Safe and Commissioner of Taxation
[2008] AATA 1151
•19 December 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 1151
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/0746
TAXATION APPEALS DIVISION ) Re TIMOTHY SAFE Applicant
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Mr A Sweidan, Senior Member Date19 December 2008
PlacePerth
Decision The Tribunal affirms the decision under review.
....(sgd) MR A Sweidan...........
Senior Member
CATCHWORDS
Income Tax - Higher Education Support Act - whether special reasons exist for deferral of "HELP" repayment - no special reasons found - decision under review affirmed
LEGISLATION
Income Tax Assessment Act 1936, s 27B(1), s27C(1)
Income Tax Assessment Act 1997, s 4-15(1)
Taxation Administration Act 1953, s 14ZZK
Higher Education Support Act 2003, s 154-1, s 154-5, s 154-20, s 154-35 and s 154-50
CASES
Deverell v CoT [2007] AATA 1312
Re Taxpayer v Federal Commissioner of Taxation 2004 ATC 234 at 237; (2004) 57 ATR 1200 at 1202, [2004] AATA 1073
Re Compton and FCT (1999) 42 ATR 1043 at 1051; 99 ATC 2287
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95Powell v Evreniades (1989) 21 FCR 252; 20 ATR 472; 89 ATC 4415
REASONS FOR DECISION
19 December 2008 Mr A Sweidan, Senior Member Background
1. By application dated 24 September 2007 the applicant applied to defer his compulsory Higher Education Loan Programme (HELP) repayment in the amount of $2,090.65 for the year ended 30 June 2007 on the ground of special reasons.
2. The respondent refused the application on 9 October 2007 and that decision was confirmed on 23 January 2008.
3. The applicant seeks review of that decision by the Tribunal.
Relevant Facts
4. The applicant lodged an income tax return for the year ended 30 June 2007 (the relevant year) disclosing taxable income of $46,459 which included Australian government allowances and payments of $9,840 and an eligible termination payment (ETP) $35,621.
5. The respondent issued a notice of assessment for the relevant year on 11 September 2007 which included a Higher Education repayment amount of $2,090.65 (HELP repayment) based on a debt of $3,883.
6. The personal circumstances of the applicant and his wife are set out in para 22 below.
Burden Of Proof
7. Section 14ZZK of the Taxation Administration Act 1953 (TAA 1953) provides:
On an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment) – the assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessment – the assessment is incorrect; or
(iii) in any other case – the taxation decision concerned should not have been made or should have been made differently.
8. In an application for deferral (under section 154-45 or 154-50 of HESA) the burden of proving the decision should have been made differently rests with the Applicant; Deverell v CoT [2007] AATA 1312 at paragraph 9.
Legislation - Relevant Statutory Provisions
Higher Education Support Act 2003 (HESA)
9. Section 154-1 of HESA provides:
(1) If:
(a) a person’s repayment income for an income year exceeds the minimum repayment income for the income year; and
(b) on 1 June immediately preceding the making of an assessment in respect of the person’s income of that income year, the person had an accumulated HELP debt;
the person is liable to pay to the Commonwealth, in accordance with this Division, the amount worked out under section 154-20 in reduction of the person’s repayable debt.
(2) A person is not liable under this section to pay an amount for an income year if, under section 8 of the Medicare Levy Act 1986:
(3)
(a) no Medicare levy is payable by the person on the person’s taxable income for the income year; or
(b) the amount of the Medicare levy payable by the person on the person’s taxable income for the income year is reduced.
10. Section 154-5 of HESA relevantly provides:
(1) A person’s repayment income for an income year is an amount equal to the sum of:
(a) the person’s taxable income for the income year; and…
11. Pursuant to Schedule 1 of the HESA taxable income has the meaning given by section 4-15 of the Income Tax Assessment Act 1997 (ITAA 1997) [see below].
12. Section 154-20 provides:
The amount that a person is liable to pay under section 154-1, in respect of an income year, is an amount equal to so much of the person’s repayable debt for the income year as does not exceed the percentage of the person’s repayment income that is applicable under the following table…
For the year ended 30 June 2007, the applicant is liable for repayment of 4.5% of repayment income of $46,459 which equals $2,090.65.
13. Section 154-35 of HESA provides:
The Commissioner may, from any information in the Commissioner’s possession, whether from a return or otherwise, make an assessment of:
(a) the person’s accumulated HELP debt on 1 June immediately before the making of the assessment; and
(b) the amount required to be paid in respect of that debt under section 154-1.
14. Section 154-50 of HESA provides:
(1) A person may apply in writing to the Commissioner for an amendment of an assessment made in respect of the person under section 154-35 so that:
(a) the amount payable under the assessment is reduced; or
(b) no amount is payable under the assessment.
(2) The application:
(a) must be made no later than 2 years after the end of the income year to which the assessment relates; or
(b) must specify the reasons justifying a later application.
(3) The Commissioner may, on application by a person under this section, amend an assessment made in respect of the person under section 154-35 so that:
(a) the amount payable under the assessment is reduced; or
(b) no amount is payable under the assessment;
if the Commissioner is of the opinion that:
(c) payment of the assessed amount has caused or would cause serious hardship to the person; or
(d) there are other special reasons that make it fair and reasonable to make the amendment.
(4) The Commissioner must, as soon as practicable after an application is made under this section:
(a) consider the matter to which the application relates; and
(b) notify the applicant of the Commissioner’s decision on the application.
Income Tax assessment Act 1997 (ITAA 1997)
15. Section 4-15(1) states:
Work out your taxable income for the income year like this:
Taxable income = Assessable income – Deductions
Income Tax Assessment Act 1936 (ITAA 1936)
16. The former section 27B(1) of ITAA 1936 provided:
If an ETP (other than a death benefit ETP) is made in relation to a taxpayer in a year of income, the taxpayer’s assessable income of the year of income includes:
(a)the taxed element of the retained amount of the post-June 83 component; and
(b)the untaxed element of the retained amount of the post-June 83 component,
17. The former section 27C(1) of ITAA 1936 provided:
(1) Subject to subsection (1A), if an ETP is made in relation to a taxpayer in a year of income, the taxpayer’s assessable income of the year of income includes 5% of the retained amount of the pre-July 83 component.
Tribunal’s Findings
18. The applicant does not dispute that he is liable for a HELP repayment in the amount of $2,090.65 for the relevant year but claims that repayment should be deferred (by amending the assessment so that no amount is payable under the assessment in respect of the HELP repayment ) under section 154-50(3) of HESA on the ground of special reasons.
19. The respondent (and accordingly, the Tribunal) has no discretion to amend the assessment unless he is of the opinion that:
·payment of the assessed amount has caused or would cause serious hardship to the person; or
·there are other special reasons that make it fair and reasonable to make the amendment.
Special Reasons
20. The term “other special reasons” is not defined in the HESA.
21. However in Case 12/2004;Re Taxpayer v Federal Commissioner of Taxation 2004 ATC 234 at 237; (2004) 57 ATR 1200 at 1202, [2004] AATA 1073, Member Webb said:
“The term “special reasons” is not defined in the Higher Education Funding Act 1988 (Cth) or related tax legislation. That term has been likened to the term “special circumstances” as it appears in social security legislation (see Re Compton and FCT (1999) 42 ATR 1043 at 1051; 99 ATC 2287 at 2293-2294) and has been taken to refer to circumstances that “may fairly be described as unusual, uncommon or exceptional” (Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 4) or where “…strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate” (Re Ivovic and Director-General of Social Services (1981 3 ALN N95 at 97).
Applicant’s Contentions
22. The applicant relies on the following as being special reasons justifying deferment:
(a)The bulk of his 2007 taxable income comprised a one-off superannuation payment (the ETP) which was received in April 2007.
(b) The ETP related to his last job which ended in 1992.
(c) He was only eligible to receive the payment because he was over 55 years and no longer in the paid workforce.
(d)The ETP was a one off payment and he has no further entitlement to any superannuation payments.
(e)The ETP was included in his taxable income but was distinguished by being taxed at a lower rate.
(f)The income at which compulsory repayments “kick in” is adjusted in line with increases in average weekly earnings which infers the regularity of a salary and wages income rather than other miscellaneous irregular payments such as superannuation.
(g)The remainder of his taxable income was made up of $9,840 which is a regular payment from Centerlink.
(h) The ETP was required to repay outstanding debts.
(i)The ETP was used to provide funds as his wife had orthopedic surgery in July 2006 and was advised afterwards that a further operation would be required in the future.
(j)$20,000 of the ETP was placed in a term deposit account with the intention of leaving it there long term.
(k)The remainder of the ETP was used to pay off debts and buy a few new white goods to last into the future.
(l)Payment of the HELP amount would result in the cancellation of the term deposit and the loss of interest.
(m) He was not studying full time in the relevant financial year.
(n) He is now enrolled in full time study.
(o)The legislation was not intended to apply to someone in his circumstances.
23. For the reasons which follow the Tribunal finds that:
(i)the circumstances cited by the Applicant do not amount to special reasons under section 154-50(3) of HESA.
(ii)the applicant’s assertion as to the intention of the legislation cannot be sustained.
The ETP
24. The superannuation payment received by the applicant is an ETP which is included in the applicant’s repayment income for the relevant year and there is no discretion to exclude it.
25. Repayment income for the relevant year includes taxable income for the year (section 154-5 of HESA). Taxable income for the year includes assessable income (section 4-15(1) of the ITAA 1997). The ETP was included in the applicant’s assessable income for the relevant year under the former sections 27B(1) and 27C(1) of the ITAA 1936.
26. The applicant’s repayment income for the relevant year is $46,459 (including the ETP of $35,621) which exceeds the minimum repayment income of $38,149 for that year. Pursuant to section 154-20 of the HESA the applicant is liable to a repayment amount of 4.5% of his repayment income which is $2,090.65.
Use of the ETP
27. The Tribunal is of the view that the loss of interest on the term deposit is not a circumstance that “may fairly be described as unusual, uncommon or exceptional” (Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 4) or where “strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate” (Re Ivovic and Director-General of Social Services (1981 3 ALN N95 at 97). The Applicant admitted he has used the ETP to pay debts and purchase white goods while investing the balance in a term deposit without making provision for the repayment of his HELP liability. The position is similar to that in Deverell v CoT [2007] AATA 1312 at paragraph 13 where Member Kenny found that there were no special reasons that would justify deferral and said:
“I also consider it to be relevant that, in February 2007 when he was well aware of the need to make repayments to the Australian Taxation Office, Mr Deverell consolidated other debts and made no attempt to include the HELP liability in that arrangement. The substantial equity that he has in his car and in the house he owns with his mother would have facilitated his capacity to do this”.
Applicant’s wife’s medical condition
28. In Deverell Member Kenny also found that there were no special reasons that would justify deferral and said in relation to the health of the applicant’s mother:
“…the question of medical treatment is speculative at this stage and any associated costs may not be realized”.
29. In Case 12/2004;Re Taxpayer v Federal Commissioner of Taxation 2004 ATC 234 at 242; (2004) 57 ATR 1200 at 1208-9, [2004] AATA 1073, the applicant’s medical condition did not constitute special reasons. Member Webb said:
“Plainly, the Taxpayer’s medical conditions are concerning, disruptive and the cause of disability that increases her difficulty in a range of activities and pursuits… I am not persuaded, on the balance of probabilities, that the Taxpayer’s medical conditions and related treatments constitute special reasons that warrant amendment of her HECS repayment assessments for any of the years in question. Considering the case of Re Beadle I am not satisfied that her conditions, in the context of the applicable legislation, are unusual, uncommon or exceptional. Many are those who suffer from disabling medical conditions that require treatment. Unlike some, the Taxpayer had private health insurance to assist her cover the costs of the treatment she required”.
30. The Tribunal notes that the applicant has not provided any medical evidence of his wife’s condition, the immanency of any surgery or the expected cost thereof. The Tribunal finds that no special reasons arise in that regard.
Study
31. In the reasons for decision the respondent stated that another example of special reasons would be where a compulsory repayment was imposed on an assessment that was for a year prior to when the applicant commenced study. The applicant had commenced part time study prior to the relevant year and thus had a HELP liability in respect of that year. It appears to the Tribunal that it is irrelevant whether the applicant studied full time, part time or at all in the relevant year.
Hardship
32. The applicant does not contend that repayment of his HELP liability will result in serious hardship and has not provided any evidence in this regard. Further the applicant has a term deposit of $20,000 part of which could clearly be used to repay the HELP liability.
33. In Case 12/2004; Re Taxpayer v Federal Commissioner of Taxation 2004 ATC 234 at 236; (2004) 57 ATR 1200 at 1202, [2004] AATA 1073, Member Webb said:
“The term “serious hardship” is not defined in the HEFA or related tax legislation. In Powell v Evreniades (1989) 21 FCR 252; 20 ATR 472; 89 ATC 4415, Hill J concluded that the term should be given its ordinary meaning and drew a distinction between hardship which is serious and hardship which is extreme, accepting that destitution would constitute “serious hardship” (at FCR 260; ATR 479; ATC 4421).
34. The Tribunal finds that there is no evidence of serious hardship in this matter.
Decision
35. For the reasons set out above the Tribunal is of the opinion that there are no special reasons which justify amendment of the assessment under section 154-50(3) of HESA to defer the HELP repayment for the relevant year and the decision under review is therefore the correct or preferable decision and should be affirmed.
I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member
Signed: ..(sgd) T Freeman...............
AssociateDate/s of Hearing 4 December 2008
Date of Decision 19 December 2008
Applicant’s Representative Self-represented
Respondent’s Representative Ms Angela McNally
ATO Legal Services Branch
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