Re Jason Hope and Commissioner of Taxation;
[2014] AATA 877
•26 November 2014
[2014] AATA 877
Division TAXATION APPEALS DIVISION
File Number 2013/6722
Re Jason Hope
APPLICANT
And Commissioner of Taxation
RESPONDENT
File Number 2013/6723
Re Sarah Hope
APPLICANT
And Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President S A Forgie
Date 26 November 2014
Place Melbourne
The Tribunal decides to affirm the respondent’s objection decisions dated 31 October 2013
and 1 November 2013.
…[sgd] S A Forgie…..
Deputy President
CATCHWORDS
TAXATION – excess contributions tax – superannuation payments in 2009 financial year – excess contributions made – request for determination from Commissioner for reallocation of contributions to other tax year – whether special circumstances – no special circumstances
TAXATION – jurisdiction – Commissioner’s decision to refuse to make determination – rights of review for determination – substantive application decided
LEGISLATION
Administrative Appeals Tribunal 1975; section 37
Currency Act 1965; section 16
Income Tax Assessment Act 1936; section 172
Income Tax Assessment Act 1997; Part 3-30, Division 280, sections 280-1, 280-5, 280-10, 280-15, 292-5, 292-15, 292-20, 292-25, 292-230, 292-390, 292-245, 292-385, 292-395, 292-405, 292-410, 292-415, 292-465, 995-1
Reserve Bank Act 1959; section 36
Sentencing Act 1989 (NSW); section 13A
Social Security Act 1947
Superannuation Legislation Amendment Act 2010; sections 2, 3
Taxation Administration Act 1953; Part IVC, section 280-50Taxation Ruling TR2010/1: Income Tax: superannuation contributions
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; (2007) 100 ALD 9; 44 AAR 436
Baker v The Queen [2004] HCA 45; (2004) 223 CLR 513; 210 ALR 1
Beadle v Director-General of Social Security (1985) 60 ALR 225; 7 ALD 670
Dranichnikov v Centrelink [2003] FCAFC 133; (2003) 75 ALD 134
Federal Commissioner of Taxation v Administrative Appeals Tribunal and Others [2011] FCAFC 37; (2011) 191 FCR 400; 276 ALR 231; 82 ATR 663
Finance Facilities Pty Ltd v Federal Commissioner of Taxation [1971] HCA 12; (1971) 127 CLR 106; 45 ALJR 241; 2 ATR 194
George v Cluning (1979) 28 ALR 57
John Holland Group Pty Ltd v Robertson [2010] FCAFC 88; (2010) 185 FCR 566; 117 ALD 215
Re Beadle and Director-General of Social Security (1984) 1 AAR 362; 6 ALD 1
Re Hamad and Commissioner of Taxation [2012] AATA 530
Re McMennemin and Commissioner of Taxation [2010] AATA 573
Re QT96/78 and Commissioner of Taxation [1996] AATA 406; (1996) 34 ATR 1175; 96 ATC 583
Re Stylis and Commissioner of Patents [2014] AATA 796
Samad v District Court of New South Wales [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871
Ward v Williams [1955] HCA 4; (1955) 92 CLR 496OTHER MATERIALS
Superannuation Legislation Amendment Bill 2010, Explanatory Memorandum
Tax Laws Amendment (Simplified Superannuation) Bill 2006, Explanatory MemorandumREASONS FOR DECISION
Mr Jason and Mrs Sarah Hope were directors and employees of Waverley Electrical Services Pty Ltd (WES) during each of the financial years ending 30 June 2007, 2008, 2009 and 2010. WES made contributions to the superannuation funds of which each was a member. The first issue in this case is whether WES made a contribution of $38,750.00 in respect of Mr Hope and of $46,000.00 in respect of Mrs Hope so that each of them exceeded the concessional contributions cap set under the Income Tax Assessment Act 1997 (ITAA97) in respect of the 2009 financial year. If so, the second issue is whether the Commissioner of Taxation (Commissioner) should make a determination disregarding or allocating the excess contributions for the purposes of another financial year. I have decided that the contributions were made in the 2009 financial year so that the concessional caps were exceeded and have also decided that a determination should not be made. Therefore, I affirm the Commissioner’s reviewable objection decisions dated 31 October 2013 and 1 November 2013 disallowing the objections made by Mr and Mrs Hope to his decision not to make determinations.
BACKGROUND
There is no dispute between the parties as to the facts leading to the issues in this case. In light of that and on the basis of the material in the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents) and the exhibits, I have made the findings of fact appearing in this section of my reasons.
Until 2010, Mrs Hope had been a bookkeeper for WES for many years including the year in issue. In that role, she was responsible for data entry, paying accounts, the payroll, making superannuation contributions, filing and general office duties. In 2007 and 2008, WES had four or five employees.
During the 2009 financial year, Mr Hope was a member of the Construction and Building Unions Superannuation Fund (CBUS) as well as a member of the IOOF Portfolio Service Superannuation Fund (IOOF). In that same year, Mrs Hope was a member of CBUS and also of Connect Superannuation Fund (Connect). Between 30 June 2008 and 30 June 2009, the following payments were made by WES and received by either CBUS or Connect on the dates shown in the following table. One payment was made through the MYOB Clearing House (MYOB CH) using M-Powered Superannuation (MPS) and one was made by Waverley Electrical Services Trading as Laser Electrical Clayton (LEC). Each of the Funds allocated the payments it received to the account of either Mr or Mrs Hope as instructed by WES. That allocation is also shown in the table with the payments made from WES shown in the shaded area and the letters “JH” representing Mr Hope’s superannuation funds and “SH” representing those of Mrs Hope:
Date Payer Amount MYOB CH Payment received CBUS
(JH)CBUS
(SH)IOOF
(JH)Connect (SH)
30/06/08
WES
$88,000.00
$88,000.00
03/07/08
$46,000.00
04/07/08
$42,000.00
30/06/09
WES t/a LEC
$38,000.00
$38,000.00
30/06/09
WES t/a LEC
$40,000.00
$40,000.00
Mr and Mrs Hope each received Member Contributions Statements (MCS) from their funds advising them of the contributions each had received on their behalf:
Date
CBUS
(JH)CBUS
(SH)IOOF
(JH)Connect (SH)
02/10/09
$38,000.00
16/10/09
$49,914.97
21/10/09
$50,000.00
24/05/2010
$40,000.00
The contributions reported by the funds as having been received in the 2009 financial year totalled $88,000.00 in the case of Mr Hope and $89,914.97 in the case of Mrs Hope.
On 8 November 2010, the Commissioner wrote to Mr Hope advising him that he had exceeded the concessional contributions cap of $50,000.00 for the 2009 financial year. He had done so by $38,000.00. The Commissioner followed his letter with an Excess Contributions Tax Notice of Assessment (ECT Assessment) dated 28 February 2011. The Commissioner assessed the excess concessional contributions tax to be $11,970.00. The Commissioner wrote in a similar vein to Mrs Hope on 23 November 2010. He advised her that she had exceeded the concessional contributions tax by $39,914.97. Later, the Commissioner assessed the excess concessional contributions tax she was liable to pay in the amount of $12,573.21. He issued an ECT Assessment to that effect on 16 February 2011.
Section 292-465 of the ITAA97 gives the Commissioner power to disregard all or part of a taxpayer’s non-concessional contributions for a financial year or to allocate them, or part of them, to another financial year. I will return to the precise wording of the provision later in these reasons. Mr and Mrs Hope both asked the Commissioner to exercise his power under the provision but, although he extended the time within which they were permitted to apply under s 292-465, he declined to do so.
Mr and Mrs Hope each objected to the “Excess contribution tax determinations”. They did so on 21 August 2013. On 1 November 2013, the Commissioner disallowed Mrs Hope’s objection against her ECT Assessment after having disallowed Mr Hope’s objection on 31 October 2013. Mr and Mrs Hope each lodged an application in the Tribunal for review of the objection decisions made by the Commissioner.
THE ISSUES
The issues in this case are:
(1)Were the amounts of $42,000.00, in the case of Mr Hope, and $46,000.00, in the case of Mrs Hope, contributions made to their respective superannuation funds in the 2009 financial year?
(2)Should the Commissioner have made a determination under s 292-465 of ITAA97 either:
(a)disregarding the excess concessional contributions made by each of Mr and Mrs Hope; or
(b)allocating them instead for the purposes of another financial year?
LEGISLATIVE FRAMEWORK
Overview of tax consequences associated with contributions to superannuation funds
Part 3-30 of the ITAA97 is concerned with superannuation. Division 280, which provides a guide to its provisions, begins with the general statement:
“Tax concessions in this Part are intended to encourage Australians to save in order to make provision for their retirement, recognising that superannuation investments, and the income from them, are quarantined for retirement.”[1]
[1] ITAA97, s 280-1(2)
ITAA97 goes on to make provision for those tax concessions. It does not trespass upon other enactments setting out prudential and operating standards for superannuation providers.[2] The provisions regulate three phases relating to investment in superannuation: the contributions phase, the investment phase and the benefits phase.[3] In this case, I am concerned with the contributions phase. Contributions may be made by an individual or by another on that individual’s behalf. Employers making contributions in respect of their employees and individuals making contributions on their own behalf can usually deduct them from their assessable income.[4] Deductibility depends on certain conditions being met. If those conditions are not met, the contributions, or that part of them that does not meet the conditions, cannot be deducted.[5]
[2] ITAA97, s 280-5(5)
[3] ITAA97, s 280-5(1)
[4] ITAA97; s 280-10(1)
[5] ITAA97; s 280-10(2)
The condition that is relevant in this case relates to the limits placed on the contributions that can be the subject of tax concessions. It is found in s 280-15(1):
“(1) There is a limit to contributions that can be made in respect of an individual in a year that receive favourable tax treatment. This limit takes the form of a tax on excessive contributions, and neutralises the favourable tax treatment arising from the excessive contributions.”
The consequences of exceeding the cap are set out in ss 280-15(2) and (3):
“(2) If concessional contributions exceed an indexed cap, the individual concerned is taxed on the excess. This tax liability can be met by releasing money from his or her superannuation interests.
(3) If non-concessional contributions (including any excess for the purposes of the first cap) exceed a second indexed cap, the individual is taxed on the excess. The second cap is equivalent to three times the first cap. The payment of this tax liability must be accompanied by releasing money equivalent to the liability from his or her superannuation interests.”
Excess contributions tax
Division 292 of ITAA97 regulates the excess contributions tax. Its object:
“… 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.”
Section 292-15 provides that:
“You are liable to pay *excess concessional contributions tax imposed by the Superannuation (Excess Concessional Contributions Tax) Act 2007 if you have *excess concessional contributions for a *financial year.”
Section 292-20(1) sets out when an individual has “excess concessional contributions”:
“You have excess concessional contributions for a *financial year if the amount of your *concessional contributions for the year exceeds your *concessional contributions cap for the year. The amount of the excess concessional contributions is the amount of the excess.”
The amount of the “concessional contributions cap” for the 2007-2008 financial year was $50,000. Thereafter but subject to Subdivision 960-M, that amount was indexed annually.[6]
[6] ITAA97; s 292-20(2)
The amount of an individual’s concessional contributions for a financial year is the sum of the amounts specified in ss 292-25(2) and (3).[7] There is no question that the contributions made by Mr and Mrs Hope are amounts of that sort.
[7] ITAA97; s 292-25(1)
Section 292-230 sets out the Commissioner’s obligations when excess contributions have been made. Section 292-230(1) provides:
“The Commissioner must make an assessment (an excess contributions tax assessment) of:
(a)if a person has *excess concessional contributions for a *financial year – the amount of the excess concessional contributions; and
(b)the amount (if any) of *excess concessional contributions tax which the person is liable to pay in relation to the financial year.”
The Commissioner must give the person notice in writing of the ECT assessment and may do so by including it in a notice of any other assessment under ITAA97.[8]
[8] ITAA97; s 292-230(3) and (4)
Objection to, and amendment of, the ECT assessment
If a person is dissatisfied with an ECT assessment made in relation to him or her, that person may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 (TA Act).[9]
[9] ITAA97; s 292-245
The provisions of Subdivision 292-F permit the Commissioner to amend an ECT assessment. It may be amended at any time during the period of four years after the original ECT assessment day for the person for that year (four year period).
Liability to pay excess contributions tax
Once the Commissioner gives the person notice of the ECT assessment, that person becomes liable to pay that amount of tax within 21 days of being given the notice.[10] Should the person not pay the excess contributions tax, which includes, excess concessional contributions tax,[11] by the date it is due and payable, that person is liable to pay the general interest charge (GIC) on the unpaid amount until both it and the GIC is paid.[12]
[10] ITAA97; s 292-385
[11] ITAA97; s 995-1(1), definition of “excess contributions tax”
[12] ITAA97, s 292-390
If an ECT assessment were to be amended to reduce a person’s liability to pay ECT, the effect of s 172 of Income Tax Assessment Act 1936 (ITAA36) is twofold. First, the amount by which it is reduced is taken never to have been payable for the purposes of calculating the GIC and for Division 280 of Schedule 1 of the TA Act applying the shortfall interest charge.[13] Second, the Commissioner must apply any tax overpaid in accordance with Divisions 3 and 3A and Part IIB of the TA Act.[14]
[13] “The object of this Division [280] is to neutralise benefits that taxpayers could otherwise receive from shortfalls of … excess contributions tax, so that they do not receive an advantage in the form of a free loan over those who assess correctly.”: TA Act, s 280-50
[14] ITAA97, s 292-395
Collection and recovery of excess contributions tax
As soon as practicable after making an ECT assessment for a person, the Commissioner must give that person a release authority. If the person is liable, as in this case, for an amount of excess non-concessional contributions tax, the Commissioner gives the release authority in respect of that amount.[15]
[15] ITAA97, s 292-405(1)(b)
The person may[16] give the release authority to a superannuation provider holding a superannuation interest (other than a defined benefit interest) for the person in a complying superannuation plan within 90 days of the date of the release authority.[17] Once given a release authority, the superannuation provider must pay the amount within 30 days after receiving the release authority for the amounts specified in s 292-415 and in accordance with that section.
[16] If for an excess non-concessional contributions tax, the person must give it to the superannuation provider and do so within 21 days: ITAA97, s 292-410(2)
[17] ITAA97, s 292-410(1)
Commissioner’s discretion to disregard contributions in relation to a financial year
A person may apply to the Commissioner for a determination that, for all practical purposes, ameliorates the tax consequences of excess contributions. In the 2009 financial year, s 292-465(1) provided:
“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.”
An application had to be made in the approved form. Although it has since been amended, and I will come back to the amendments at [29] below, an application could then:
“… only be made within:
(a)the period:
(i)starting on the day you receive an *excess contributions tax assessment for the *financial year; and
(ii)ending 60 days after that day; or
(b)a longer period allowed by the Commissioner.”[18]
[18] ITAA97; s 292-465(2)
Once an application has been made:
“… 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.”[19]
[19] ITAA97, s 292-465(3)
Subdivision 292-465 goes on to specify the matters to which the Commissioner may have regard:
“(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.”[20]
Section 292-465(7) provides that “The Commissioner must give you a copy of the determination.”
[20] ITAA97, ss 292-465(4)-(6)
Review of determinations
Until the enactment of the Superannuation Legislation Amendment Act 2010 (2010 Amendment Act), no provision was made for the review of determinations made by the Commissioner under s 292-465: Commissioner of Taxation v Administrative Appeals Tribunal and Another[21] (McMennimen). Provision was made for review when the 2010 Amendment Act amended ss 292-465(2) and added ss 292-465(8) and (9) with effect from 17 November 2010.[22] The ECT assessment issued to Mrs Hope was dated 16 February 2011 and that to Mr Hope was dated 28 February 2011. As they were issued after the amendments made by the 2010 Amendment Act came into operation, the review rights conferred by s 292-465(9)(a) meant that each could object on the ground that they were dissatisfied with a determination that each had also applied for under that section.
[21] [2011] FCAFC 37; (2011) 191 FCR 400; 276 ALR 231; 82 ATR 663; 82 ATR 663 Keane CJ and Gordon JJ; Downes J dissenting
[22] 2010 Amendment Act; s 2(1); Items 8 and 28
The hearing was conducted on the basis that the Tribunal had jurisdiction to review the Commissioner’s objection decision. The Commissioner’s decision followed Mr and Mrs Hope’s having objected on two grounds: first, that the Commissioner had refused to make a determination and second, that he had not correctly calculated ECT. That necessarily assumed that Mr and Mrs Hope had been entitled to object to the ECT assessments on the ground that they were dissatisfied with the determination that each had applied for. Their objections would be considered under Part IVC of the TA Act and they had rights to apply for review of the Commissioner’s objection decisions after he considered their objections. There would seem to be no difficulty with that assumption in so far as their second ground is considered. The assumption is more problematic in relation to their first for the question arises whether s 292-465(9)(a) permits a person to object against an ECT assessment on the ground of dissatisfaction with the Commissioner’s decision to refuse to make a determination. It is clear that it permits an objection to be made on the ground of dissatisfaction with the determination that has been made but, to my mind, it is not at all clear that it allows an objection to be made when the Commissioner has not made a determination at all on the person’s application.
I have not gone back to the parties for their submissions on this point. Rather, I have decided to raise the question as to jurisdiction without coming to a conclusion and have considered the substantive merits of the applications for review. In taking that approach, I do not intend to try to assume jurisdiction when there is none for that is not permitted whether by agreement, concession, assumption or otherwise.[23] Rather, I am assuming jurisdiction without deciding the issue in order to save the parties further costs in addressing the point when I have reached the conclusion that, if the Tribunal does have jurisdiction, their applications will be unsuccessful on their merits.
[23] John Holland Group Pty Ltd v Robertson [2010] FCAFC 88; (2010) 185 FCR 566; 117 ALD 215; Spender, Dowsett and Logan JJ at [30] per Dowsett J with whom Spender J agreed
Paragraphs 292-465(2)(a) and (b) were repealed and substituted with others so that s 292-465(2) then required that:[24]
“… 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.”
[24] 2010 Amendment Act; s 3, Schedule 4, Items 26 and 27
Sections 292-465(8) and (9) were also added by the 2010 Amendment Act.[25] Section 292-465(8) provides that:
[25] 2010 Amendment Act; s 3; Schedule 4, Item 28
“A determination under this section may be included in a notice of assessment.”
Section 292-465(9) that was added reads:
“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.”
At the time the Full Court considered the issue in McMennimen, the 2010 Amending Act had been passed but did not affect any review rights relating to ECT assessments made before 17 November when the relevant amendments came into operation. The majority decided that the Commissioner’s ECT assessments were not reviewable. They also touched upon whether a decision made by the Commissioner under s 292-465 was reviewable after the amendments. They referred to the Explanatory Memorandum to the 2010 Amendment Act and said:
“ According to the EM, the 2010 amendments were to allow the Commissioner to exercise the discretion to disregard or allocate to another financial year all or part of a person’s contributions for the purposes of excess contributions tax before an assessment was issued: p 42. The reason proffered at p 47 for the amendment was to ‘facilitate administration of the timing of the use of the discretionary power’. Additional amendments were made so that the Commissioner may include notice of a determination made in a notice of assessment, that a taxpayer may object against an ECT assessment on the ground that he or she is dissatisfied with a determination sought under s 292-465 and that the making of a determination is now a decision forming part of the process of making an assessment of tax for the purposes of the ADJR Act. Now the determination process is to occur before the assessment, it can be seen that each of these amendments was necessary to engage the review rights conferred by Pt IVC of the TAA. Nothing in the EM or the Second Reading Speech suggests that the 2010 amendments lead to a different conclusion.”[26]
[26] [2011] FCAFC 37; (2011) 191 FCR 400; 276 ALR 231; 82 ATR 663 at [43]; 410; 240; 673
The majority did not consider the matter further for they found the amendments not to be retrospective and did not reflect on the proper construction of ITAA97 before their enactment.[27] If the matter were to become relevant in a future case, thought might need to be given to whether a decision refusing to make a determination under s 292-465 can be regarded as “the making of a determination” under that section. That issue is relevant because the right to object given by s 292-465(9)(a) is on the ground that the person is “dissatisfied with a determination that you applied for under this section”. It does not provide that a person dissatisfied with a decision made on his or her application for a determination under that section may object.
[27] [2011] FCAFC 37; (2011) 191 FCR 400; 276 ALR 231; 82 ATR 663 at [37]; 409; 238-239; 672
Section 292-464(9)(b) provides that the “making of a determination under this section is a decision forming part of the process of making an assessment of tax” under ITAA97 (emphasis added). Section 292-465(8) provides that a “determination under this section may be included in a notice of assessment”. Neither speaks of a “decision” about the application made for a determination and the fact that neither does is consistent with the fact that s 292-465(3) provides that “The Commissioner may make the determination only if he or she considers …” (emphasis added) that, after having regard to the matters set out in ss 292-464(5) and (6), there are special circumstances and “making the determination” is consistent with the object of the Act. Clearly then if, having had regard to those, the Commissioner decided not to make a determination, the decision could not be described as a determination. As s 292-465(3) states, the determination may only be made if its criteria are satisfied.
THE SUBMISSIONS
On behalf of Mr and Mrs Hope, Mr Morris of counsel submitted that, consistently with the purpose of the legislation, they were attempting to build their superannuation over time. In doing so, they sought advice from their accountant and made arrangements to make the payments with the expectation that the contributions deducted from WES’s account on 27 June 2008 would be credited to their accounts in the relevant superannuation funds in the 2008 financial year. Mr and Mrs Hope could not have reasonably foreseen that the payment made through the MPS would not be credited to their accounts on 30 June 2008 but on a later date.
It is not relevant to have regard to the terms in the MYOB Product Disclosure Statement related to MPS because there was no agreement between MYOB and Mr and Mrs Hope. The agreement was with WES. Even if it were relevant to have regard to those terms, it is unfair to expect them to be acquainted with those terms. The program does not advise the user that the payment will not be received on the same day as it is deducted from the licensee’s bank account. WES has experienced no such delay when making payments to creditors or employees and so it was reasonable for Mr and Mrs Hope to expect that there would be none in processing their superannuation contributions. It is unreasonable to expect them to be aware that MYOB’s terms relating to MPS specified three business days when they operated a busy business and it was a particularly busy time of year. To expect them to have knowledge of that sort is akin to their remembering whether their electricity or gas provider accepts payment by AMEX and any associated surcharge.
Mr Morris referred to the analysis of the expression “special circumstances” in Re Hamad and Commissioner of Taxation.[28] He drew from that analysis the proposition that special circumstances will exist if a harsh and unjust result would be the outcome if the Commissioner were not to make a determination on the applications made by Mr and Mrs Hope. There is no difference between Example 1.13 provided in the Explanatory Memorandum introducing Division 292 and Mr and Mrs Hope’s situation. The example is given in relation to the clause that became s 292-465 and in the context of whether or not the Commissioner might be satisfied there were special circumstances within the meaning of s 292-465(3). The example reads:
“George’s employer contributes $50,000 each year to his superannuation plan under the terms of an effective salary sacrifice agreement. However, his employer’s contribution for Year 1 was made on 3 July of Year 2. The employer’s contribution for Year 2 was then made on 29 June of that same year (again during Year 2). This resulted in George having no concessional contributions in Year 1 but concessional contributions of $100,000 in Year 2.
The Commissioner may exercise his discretion in this case, to allocate $50,000 to Year 1 as the first contribution is more appropriately allocated to Year 1. Reallocating the amount to Year 1 would be consistent with the object of the excess contributions taxes and fairly matches the employer's contributions to the financial year in which they should have been made to George’s fund.”[29]
[28] [2012] AATA 530; Senior Member Allen
[29] Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 enacted as Act No. 9 of 2007 at [1.121], Example 1.13
On behalf of the Commissioner, Ms Martin of counsel submitted that the time at which a contribution is made to a person’s superannuation fund is determinative not simply of whether that person has exceeded his or her concessional contributions in respect of a financial year. It is also determinative of the financial year in which a person may claim a deduction in respect of the contribution and of the financial year in which a superannuation provider must include that contribution as assessable income. The importance of timing was highlighted in the Explanatory Memorandum in another example given in considering whether an excess contribution would be reasonably foreseeable and so giving rise to special circumstances. The example is found at [1.119] of the Explanatory Memorandum in relation to what was to be enacted as s 292-465(4) and so to ss 292-465(5) and (6):
“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. …”
Ms Martin referred to the Commissioner’s Taxation Ruling TR2010/1 entitled “Income tax: superannuation contributions” where the Commissioner has summarised the ways in which contributions are typically transferred to superannuation funds. Against each way, he has set out the time at which the contribution will be taken to have been made to the superannuation fund, as shown in the following table.
No.
If the funds are transferred by …
A contribution is made when …
…
2
An electronic transfer of funds to the superannuation provider
The funds are credited to the superannuation provider’s account.
3
…
…
4
Giving the superannuation provider a personal cheque (other than one that is post-dated …) that is presented and honoured with cash or its electronic equivalent
The personal cheque is received by the superannuation provider, so long as the cheque is promptly presented and is honoured.
5-7
…
…[30]
[30] TR 2010/1 at cl. 13 (footnote omitted)
THE EVIDENCE
Contributions authorised through MYOB in June 2008
It was her understanding, Mrs Hope said, that amounts leaving WES’s account on a particular day would arrive in the account of the payee on that same day. That was generally what happened when she paid supplier accounts. She had not installed the MYOB MPS software. When she used it to make the superannuation contributions, it did not advise her of the time at which the funds would be deposited in the superannuation funds’ accounts. She did not know that there was a difference between payments made through MPS and other payments she made electronically.
Mrs Hope said that she used the MYOB MPS software once a month. She would first have to go to the payroll function in MYOB and then to the superannuation function. She would authorise the payments so that the funds were transferred. At that time, she could not electronically monitor the superannuation funds to check the payments.
Mr Hope said that the MYOB software had been installed before 2007. He was not aware of the three or four day delay in processing payments made to the superannuation funds. His wife implemented decisions made about superannuation contributions and he did not operate the MYOB system. He said that, when the button is hit on MYOB, he assumes that the money is going out. The fact that it has gone out is shown in the statement and he assumes that everything is all right. Seeing the payments going out in MYOB on 27 June 2008, he assumed that they would arrive at the relevant superannuation funds on the same day; not several days later.
Statements relating to 2008 financial year
A Member Statement issued by Connect on 26 September 2008 for Mrs Hope refers to the period from 1 July 2007 to 30 June 2008. It includes the following information:[31]
[31] Exhibit B
Your account details for the period
The amounts reported below are the totals for the different transactions reported. More details on these transactions can be found on the following pages.
Description Total ($)
Opening account balance at 1 July 2007
$47,787.89
Plus
Contributions received from your employer(s)
$13,856.13
Less
Earning from your investments
-$6,459.31
Federal Government Contributions Tax
-$2,051.73
Administration Fee
-$70.20
Insurance Premiums
-$107.64
Closing account balance at 30 June 2008
$52,955.14
Tables on the second page of the Member Statement itemised the transactions relating both to contributions and to periodic fees or charges that had been deducted. In relation to payments of contributions, all of which had been made by WES, a table set out details of 13 payments totalling $13,856.13, which is the figure shown in the table above as the contributions received from WES between 1 July 2007 and 30 June 2008. The table also set out the deductions made for a 15% Contributions Tax and the net amount of the contribution. Ignoring those figures and referring only to the gross contributions made in the period, the table records the following contributions:[32]
[32] Exhibit B
Contributions received and contributions tax applied
Contribution details for the period
Employer/SG
($)
May 07 received 04/07/07 10,000.00 Jun 07 received 11/07/07 242.31 Jul 07 received 14/08/07 301.15 Aug 07 received 04/09/07 376.44 Sept 07 received 12/10/07 301.15 Oct 07 received 12/11/07 301.15 Nov 07 received 10/12/07 376.44 Dec 07 received 28/12/07 451.73 Jan 08 received 18/02/08 225.87 Feb 08 received 25/03/08 301.15 Mar 08 received 14/04/08 301.15 Apr 08 received 15/05/08 376.44 May 08 received 13/06/08
301.15
Employer Total 13,856.13
The payment of $10,000.00 recorded as having been received on 4 July 2007, matches the screen print out from the MYOB Superannuation Payment Details. It is a payment recorded as having been created on 29 June 2007 with a status of “Processed”. A payment of $9,500.00 to IOOF is recorded on the same payment details.[33]
[33] Exhibit A
When asked whether she had, during the 2009 financial year, given any Annual Statements relating to the 2008 financial year to her husband so that he could give them to the accountant, Mrs Hope replied that she would have but she probably had not even opened any such statement. She was not monitoring the payments that were made. Their accountant reviewed the payments. Mrs Hope said that she was told what amounts to transfer to the superannuation funds. She did not know why payments were made to one superannuation fund and not another at any particular time. Perhaps they were naïve, she said, but they were following advice.
Mrs Hope said that she realises now that the Member Statement from Connect shows that the amount of $10,000.00 was not contributed until 4 July 2007 but, at the time, she did not. She had not contacted Connect before 30 June 2009 to check the then total amount of contributions made on her behalf. Her time had been taken up with day to day tasks and she had not realised there was a problem. Her accountant had not drawn it to her attention.
The MYOB Product Disclosure Statement
Section 6 of the MYOB Product Disclosure Statement (PDS) relates to MPS. It requires the person using it to consent to MYOB’s sharing personal information between the two of them and with third parties. It requires the person to notify his or her personnel of this and to comply with privacy obligations imposed by cl 3.4(d) of the PDS.[34] The person is required to nominate an MPS Account to be used by MYOB as the debit account for all Superannuation Payment Messages he or she sends by using MPS. The person acknowledges and agrees that MYOB is not liable for any loss or claim for not processing Superannuation Payment Messages due to its inability to draw funds from the MPS Account.[35]
[34] PDS; cl 6.2; T documents; T 15 at 82
[35] PDS; cl 6.3(d); T documents; T 15 at 82
The person acknowledges that MPS only supports the ability to process Superannuation Contribution Information to Regulated Superannuation Funds. He or she authorises MYOB to accept and process any Superannuation Payment Message that has been sent to the MYOB M-Powered Services Gateway and which appears to have been correctly authorised by the nominated number of M-Powered Authorisers using the correct Passwords. MYOB may, at its discretion, determine not to accept and process any Superannuation Payment Message. Once an authorised Superannuation Payment Message has been sent to the MYOB M-Powered Services Gateway, neither that message nor the payments that it intends to effect may be amended, suspended or cancelled in any way.[36]
[36] PDS; cl 6.5(a) to (e); T documents; T15 at 82-83
Clause 6.5 of the PDS then goes on to state:
“(f) If we receive an authorised Superannuation Payment Message before the applicable MPS Cut-off Time on a Business Day, debiting of your MPS Account will occur overnight. Alternatively, if the authorised Superannuation Payment Message is received after the applicable MPS Cut-off Time, or on a non-Business Day, debiting of your MPS Account will occur overnight on the following Business Day.
(g)Money transferred into the MYOB MPS Settlement Account will remain in the MYOB MPS Settlement Account for a period of 3 Business Days to ensure the debit will be honoured by the financial institution that holds your MPS Account, prior to the distribution of that money and the Superannuation Contribution information to the nominated Regulated Superannuation Funds.
(h)In respect of a payment that is required to be made to a Regulated Superannuation Fund by means of cheque, the amount of money to make this payment will be transferred into the MYOB MPS Cheque Clearing Account from the MYOB MPS Settlement Account following the elapsing of the 3 Business Days required in clause 6.5(g).
(i)Payments by cheque to Regulated Superannuation Funds from the MYOB MPS Cheque Clearing Account, and the distribution of the related Superannuation Contribution Information, will occur on a daily basis.”[37]
[37] T documents; T15 at 83
Clause 6.5(n) relates to superannuation guarantee contributions:
“It is your responsibility, in relation to Superannuation Guarantee contributions made using MPS, to ensure that a Superannuation Payment Message authorised by your M-Powered Authorisers is received by us before the applicable cut-off date to allow for a sufficient timeframe to process the Superannuation Payment Message so that the relevant Regulated Superannuation Funds may receive your superannuation contributions within the statutory time limits imposed for Superannuation Guarantee contributions. By way of example, as at the time of printing of these Terms, you need to have sent your Superannuation Payment Message to the MYOB M-Powered Services Gateway by the 18th day of the month following the end of the reporting quarter to ensure payment is made to the relevant Regulated Superannuation Funds by the statutory time limit of the 28th day of that month.”[38]
[38] T documents; T15 at 83
Events leading to the contributions made by cheque in June 2009
In relation to the payment made on 30 June 2009, Mr Hope said in a written statement:
“On Tuesday the 30th of June 2009 our employer company [Waverley Electrical Services Pty Ltd] made contributions to our respective Superannuation accounts with the CBUS fund being $38,000 for Jason Hope and $40,000 for Sarah Hope, on advice from our financial planner Stephen Legg who asked for a cheque for $78,000 which he delivered to the CBUS office. We saw that the cheque was presented and appeared on our company bank statement dated June 30th 2009. At the time we were not fully cognizant of our circumstances in terms of year to date contributions received by our superannuation funds as our understanding of our circumstances naturally was in terms of when our company made contributions which we were careful to see occurred on or before June 30th each year. In particular, it was not drawn to our attention that our June 2007 contributions and our June 2008 contributions had been reported by the superannuation funds to the Tax Office as being contributions for July 2008 and July 2009 respectively.”[39]
[39] Exhibit J at [3]
Mr Stephen Legg has been a Financial Adviser for the past 24 years and has been engaged by Mr Hope since 1997. Mr Legg said that he had never given Mrs Hope advice and Mrs Hope gave evidence to the same effect. He and Mr Hope have discussed superannuation at the end of each financial year and, more specifically, in June. While he could not specifically recall discussing contribution caps with Mr Hope seven or eight years after the relevant events had taken place, he was sure that he would have done so. Mr Legg said that he would have told Mr Hope that it was important that the contributions be made in June of each year.
In relation to the 2009 financial year, Mr Legg said that Mr Hope had spoken with his accountant and with him about the amount that could be contributed to the superannuation funds. That meeting had taken place at a venue other than his office. Mr Hope told him that he wanted to remain within the contribution caps for the year. Mr Legg said that he responded to Mr Hope unaware that the contributions intended for the 2008 financial year had been attributed to the 2009 financial year.
As CBUS and CONNECT do not deal with financial advisers, Mr Legg said, he had no way of tracking the contributions made to those funds on behalf of Mr and Mrs Hope. He did have access to the information held by IOOF but, as he was not in his office during the meeting, he did not have online access to it. In his written statement, Mr Legg stated:
“There was no reason for my clients to remedy the situation by delaying their contribution until July 2009 as there was no timely notification from the superannuation funds or from the Tax Office until, the ATO drew attention to the situation many months later after the end of the 2008-2009 financial year.”[40]
[40] Exhibit L at 2
In cross-examination, Mr Legg explained that it was usual for superannuation funds to issue Annual Statements in approximately August or September of each year. He generally goes online to read them and to see the record of transactions. When asked why he had advised Mr Hope to make large payments to the superannuation funds on 30 June 2009 when he did not have access to the contributions made over the previous year, Mr Legg replied that the matter had been discussed with Mr Hope and Mr Hope’s accountant. At the time, he was working from the company’s accounts. In re-examination, Mr Legg said that he did not have the Annual Statements from the superannuation funds and could not recall asking for them.
At the time, Mr Legg said, he thought that there was no difference between the time at which a contribution made by means of an electronic transfer of funds would be taken to have been made to a superannuation fund and the time at which it would be taken to have been made if a cheque were presented to it. He thought that the contributions would each be taken to have been made at the same time i.e. at the time the person authorises the electronic transfer and the time of the presentation of the cheque.
Mr Hope said that he had relied on Mr Legg for advice. He believed that Mr Legg had access to his IOOF account. Mr Hope could recall having discussions with his accountant about the contributions that should be made but he could not recall the precise detail of those conversations.
Mr Hope said that he, and not his wife, talked with the accountant on most occasions. He knew that there were contribution caps but he never knew that there could be a delay in receipt of contributions. His accountant had never told him. He was given advice as to the superannuation funds to which he and his wife should make contributions but he could not recall who gave him particular advice about each. Mr Hope could not say whether he had passed on the Member Statements he and his wife received from their superannuation funds. It was his belief that Mr Legg was not in a position to review their accounts with any fund other than IOOF. He could not answer why he did not show Mr Legg the Member Statements they had received and could not recall whether he himself knew the correct position when he made the payments later in June 2009. He did not consider contacting IOOF to check his contributions.
Mr Hope said that he found the statements received from the superannuation funds to be confusing and so he just looks at the bottom line and asks whether it is better than last year. Mr Hope said that he had never contacted anyone for an explanation because he is busy running his business. Whatever the bottom line is, it is. He just needs to work harder next year to give that bottom line a boost. Advisers would explain the funds’ fees and the like but what mattered to him, Mr Hope explained, was that he was in the best fund he could be in because it was the bottom line that mattered.
Mr Hope said that he had not received any warning from the Australian Taxation Office (ATO) that he might be exceeding his contribution cap in the 2009 financial year. He thought that the ATO would do that because, at times, they send notices about other things.
Statements relating to 2009 financial year
A Superannuation Payment Report printed on 21 March 2012 relates to payments made by WES trading as LEC.[41] It refers to a payment by means of a reference number and to its receipt. The “Status” was shown as “Processed”. The “Date Created” was entered as 27 June 2008. The payment consisted of $46,000.00 made to Mrs Hope’s account with Connect and a further $42,000.00 made to Mr Hope’s account with IOOF. These amounts were described as Superannuation Guarantee contributions for the period 19 June 2008 to 25 June 2008. The payments totalled $88,000.00 and that was shown on the Superannuation Payment Report. Each fund was described in that document together with Mr and Mrs Hope’s personal details relating to date of birth and the like.
[41] T documents in 2013/6723; T13 at 69. The information on that Superannuation Payment Report is consistent with the screen print that Mrs Hope made from the MYOB system: Exhibit C.
The ANZ Bank Statement Report relating to transactions made in relation to WES’s account on 30 June 2008 shows a payment of $88,000.00 made to MYOB on that day.[42]
[42] Exhibit K at 1
Connect sent a Member Statement to Mrs Hope for the period from 1 July 2008 to 30 June 2009. It was in the same form as that which she had received for the previous financial year. It summarised her account details on the first page:[43]
[43] T documents in 2013/6722; T17 at 95
Your account details for the period
The amounts reported below are the totals for the different transactions reported. More details on these transactions can be found on the following pages.
Description Total ($)
Opening account balance at 1 July 2008
$52,956.14
Plus
Contributions received from your employer(s)
$49,914.97
Less
Earning from your investments
-$15,858.81
Federal Government Contributions Tax
-$7,460.58
Administration Fee
-$70.20
Insurance Premiums
-$107.64
Closing account balance at 30 June 2008
$79,372.88
The second page of the Member Statement showed the contributions that Connect had received on Mrs Hope’s behalf. It was written in the same form as it had been in the previous year. A payment of $301.15 was shown as “Jun 08 received 01/07/08” and a payment of $46,000.00 as “Jun 08 received 03/07/08”. A further eleven contributions were recorded and they total $49,914.97 as shown in the summary set out in the previous paragraph.
A copy of a Member Statement prepared by IOOF and relating to the 2009 financial year for Mr Hope shows details of the transactions on his account for that year and the closing balance of his account as at 30 June 2009. Details of his contributions are set out on the fourth page of the document. They amounted to $50,000.00 in that year.[44] The dates on which his employer made the contributions are shown in no order that makes immediate sense.[45] They are certainly not set out chronologically. A payment of $42,000.00 is shown as having been made on 4 July 2008 and as having been withdrawn on the same day. A further contribution of $38,750.00 appears as having been made on 4 July 2008 but, as Mr Hope said in his evidence, that was not an additional contribution. A letter from IOOF dated a year later on 3 July 2009 explains that it was part of the original contribution of $42,000.00. In that letter, IOOF returned a cheque in the amount of $3,250.00 to MYOB at WES’s address. IOOF advised that this sum was returned as Mr Hope had advised it that this part of the contribution had been sent in error. As a result, IOOF had not credited that amount to his account.[46]
[44] Exhibit E at 2 of Member Statement
[45] Exhibit E at 4 of Member Statement
[46] Exhibit G
At the side of the listed contributions is a statement advising that contributions may be made by cheque, direct debit or BPAY. Relevant information is given as to the way in which those payments are made but no indication is given as to the time at which a payment by any of the methods will be taken to have been received by or made to IOOF.[47] Further information is given on the following page and it includes the following paragraph:
“Please check to ensure all expected contributions have been received into your account and appear on your statement. We are not aware of any overdue contributions for the reporting period. However, if you believe that any required contributions have not been paid, please contact your employer. Please note, any contributions that are received after 30 June 2009 which relate to the period ending 30 June 2009 will not be included in this statement but will appear in your next statement.”[48]
CONSIDERATION
[47] Exhibit E at 4 of Member Statement
[48] Exhibit E at 5 of Member Statement
When were the payments made to the superannuation funds?
The parties accepted that the relevant payments had been made in the 2009 financial year and that they exceeded the concessional caps. I will briefly explain why I think that they were correct to do so. In doing so, I note that the conclusions I have reached are consistent with cl 13 of the Commissioner’s Taxation Ruling TR 2010/1 entitled “Income tax: superannuation contributions” in so far as it sets out the time of payment by electronic funds transfer and by cheque. I have set out the relevant passage at [41] above. Once it is accepted that the payments have been made in the 2009 financial year, it follows that the amounts paid by Mr and Mrs Hope to their superannuation funds exceeded the concessional caps by the amounts assessed by the Commissioner.
I will begin with the payments in June 2009. They were made by cheque which is not regarded as legal tender under the Reserve Bank Act 1959 and the Currency Act 1965. Only bank notes and coins as circulated in accordance with that legislation may be regarded as legal tender.[49] That is not to say, however, that payment may not be effected by a means and in a form that is not regarded as legal tender. Payment by credit cards and debit cards provide obvious examples but so too does payment by cheque. Whether payment is actually made by any of these means, rather than by legal tender, is a matter of agreement between the person offering payment by a particular means and the other person’s accepting payment in that form.
[49] See Reserve Bank Act 1959; s 36 and Currency Act 1965; s 16
Taking cheques as an example, their use has, until recently, been so prevalent over the years that in 1979 Mason J, with whom Aickin J agreed, said in George v Cluning:[50]
“… In my opinion the appellant, through his solicitors, by receiving the respondent’s personal cheque without objecting to it on the ground that it did not constitute legal tender, must be taken to have accepted the cheque as payment of the amount for which it was drawn. The practice of giving and accepting personal cheques in payment of debts and liabilities is now so widespread that there is a general expectation on the part of persons making payments that a personal cheque, given in payment of a debt or liability, will be accepted unless the payee objects before or at the time of receipt that the cheque does not constitute legal tender. To my mind the law was correctly stated in two Canadian decisions … where it was decided that a personal cheque, though not legal tender, was a sufficient payment if not objected to on that account.”[51]
[50] (1979) 28 ALR 57; Barwick CJ, Mason, Murphy, Aickin and Wilson JJ
[51] (1979) 28 ALR 57 at 62-63
As to the time at which payment was made, Barwick CJ said in the same case:
“… [T]he cheque itself, unless the agreement is read as demanding legal tender, is conditional payment. When honoured it is payment as from the date of the receipt of the cheque. Of course, if it were not honoured, then no payment has been made. …”[52]
[52] (1979) 28 ALR 57 at 59 This is consistent with the Commissioner’s Ruling TR 2010/1 at cll 188-192
I now turn to the payments sent electronically in June 2008. Payment by electronic means is not payment by legal tender. Again, it is payment in a form agreed upon between the parties. Unlike the law relating to cheques, the law relating to electronic forms of payment has not reached the stage where certain assumptions about payment are made unless the agreement of the payer and the payee states otherwise. The way in which the payment is made and the time of that payment are subject to the terms of the agreement under which it is forwarded by one to another and the terms on which it is accepted. Agreement on those matters might be drawn from the fact that the payee lists various forms by which a contribution may be made or a debt paid and provides information, such as its biller code, to enable the payer to make payment by one form or another.
Agreement on the form is a matter for the parties but neither may have any control over the way in which the chosen form effects payment. That follows from the fact that the entity that enables payment to be made in a form other than legal tender may not be, and usually is not, either the person wishing to make the payment or the person receiving it. BPAY used to transfer money from a person’s bank account to another person’s bank account provides an example. The entity transmitting the payment is the payer’s financial institution. It has in place checks and balances to ensure that the payer has the necessary funds to cover the transaction and to ensure that security checks are satisfied. It then transmits it according to the payer’s instructions to the payee’s financial institution and so to the payee’s account.
The Commissioner’s view is that the payment is made when the amount is credited to the account of the institution to whom the payment is made and that the clearing rules of these systems bind the financial institutions but not their customers.[53] I have no reason to disagree but it was not a matter of evidence and I have no need to go further than to touch on this form of payment as an example. This form of payment is not the form used in this case for WES did not direct its financial institution to make the payment.
[53] TR 2010/1 at cl 186
WES used the MYOB MPS system and it and MYOB did have an agreement on a number of issues including on issues relating to clearing the funds before they were paid to the superannuation funds. I have set out some of the terms of the agreement between WES and MYOB in so far as they relate to the operation of MPS and so to the transfer of payments to superannuation funds. The terms clearly show that MPS acts on Superannuation Payment Messages generated and authorised, in this instance, by WES in the manner prescribed by cl 6.5(b). On receipt of that message, the amount of money specified in the Superannuation Payment Message was debited from WES’s account and transferred to the MYOB MPS Settlement Account: cl 6.5(d). It is clear from the terms of that clause that payment to the relevant superannuation fund was not effected at that time. That this was so is underlined by cl 6.5(g) when it provides that the money transferred into the MYOB MPS Settlement Account remains in that account for three business days to enable MYOB to ensure that the debit will be authorised by WES’s financial institution holding its account from which the funds are to be debited: cl 6.5(g). Only then is the money transmitted to the relevant superannuation fund. That is the effect of cl 6.5(g). It is also set out in the context of superannuation guarantee contributions where statutory time limits apply to the receipt of those contributions by superannuation funds. Clause cl 6.5(n) warns the user of MPS to ensure that Superannuation Payment Messages are received by MPS in sufficient time to allow MPS to process it so that the relevant superannuation fund may receive superannuation guarantee contributions within the statutory time limits.
Is the Commissioner’s power discretionary?
The Commissioner “may make the determination only if he … considers” that two criteria have been met. One is that there are special circumstances and the other is that making the determination is consistent with the object of Division 292. Acknowledging that the Commissioner has no discretion whether or not to make a determination if either or both of those criteria are not met, there is a question whether s 292-465 permits regard to be had to other factors. To put that question another way, is the Commissioner required to make the determination if satisfied that there are special circumstances and that making the determination is consistent with the objects of Division 292.
In Re Stylis and Commissioner of Patents[54] (Stylis), I summarised some of the authorities that are relevant in answering this question. I adopt that summary as part of these reasons. In essence, those principles indicate that the answer can be reached by considering the form in which the power is conferred as well as the object of the provision and of the statutory scheme in which the power is conferred. In this case, the object of Division 292 is set out in s 292-5 and is to ensure that the amount of concessionally taxed superannuation benefits that a person receives results from superannuation contributions made gradually over the course of the person’s life. The power given to the Commissioner is cast in terms that he or she “may make a written determination” disregarding or reallocating the person’s contributions (emphasis added). That is a power that ameliorates the consequences that would otherwise follow if a person were to breach the concessional contribution cap.
[54] [2014] AATA 796 at [56]-[68]
The word “may” is a word that is used at times to confer a discretion but it may also be used to confer a power that the conferee is obliged to exercise. Having regard to the ameliorating effect that the exercise of the power would have, it seems to me that s 292-465(3) should be interpreted as requiring the Commissioner to exercise the power if both criteria are met. There is no room for the Commissioner to have regard to any criteria other than special circumstances and the need that any determination be consistent with the objects of Division 292.
This conclusion is consistent with the conclusion reached by Windeyer J in Finance Facilities Pty Ltd v Federal Commissioner of Taxation.[55] The question was whether the Commissioner was obliged to allow a rebate when satisfied that certain conditions had been met as to the non-payment of dividends. As explained by Gleeson CJ and McHugh J in the later case of Samad v District Court New South Wales,[56] the High Court in Finance Facilities Pty Ltd v Federal Commissioner of Taxation had decided that:
“… The context indicated that it was not intended that the Commissioner should have a discretionary power to defeat that right or entitlement. The word ‘may’ conferred a power; and the statutory intention was that the power be exercised if the condition was fulfilled. …”[57]
[55] [1971] HCA 12; (1971) 127 CLR 106; 45 ALJR 241; 2 ATR 194; Barwick CJ, Windeyer and Owen JJ; McTiernan J dissenting
[56] [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871; Gleeson CJ, Gaudron, McHugh, Gummow and Callinan JJ
[57] [2002] HCA 24; (2002) 209 CLR 140; 189 ALR 1; 76 ALJR 871 at [34]; 152-153; 11; 878
Gleeson CJ and McHugh J cited the judgment of the High Court in Ward v Williams[58] with approval. I will refer to one passage from that judgment in Ward v Williams:
“… One situation in which the conclusion is justified that a duty to exercise the power or authority falls upon the officer on whom it is conferred is described by Lord Cairns in his speech in the same case [Julius v Bishop of Oxford (1880) LR 5 AC 214 at 235]. His Lordship spoke of certain cases and said of them ‘[they] appear to decide nothing more than this: that where a power is deposited with a public officer for the purpose of being used for the benefit of persons who are specifically pointed out, and with regard to whom a definition is supplied by the Legislature of the conditions upon which they are entitled to call for its exercise, that power ought to be exercised, and the Court will require it to be exercised.”[59]
Special circumstances
[58] [1955] HCA 4; (1955) 92 CLR 496; Dixon CJ, Webb, Fullagar, Kitto and Taylor JJ
[59] [1955] HCA 4; (1955) 92 CLR 496 at [8]; 505-506
A.“Special circumstances”: meaning of expression
The expression “special circumstances” has often been described as requiring circumstances that are unusual, uncommon or exceptional. This description has its origin in the following passage from the reasons for decision of the Tribunal in Re Beadle and Director-General of Social Security:[60]
“ 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. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. 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.”[61]
[60] (1984) 1 AAR 362; 6 ALD 1; Toohey J, Presidential Member, Mr Wilkins and Dr Billings, Members
[61] (1984) 1 AAR 362; 6 ALD 1 at 364; 3
The context in which the Tribunal expressed these views is important. It is that of the Social Security Act 1947 (1947 Act). The issue under consideration was whether there had been special circumstances justifying a decision to pay a handicapped child’s allowance from the date on which Mrs Beadle became eligible to claim in respect of her daughter even though she had lodged her claim some three years after that date. In assessing whether Mrs Beadle’s circumstances were special, the Tribunal said:
“ But it is not helpful to focus too closely on each particular circumstance of the applicant and ask whether it is special. Of itself it is unlikely to be special for there would be many in a similar situation. The question is whether, when the relevant circumstances of the applicant are looked at in their entirety, they may fairly be described as unusual, uncommon or exceptional so as to warrant payment of the allowance earlier than the date on which it would ordinarily be paid.”[62]
[62] (1984) 1 AAR 362; 6 ALD 1 at 366; 4
On appeal,[63] the Full Court looked at the six month period permitted by the legislation for lodgement of a claim:
“… Presumably in this context special circumstances must include events which would render the six months unfair or inappropriate. For example, where the delay beyond six months was due to the claimant’s being misled by a departmental officer or was due to the negligence of a third party it might be thought the normal six months would be inappropriate; that special circumstances had been shown which warranted a longer period. More difficult would be questions of ignorance, illiteracy, isolation, illness and the like. It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.”[64]
[63] Beadle v Director-General of Social Security (1985) 60 ALR 225; 7 ALD 670; Bowen CJ, Fisher and Lockhart JJ
[64] (1985) 7 ALD 670 ; 60 ALR 225 at 673-674; 228
In the later case of Dranichnikov v Centrelink,[65] Hill J, with whom Kiefel and Hely JJ agreed, said that “… The reference to the first instance decision from which the words ‘unusual, uncommon or exceptional’ come was not actually affirmed by the Full Court.”[66] In the case of Angelakos v Secretary, Department of Employment and Workplace Relations,[67] Besanko J observed that:
“… the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to the exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the statutory context.”[68]
[65] [2003] FCAFC 133; (2003) 75 ALD 134; Hill, Kiefel and Hely JJ
[66] [2003] FCAFC 133; (2003) 75 ALD 134 at [65]; 148
[67] [2007] FCA 25; (2007); 100 ALD 9; 44 AAR 436
[68] [2007] FCA 25; (2007) 100 ALD 9; 44 AAR 436 at [33]; 17; 445
Although in the context of the criminal law and in relation to the notion of “special reasons”, the statement by Gleeson CJ in Baker v The Queen[69] is relevant also in this context. Section 13A(3A) of the Sentencing Act 1989 (NSW) provided that a person who was the subject of a non-release recommendation was not eligible for the determination of a minimum term and an additional term under that provision unless the Court was satisfied that special reasons existed that justified the making of the determination. In his judgment, Gleeson CJ said:
“ There is nothing unusual about legislation that requires courts to find ‘special reasons’ or ‘special circumstances’ as a condition of the exercise of a power … This is a verbal formula that is commonly used where it is intended that judicial discretion should not be confined by precise definition, or where the circumstances of potential relevance are so various as to defy precise definition. That which makes reasons or circumstances special in a particular case might flow from their weight as well as their quality, and from a combination of factors.”[70]
[69] [2004] HCA 45; (2004) 223 CLR 513; 210 ALR 1; Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ; Kirby J dissenting
[70] [2004] HCA 45; (2004) 223 CLR 513; 210 ALR 1 at [13]; 523; 7
These authorities show that there is no precise definition of what is meant by “special circumstances”. Regard must first be had to the particular provision in which the expression is used. It will be a provision ameliorating, and so moderating or modifying, the operation of another provision. Amelioration may be provided for simply on the basis that there are special circumstances or it may arise only if those special circumstances meet some further criterion e.g. they are outside the person’s control, they could not have been reasonably foreseen or they occurred in a particular time period.
Having identified the scope of the particular provision, regard must then be had to the wider legislative context in which the ameliorating provision appears and what it is that is being ameliorated. It is against that background that a person’s circumstances must be examined and weighed.
Having regard to the person’s circumstances in so far as they meet any additional criterion, consideration is then given to whether those circumstances take the person outside the circumstances of those people generally affected by the particular legislative provision whose operation may be ameliorated. The question is then asked whether, in the particular case, it would be unfair or inappropriate to allow the legislation to operate in the usual way. As Senior Member Muller put it in Re QT96/78 and Commissioner of Taxation:[71]
“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.”[72]
[71] [1996] AATA 406; (1996) 34 ATR 1175; 96 ATC 583
[72] Approved by McKerracher J in Liwszyc v Commissioner of Taxation [2014] FCA 112 at [75]
In deciding where that dividing line is drawn in the application of s 292-465(3), it is arguable that the issues set out in ss 292-465(5) and (6) are not themselves relevant for they could be said to relate to two different decisions. Section 292-465(3) could be said to require the Commissioner to decide whether to make a determination. He may only make a determination if both criteria set out in s 292-465(2) have been satisfied. Section 292-465(4) refers to the decision that the Commissioner must make as to the terms of the determination he has decided to make under s 292-465(3). It does so by setting out the matters to which the Commissioner may have regard “in making the determination” (emphasis added).
There would be a contrary position that would be arguable. That would be that ss 292-465(3) and (4) are referring to different aspects of the one decision. One aspect is whether to make a determination at all but that aspect is inseparable from an identification of the terms of the determination if it were to be made. Putting that another way, it is not practically possible to decide whether or not to make a determination without deciding what the terms of that determination would be.
I think that the second position is to be preferred. I have not returned to the parties for submissions on the point as the outcome makes no difference to the substantive issues I have to decide. To ask for further submissions would add to their costs but serve no practical purpose.
B.Are there special circumstances in this case?
The usual way in which the concessional tax provisions operate is that a person may claim a deduction for contributions made to his or her superannuation fund provided the level of those contributions does not exceed certain limits in each financial year. Those limits have previously been set for a particular financial year and the amount of those limits is publicly available. There are consequences for the person who exceeds the limits in a particular year. They take the form of the imposition of taxation on the amount by which the contributions exceed the particular limits.
In this case, I am not satisfied that Mr and Mrs Hope’s circumstances are special. They were not newcomers to superannuation contributions having made them to one fund or another in at least the 2008 financial year as well as the 2009. As directors of WES, they were the controlling minds of their employer. Unlike George in the Commissioner’s example in TR 2010/1 and to which Mr Morris referred, they were not subject to the vagaries of their employer. They were in a position to control and rectify any vagaries.
Long before Mr Legg delivered the cheques to their superannuation funds in June 2009, Mrs Hope, at least, had received a Member Statement from one of her superannuation funds. I refer to the Member Statement issued by Connect on 26 September 2008 and relating to Mrs Hope’s account. It set out the contributions that had been made in that particular year. Two things should have come to Mrs Hope’s attention immediately. The first was that, except in relation to December 2007, the payments made in respect of each month were not received until after the end of the month in respect of which they were paid.
The second thing to notice is that the amounts were attributed not to the months for which they were due but in respect of the month in which they were received. Taking, for example, the payment of $10,000.00 made in the 2008 financial year, that payment was described in the Member Statement as a contribution for May 07 but was recorded as received on 4 July 2007 and counted among the contributions made for the 2008, and not the 2007, financial year. Those entries on the Member Statement should have put Mrs Hope on notice that payments were recorded against the financial year in which they were received and not the month and financial year to which she attributed the contributions.
Had they read the PDS, I find that Mr and Mrs Hope would have been aware of delays between instruction to make a payment and receipt of that payment when the MYOB MPS system is used. The document is quite clear in explaining the delays and, in particular, that the payment is held in the MYOB CH for three business days before payment is made to the nominated superannuation fund. Not only is the document clear, the PDS specifically drew attention to the need to allow sufficient time to process the Superannuation Payment Message in order to meet statutory time frames.
I understand that Mr and Mrs Hope did not pay particular attention to the Member or Annual Statements they each received from their superannuation funds. They did not do so because they were busy but their failing to do so cannot be regarded as something that takes them outside the circumstances of very many in the community who find themselves in the same position. To some extent, they have relied on the advice of their accountant and financial adviser. Whether those advisers should have obtained further information, be it from Mr and Mrs Hope or elsewhere, before advising them is not a matter I need to decide. Mr and Mrs Hope are in no different position from many in the community in this regard.
In summary, I have decided that Mr and Mrs Hope’s circumstances are not special circumstances within the meaning of s 292-465(3)(a). There is no need to go on to consider the criterion in s 292-465(3)(b) for the criteria are cumulative and not expressed in the alternative. Therefore, for the reasons I have given, I affirm the Commissioner’s objection decisions dated 31 October 2014 and 1 November 2014.
I certify that the one hundred preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ……[sgd]..............................................
Associate
Date of Hearing 3 October 2014
Date of Last Submission 3 October 2014
Date of Decision 26 November 2014
Counsel for the Applicant Mr Scott K Morris
Solicitor for the Applicant Mr Bruce Climie
John Burgess & Co
Counsel for the Respondent Ms Louise Martin
Solicitor for the Respondent Ms Carmen Basilicata
ATO Review and Dispute Resolution
4
13
10