Robert Sisely and Commissioner of Taxation

[2014] AATA 411

[2014] AATA 411 

Division	Taxation Appeals Division
File Number(s)	2013/1787
Re	Robert Sisely
APPLICANT
And	Commissioner of Taxation
RESPONDENT

DECISION

Tribunal	Senior Member Bernard J McCabe
Date	24 June 2014
Place	Brisbane

The decision under review is affirmed.

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Senior Member Bernard J McCabe

CATCHWORDS

TAXATION – Excess superannuation contributions – Excess taxed at higher rate – Commissioner refused to exercise discretion to disregard or reallocate excess – No finding of ‘exceptional circumstances’ – Exercise of discretion not consistent with statutory objective – Reviewable decision affirmed.

LEGISLATION

Income tax Assessment Act 1997 (Cth) ss 292.5; 292.465

Taxation Administration Act 1953 (Cth) s 14ZZK

CASES

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

Senior Member Bernard J McCabe

24 June 2014

1. There are limits on how much a taxpayer may pay into superannuation funds because of the tax advantages that accrue. Mr Robert Sisely managed to contribute over $678,000 into his superannuation funds over a three year period when the statutory limit was $450,000. The Commissioner said Mr Sisely must now pay tax at 46.5% on the excess contributions.

2. The parties agree the excess contributions were paid. But Mr Sisely has asked the Commissioner to exercise his discretionary power under s 292.465 of the Income tax Assessment Act 1997 (Cth) (“the ITAA97”) to disregard the excess or allocate it to another year so that the excess amount is not taxed at the higher rate. The Commissioner refused, and now Mr Sisely has asked the Tribunal to reconsider the matter.

3. The discretion in s 292.465 is only enlivened where the decision-maker is satisfied (a) there are special circumstances and (b) making the determination is consistent with the objects of Division 292: s 292.465(3). These are threshold issues: if the taxpayer is unable to persuade me he satisfies both these requirements and that the Commissioner was wrong to conclude otherwise, the taxpayer must fail: s 14ZZK,

   
   Taxation Administration Act 1953

   (Cth).

4. I am not persuaded there are special circumstances in this case. I also find that exercising the discretion would not be consistent with the objectives of Division 292 of the ITAA97. I explain my reasons below.

   WHAT HAPPENED

5. The taxpayer explained in oral evidence that he was self-employed for many years before he set up superannuation arrangements in 2005. (He paid compulsory national insurance contributions into government funds in the United Kingdom, New Zealand and South Africa when he worked in those countries many years ago, but it seems unlikely those payments would be regarded as superannuation contributions for the purposes of Australia’s taxation legislation.) He made a number of contributions into the various funds in his name after 2005, including a $230,000 payment on 23 August 2008 and the transfer of three tranches of shares (worth $197,775, $152,930 and $98,245 respectively) in March 2011. He also made withdrawals.

6. The $230,000 payment in 2008 exceeded the $150,000 cap on non-concessional contributions that was applicable for the 2009 financial year. That payment triggered the so-called “bring-forward” mechanism incorporated in s 298.85 which allowed Mr Sisely to effectively spread his non-concessional contributions over a three year period provided the total contributions over that period did not exceed $450,000. Unfortunately for
   Mr Sisely, the value of the shares he transferred to the funds was treated as a contribution. That meant his total non-concessional contributions during the three year period exceeded the cap by $228,950. He was assessed for tax on that amount in the year ended 30 June 2011.

7. Mr Sisely says he misunderstood the rules and would not have made the excess contributions if he had understood the true position. He now says the misunderstanding was effectively induced by erroneous advice he received from the Australian Taxation Office in 2010 and 2011.

   The telephone calls to the ATO

8. Mr Sisely said in his oral evidence that he called the “ATO Super Centre” help line on
   26 November 2010. The call is noted in the taxpayer’s call charge records which were tendered in evidence (exhibit five) and was acknowledged by the Commissioner. Those records disclose the call lasted for 21 minutes. The Commissioner does not have any internal record of the call, and the taxpayer has not tendered an independent note of his recollections. The taxpayer nonetheless insists he spoke with an officer – he does not recall if the officer was male or female – about his affairs. The taxpayer explained in his oral evidence that he told the officer of the payment made in August 2008 and asked how any amounts already withdrawn would be treated as contributions if “recontributed”. He said he told the officer about his history but the officer did not suggest the
   “bring-forward” provisions had already been triggered.  Mr Sisely said he was told he could make further contributions without incurring any penalty.

9. Mr Sisely says he made other telephone calls but the one on which he particularly relies occurred on 31 January 2011. (The call charge records show he made an earlier call to the Australian Taxation Officer on that day, but he said he was told he had rung the wrong number. I will ignore that call for present purposes.) He pointed out in his evidence that he was told the call was being recorded so he did not feel obliged to keep notes of the conversation that followed. The recording has not been located. The call charge records show the call lasted 43 minutes.

10. The taxpayer says in his evidence that he revisited the substance of his earlier discussion with the “ATO Super Centre”. He said he explained his situation to the officer who took his call and said he was previously advised he could make further contributions without incurring any sort of penalty. He claims the officer confirmed the earlier advice with words to the effect “if that is what you were advised, it must be true”. There was no suggestion the “bring-forward” provisions had already been triggered. Armed with this advice, the taxpayer says he proceeded to transfer the shares into his self-managed superannuation fund in March 2011. The taxpayer’s representative at the hearing,
    Ms Waterhouse, argued this behaviour was consistent with the taxpayer’s evidence as to the contents of the phone conversation. He said he did not realise there was a problem until he received the notice of assessment.

    The Commissioner is unconvinced

11. The Commissioner has no direct evidence of what was said in the telephone calls in 2010 and 2011. He doubts the taxpayer was given bad advice, however, and points to the taxpayer’s behaviour once the notice of assessment was issued.

12. The taxpayer was told of the need to inform the Commissioner of any special circumstances that might justify the exercise of the discretion. Mr Sisely completed a form titled Application – excess contributions tax determination which he sent to the Commissioner by fax on 10 August 2012. A copy of the form and the supporting documentation is set out in exhibit one at p 18ff. In the supporting documentation, he conceded (exhibit one at p 22) he had “made a miscalculation” and added:

    There was no intention, deliberate or otherwise to breach any rules nor exceed any amounts permitted. It was a genuine error which hopefully can be corrected without penalty attached.

13. Mr Sisely’s supporting documentation referred to a number of matters that explained the miscalculation, including the pressures associated with acting as a carer for an elderly friend and the confusion arising out of his attempts to establish a self-managed superannuation fund. Mr Sisely did not refer to erroneous advice from the Australian Taxation Office. When asked about that omission in cross-examination, Mr Sisely replied he did not have much time to prepare the document and did not understand what was required. He said he did the best he could and was honest in his dealings with the Commissioner.

14. The Commissioner wrote to the taxpayer on 20 September 2012 to explain the Commissioner would not be exercising the discretion in Mr Sisely’s favour (exhibit one at p 35). At that point, Mr Sisely decided to engage a firm of solicitors to help prepare the objection. A copy of the lawyer’s submission is found in exhibit one at p48ff.

    
    

    The submission refers to a number of matters which might qualify as special circumstances, including the pressures associated with the taxpayer’s elderly friend. Finally, at paragraph [22] of the submission, there is an oblique reference to advice received from the Commissioner. The submission says:

    Mr. Sisely also sought information from the ATO website and would call the ATO to seek clarification and was often given conflicting information from each source. This confusion certainly did not assist Mr. Sisely in attempting to comply.

15. Mr Brennan, who appeared for the Commissioner, asked Mr Sisely whether he reviewed the submissions in draft form. The taxpayer said he commented on drafts but was only given a short time to read the final draft before it was submitted. He said the lawyers may have misunderstood his instructions.

16. Ms Waterhouse, who appeared for the taxpayer, suggested from the bar table that

    
    

    Mr Sisely’s lawyers at the time may not have appreciated the significance of the taxpayer’s instructions that he had been misled by the telephone advice from the ATO Super Centre, and did not highlight it accordingly. That seems unlikely, with respect: anyone with a passing acquaintance with this process would appreciate the significance of erroneous advice in the circumstances. Indeed, anyone in Mr Sisely’s position would be expected to respond immediately to the Commissioner’s assessment with words to the effect, “But that is not what you told me before”. Mr Sisely did not do that, and his explanations for failing to do so – that he had a limited time to respond, he did not have all of the documents, he was distracted by other events – are unconvincing.

17. Mr Sisely has only come to rely on a claim of erroneous advice comparatively recently. His behaviour calls into question precisely what he was told in the telephone calls to the Australian Taxation Office in 2010 and 2011, and the role that advice played in his subsequent behaviour. I am not persuaded he made the excess contributions as a result of advice he received from the Commissioner’s officers.

    WERE THERE ANY OTHER SPECIAL CIRCUMSTANCES?

18. The expression ‘special circumstances’ is used in a number of different statutes. It is generally taken to be a reference to circumstances that are unusual or different or exceptional. The circumstances must be such that they suggest it would be appropriate to make an exception in this case and treat it differently to other cases: see generally
    Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J.

19. A taxpayer who was provided with erroneous advice by the Commissioner might be able to satisfy a decision-maker that special circumstances arose – although that would depend on the precise facts of the case. But I have already said I am not satisfied the Commissioner provided erroneous advice in this case, or that the taxpayer acted in reliance upon it. Was there anything else about this case that might suggest special circumstances?

20. The taxpayer referred to a number of matters that explained the mistake that led to the excess contributions. The complexity of the rules is an obvious explanation, but that is not a special circumstance: everyone faces the same problem, and it can be addressed with proper advice. The impact of the global financial crisis was also discussed, although it does not explain why the taxpayer made the mistake he made – and the impact of the global financial crisis is not (without more) a special circumstance in any event because it was a change in the market that affected everyone.

21. Mr Sisely did refer to the pressures associated with caring for an elderly friend. I was told the pressures associated with that commitment became more onerous in early 2011 when her property was affected by flooding.

22. I am aware the taxpayer was sufficiently involved with his friend’s care to justify the award of a carer’s pension. I was given limited information about the relationship and its burdens, most obviously because the taxpayer conducted his case on the basis that the real explanation for the mistake in 2011 was the Commissioner’s erroneous advice.

23. I am not satisfied on the basis of the evidence before me that the taxpayer’s commitments as a carer in 2011 amounted to special circumstances. Given I am not aware of any other matters that would answer that description, I am not persuaded the discretion in
    s 292.465 of the ITAA97 is enlivened. That means the discretion cannot be exercised in the taxpayer’s favour.

    WOULD THE EXERCISE OF THE DISCRETION BE CONSISTENT WITH THE OBJECTIVS OF DIVISION 292?

24. The taxpayer’s case cannot succeed in light of my finding as to special circumstances. For the sake of completeness, I would add I do not accept the exercise of the discretion in this case is consistent with the objective of Div 292 of the ITAA97. Section 292.5 establishes that the object of Div 292 is:

    “to ensure, in relation to non-concessional contributions to superannuation, that the amount of concessionally taxed superannuation benefits that an individual receives results from contributions that have been made gradually over the course of the individual's life.”

25. Exercising the discretion in Mr Sisely’s favour is not appropriate. He made several substantial lump sum contributions in 2008 and 2011. Those contributions came towards the end of his working life. They are not contributions made gradually over the course of his life. Any exercise of the discretion under s 292.465 would effectively confer on
    Mr Sisely a benefit that was not intended by Div 292.

    CONCLUSION

26. The objection decision is affirmed.

I certify that the preceding 26 (twenty -six) paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.

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Associate

Dated   24 June 2014

Date(s) of hearing	16 June 2014
Solicitors for the Applicant	LAC Lawyers
Counsel for the Respondent	Mr Vincent Brennan