributions.

TRIBUNAL’S FINDING THAT NO SPECIAL CIRCUMSTANCES EXIST AND THAT NO DETERMINATIONS SHOULD BE MADE

The Tribunal finds that:
82.1The applicant is correct that concessional contributions made by RSG/Coffey Mining are attributed to the financial year in which they are made, and included in the assessable income of the Super Fund.
82.2The applicant is also correct that pursuant to subsection 23(6) of the SGAA, a contribution by RSG/Coffey Mining may be taken into account in a quarter if it is made within 28 days after the end of the quarter.
82.3However, in relation to salary sacrifice contributions, the timing of any concessional contributions depends upon the terms of the salary sacrifice agreement between the applicant and RSG/Coffey Mining. The applicant did not have, as part of his salary sacrifice arrangement with RSG/Coffey Mining, a requirement that contributions be made in the same month they were accrued or at any particular date.
It is therefore unremarkable that the contributions relating to the wages that accrued to the applicant for the months of June 2007 and June 2008 were made by RSG/Coffey Mining to the Super Fund in July 2007 and July 2008 respectively, and attributed by the Super Fund to the years ended 30 June 2008 and 2009 respectively. These circumstances are commonplace, and were in accordance with the normal pattern of contributions so that the applicant’s circumstances are not in any way unusual, exceptional or uncommon. Such factors do not make the applicant’s circumstances special.
The ‘timing difference’, said by the applicant to flow from the provisions of the ITAA97 and SGAA 92, is the result of those legislative provisions operating as Parliament intended and are not special circumstances. As the Tribunal noted in Schuurmans-Stekhoven (supra), these consequences are the inevitable result of the application of the rules which, while detailed, are available for anyone to see.
The evidence clearly shows that from the inception of the salary sacrifice agreement between the applicant and the employer in September 2006 up to and including 27 January 2009, salary sacrifice employer contributions were made for the applicant’s benefit by RSG/Coffey in accordance with a consistent pattern; that is, in the month or months following that in which they were accrued. The contributions that the applicant seeks to re-allocate were made during this period and in accordance with this established pattern.

The fact that contributions made by RSG/Coffey in respect of the applicant on 30 January 2009 were accrued in that same month is a disruption of the established pattern and is clearly attributable to the ceasing of the applicant’s employment with RSG/Coffey in that month. In any case, this fact is of limited relevance as the contributions sought to be re-allocated were made on 2 July 2007 and 16 July 2008 in accordance with the established pattern in place from September 2006 to 27 January 2009.
The fact that the June 2007 and June 2008 salary sacrificed concessional contributions were made by RSG/Coffey Mining in July 2007 and July 2008 respectively (that is, in a different financial year to which they were accrued) is not sufficiently uncommon, unusual or out of the ordinary to make the applicant’s circumstances special. In fact, the timing of these contributions by RSG/Coffey Mining accords with the regularity of other concessional contributions it made to the Super Fund. The applicant was not placed at a disadvantage by, for example, erratic contributions by RSG/Coffey Mining.
The importance of a taxpayer ascertaining the timing of superannuation contributions was highlighted by the Explanatory Memorandum:
1.119 When considering whether an excess is reasonably foreseeable, the Commissioner may consider the terms of any agreement or arrangement between the individual and another person where those terms affect the amount or timing of the contribution. For example, where contributions are made by an employer under a workplace agreement, industrial award or an effective salary sacrifice agreement the Commissioner will need to consider the terms of those agreements. The Commissioner may also consider the extent to which the individual has control over the making of the contribution. For example, a person who is making a contribution towards the end of a financial year should ensure that the fund receives the contribution before the end of the financial year to ensure it is taken into account in that year and not the subsequent one. [Schedule 1, item 1, subsection 292-465(4)]”
The Tribunal finds that it was reasonably foreseeable, at the time the final contributions were made in each of the years ended 30 June 2008 and 2009, that the applicant would have excess concessional contributions (subsection 292-465(6)). In particular:
89.1The timing of contributions by RSG/Coffey Mining followed a consistent pattern.
89.2The applicant did not have, as part of his salary sacrifice arrangement with RSG/Coffey Mining, a requirement that contributions be made in the same month they were accrued.
89.3As a trustee of the Super Fund, the applicant was aware, or should have been aware, that the contributions made by RSG/Coffey Mining for the months of June 2007 and June 2008 would be received by the Naude Superannuation Fund in the following month, given:
89.3.1The timing of contributions followed a consistent pattern of being paid in arrears throughout the whole of the relevant period.
89.3.2The applicant, as trustee of the Super Fund was advised of the dates of the payments by RSG/Coffey,
89.3.3The applicant, as trustee of the Super Fund received the bank statements for the Super Fund,
89.3.4The applicant, as trustee for the Super Fund provided the respondent with details of the contributions received in each year in the annual returns. The income tax return for the Super Fund for the year ended 30 June 2007 was lodged on 7 January 2008 and the annual return for the year ended 30 June 2009 was lodged on 8 December 2008.
The Tribunal furthermore finds that the applicant’s assertion that ‘the change to the employer’s internal processes from pre to post 30 June superannuation contributions would make it difficult for anyone to foresee when the June payment would be made’, is without foundation. The witness statements of Kenneth Roy Jeffrey and Vikki Cookson refer to the previous practice of RSG to ‘pay all employee superannuation entitlements before the end of the financial year’ or that ‘all superannuation contributions for the June period were paid to our employee’s super fund of choice in the same month to meet end of financial year deadlines’. Both witnesses indicate that at some point following the takeover by Coffee Mining this practice changed and all superannuation contributions were made in the following month, but neither witness can recall the date of this change. It is clear from the evidence that the applicant’s contributions were paid to the Super Fund in the following month as from the inception of the salary sacrifice agreement in September 2006.
Even if the applicant was not in a position to control the timing of payments by RSG/Coffey Mining, he was clearly able to adjust the amount of the contributions made in the year ended 30 June 2008 or cease the salary sacrifice arrangement to ensure the concessional contributions cap was not exceeded. The email communications between the applicant and the payroll section of the employer highlight both the applicant’s awareness of the concessional cap requirement and his ability to control the amount of his salary sacrificed concessional contributions.
The applicant was able to control the amount of the contribution from the Naudia Mirror Trust in January 2009 to ensure the concessional contributions cap was not exceeded in the year ended 30 June 2009.
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.
Neither the example in the Explanatory Memorandum at paragraph 1.121 - Example 1.13, or the similar example in PS LA 2008/1 at paragraphs 60-64 on which the applicant seeks to rely, are of assistance to the applicant as they are factually different from the present case. They involve a single payment rather than a consistent pattern of contributions being paid in arrears throughout the whole of the relevant period.
There is no evidence to support the applicant’s allegation (see paragraphs 84 to 86 of the SFIC) that at some unspecified time during the 2009 calendar year, the ATO was willing to reallocate the applicant’s concessional contributions in respect of the year ended 30 June 2008 to the previous financial year. It is contradicted by the written record of a telephone conversation between an ATO officer and the applicant’s tax agent on 19 June 2009 contained in the “T” documents.
The applicant’s further allegation (see paragraphs 87 and 88 of the SFIC) that at some time between May 2009 and October 2010 the respondent made a determination to disregard or reallocate contributions in respect of the year ended 30 June 2008 to the previous financial year, which was not communicated to the applicant, is also clearly without substance. Not only is there no evidence of this but no application for a determination in the approved form was made and, in any event, at that time such an application could only be made after an excess contributions tax assessment had been issued.
Finally, there is no evidence which shows that the assessments result in an outcome that is unjust, unreasonable or inappropriate. Accordingly, the applicant’s circumstances are not unusual, exceptional or uncommon, and in light of the object of Division 292 of the ITAA97 the Tribunal finds that no determination should be made pursuant to s. 292-465(3) of the ITAA97.

DECISION

The objection decisions are affirmed.

I certify that the preceding 98 paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member .

....(sgd) T Freeman................

Associate

Dated 28 February 2012

Date(s) of Hearing

15 February 2012

Representative for the Applicant

Mr P Hoff

Representative for the Respondent

Mr M Vincent

Australian Taxation Office Legal Services Branch