Surfers Paradise Rock and Roll Caf� Pty Ltd and Commissioner of Taxation

[2007] AATA 1833

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1833

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No QT200600330

TAXATION APPEALS DIVISION		)               QT200700014
Re		SURFERS PARADISE ROCK AND ROLL CAFE PTY LTD

Applicant

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Dr KS Levy, RFD, Senior Member

Date4 October 2007

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

..................[Sgd]............................

Senior Member

CATCHWORDS

TAXATION – superannuation guarantee shortfalls imposed – further penalty imposed under Part 7 of the Superannuation Guarantee (Administration) Act 1992 (Cth) – whether the Commissioner has a discretion to remit the superannuation guarantee charge – whether the Part 7 penalty should be further remitted – decision affirmed

Superannuation Guarantee (Administration) Act 1992 (Cth) s 6, 16, 17, 19, 31, 32, 33, 42, 49, 59, 62, Part 7
Administrative Appeals Tribunal Act 1975 (Cth) s 37

Taxation Administration Act 1953 (Cth) s 14ZZK

Jarra Hills Pty Ltd and Federal Commissioner of Taxation (1997) 37 ATR 1022
Iwec Pty Ltd and Commissioner of Taxation (2007) 94 ALD 247
005 542 512 Pty Ltd (Controller Appointed) v Commissioner of Taxation [2007] FCA 861
Pye and Federal Commissioner of Taxation (2004) 55 ATR 1024
Kancroft Pty Ltd (Acting as Trustee for Robertson Family Trust) and Federal Commissioner of Taxation (2004) 56 ATR 1086

REASONS FOR DECISION

4 October 2007   Dr KS Levy, RFD, Senior Member     

Introduction

1. This applicant seeks a review of decisions made by the Commissioner of Taxation to impose superannuation guarantee shortfalls in relation to the applicant’s 2001 tax year. In addition to superannuation guarantee charges, a Part 7 penalty under the Superannuation Guarantee (Administration) Act 1992 (“the Act”) was also imposed.  The applicant has lodged two notices of objection to the assessments which resulted in a variation of part of the original assessments following a long period of seeking further particulars by the Commissioner of Taxation. Information was provided by Mr Pikos, on behalf of the applicant. The applicant now appeals those decisions. 

2.      Mr Mick Pikos, the proprietor of the applicant company appeared on behalf of the applicant.  Ms Diane Hopton appeared on behalf of the Commissioner of Taxation.

Issues

3.The issues for determination are:

(a)Does the Commissioner have a discretion to remit the Superannuation Guarantee Charge (SGC) for the 2001 year?

(b)Does the Commissioner have discretion to remit or waive the components of the SGC or the General Interest Charge (GIC) for the 2001 year?

(c)Is the remission of the Part 7 penalty from a maximum penalty of 200% to 9%, reasonable in the circumstances and should that penalty be further remitted?

Evidence

4.The following documentary evidence was admitted:

·Exhibit 1 The T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 for application QT200600330

·Exhibit 2 The T Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 for application QT200700014

·Exhibit 3     Letter from the Australian Taxation Office to Ms N Waterhouse dated 16 February 2007

·Exhibit 4     Letter from the Australian Taxation Office to Ms N Waterhouse dated 26 June 2007

·Exhibit 5     Letter from the Australian Taxation Office to Ms N Waterhouse dated 13 August 2007

·Exhibit 6     A summary of the applicant’s documents indexed and paginated (ATO letter dated 16 February 2007)

·Exhibit 7     A list of superannuation guarantee shortfalls for 16 employees

·Exhibit 8     Superannuation guarantee shortfall calculator

·Exhibit 9     Excel spreadsheet – reconciliation of relevant transactions

5.      Following opening addresses by Ms Hopton and Mr Pikos, Ms Hopton referred Mr Pikos to the transactions listed in Exhibit 9.  There was agreement between Mr Pikos and Ms Hopton on many of the transactions.  It was clear that Mr Pikos and/or his staff had endeavoured to be co-operative in providing information to the Commissioner.  It was also clear that Ms Hopton and the Commissioner’s staff had done extensive work verifying the actual superannuation guarantee shortfalls.  Their investigation emanated from a complaint by a former employee of the applicant that the amount paid by Mr Pikos in respect of that former employee’s superannuation entitlements was less than it should have been. 

6.      The hearing of this matter was facilitated by a reconciliation of relevant transactions summarised by the Respondent (see Exhibit 9).  In considering each of the transactions in Exhibit 9, Ms Hopton showed the amount remitted by Mr Pikos’ books of account and also compared that with the superannuation guarantee amounts which the ATO had calculated.  Ms Hopton identified the relevant source documents in Exhibit 6 to determine the annual income of the respective employees and also highlighted adjustments made where, in particular months, employees had earned less than the minimum threshold of $450.  Of the total income, the ATO showed the calculation of the superannuation guarantee amount, which was based on 8% of the calculated gross income.  The 8% charge was the effective rate in 2001. Compared with these amounts also were the amounts of contributions credited to individual employees accounts in ANZ Super.

7.      Having verified each of the relevant transactions, I am satisfied that the Commissioner’s calculations in Exhibit 9 are correct, subject to the amendment of amounts affecting two employees.  The revised amounts were presented by Ms Hopton on behalf of the Commissioner during final submissions.  I am satisfied that the amended amounts put to the Tribunal in final submissions are also correct.  It is clear that some shortfalls occurred because of errors by Mr Pikos’ staff and/or his bookkeepers.  Some errors in amounts also occurred because of the crediting of incorrect amounts to the individual employee’s account in ANZ Super.  Those misallocations by ANZ Super are essentially, still unresolved.  This is a matter which must be regularised by ANZ Super in conjunction with Mr Pikos resolving matters with that company.  If these can be regularised, the ATO has indicated it will modify the amounts of shortfall and possibly, the penalty charges.

Consideration

8. I have taken into account all of the facts presented by Mr Pikos (on behalf of the applicant) and Ms Hopton (on behalf of the Commissioner). The objections made by Mr Pikos are in accordance with s 42 of the Act. However, the review by this Tribunal is limited to the grounds stated in the applicant’s taxation objection (s 14ZZK(a)) of the Taxation Administration Act 1953 (TAA). The applicant also bears the onus of proof of showing the assessments are excessive (s 14ZZK(b)(i) of the TAA).

9.I make the following findings of fact:

·     The applicant was an employer and made payments of salaries/wages and superannuation contributions for the 2001 year.

·     The applicant has a number of businesses and has relied on staff or his bookkeeper/accountant in processing the superannuation guarantee amounts.

· Mr Pikos did not pay the required minimum superannuation contribution for employees as required under s 23(6A) of the Act.

·     The actual shortfalls (which would be subject to an amended assessment of SGC for the 2001 year) are as follows:

(i)Total superannuation guarantee shortfall   $9,587.73

(ii)Nominal interest component  $4,733.45

(iii)Administration component  $1,280.00

(iv)Total superannuation guarantee component  $15,601.18

(v)Calculated superannuation penalty based on 9% of  the SGC $1,404.11

·Despite the applicant not paying the minimum superannuation contributions as per finding of fact (3) above, the applicant appears to have been adversely affected by the errors which occurred in the books of ANZ Super.

Legislation

10.The following provisions of the Act are relevant:

· Section 6 defines “assessment” as:

“(a)the ascertainment of an employer’s superannuation guarantee shortfall in a year and of the superannuation guarantee charge payable on the shortfall; or

(b)the ascertainment of additional superannuation guarantee charge payable under part 7.”

· Section 16 – any superannuation guarantee shortfall in a particular year is payable by the employer.

· Section 17 – the superannuation guarantee shortfall for a particular year is the sum of the total superannuation guarantee shortfall; and the employer’s nominal interest component for the year; and the employer’s administration component for the year.

· Section 19(2) – an employer’s quarterly shortfall is calculated by the formula:

· Section 31 – this is the nominal interest component for the year calculated at the rate specified in the regulations.

· Section 32 – this is the employer’s administration component based on the following formula:

Base amount + [N x Per capita amount]

where:

Base amount is $50 or such other amount as is from time to time   prescribed.

N is the number of employees in respect of whom the employer has an      individual superannuation guarantee shortfall for the year.

Per capita amount is $30 or such other amount as is from time to time      prescribed

· Section 33 – This prescribes that an annual superannuation guarantee statement for a financial year must be lodged on or before 14 August in the following year.

· Section 49 – This provides for the imposition of a general interest charge on any unpaid amount of the superannuation guarantee charge.

· Section 59 – Where an employer refuses or fails to provide the annual superannuation guarantee statement, the employer is liable to pay a penalty, which is an “additional superannuation guarantee charge” equal to double the amount of the superannuation guarantee charge payable by the employer for the year.

· Section 62(3) – the Commissioner may remit all or part of the additional superannuation guarantee charge payable by an employer.

Answering the Issues

·     Issue 1 – Does the Commissioner have a discretion to remit the SGC for the 2001 year?

11. Sections 16, 17 and 19 outline the components of the superannuation guarantee shortfalls. When comparing those provisions with, for example, s 62 of the Act which makes an express provision for remitting part of the SGC payable by the employer, it is apparent that there is no power to remit the SGC. This has been well established in a number of cases (Jarra Hills Pty Ltd and Federal Commissioner of Taxation (1997) 37 ATR 1022 at 1024; Iwec Pty Ltd and Commissioner of Taxation (2007) 94 ALD 247 at 251; 005 542 512 Pty Ltd (Controller Appointed) v Commissioner of Taxation [2007] FCA 861).

12.My answer to Issue 1 is there is no power to remit the SGC for the 2001 year.

·     Issue 2 – Does the Commissioner have discretion to remit or waive the components of the SGC or the General Interest Charge (GIC) for the 2001 year?

13.     It is also apparent that none of the components of the SGC can be remitted.  (Pye and Federal Commissioner of Taxation (2004) 55 ATR 1024; Jarra Hills Pty Ltd and Federal Commissioner of Taxation (1997) 37 ATR 1022; Iwec Pty Ltd and Commissioner of Taxation (2007) 94 ALD 247; 005 542 512 Pty Ltd (Controller Appointed) v Commissioner of Taxation [2007] FCA 861).

14.     In relation to the general interest component, s 49 provides a power to charge the general interest charge on any unpaid amount of the superannuation guarantee charge. However, this interest charge is not an “assessment” as defined in s 6. It therefore cannot be subject to an objection under s 42. Therefore it is not a reviewable decision. (Kancroft Pty Ltd (Acting as Trustee for Robertson Family Trust) and Federal Commissioner of Taxation (2004) 56 ATR 1086 at 1088).

·     Issue 3 – Is the remission of the Part 7 penalty from a maximum penalty of 200% to 9%, reasonable in the circumstances and should that penalty be further remitted?

15. Section 59 provides that where the superannuation guarantee statement is not provided as required by law, then a penalty (which is an “additional superannuation guarantee charge”) may be imposed.

16. This Part 7 penalty was originally assessed on the basis of the amount specified in s 59 of the Act. On subsequent objection and review, that penalty has been reduced from 200% to 9%. This discretion was exercised under s 62(3) of the Act as well as Superannuation Guarantee Ruling 94/3.  The applicant seeks to have the penalty, which has already been reduced substantially, to be reduced even further. 

17.     The reduction in penalty has been considerable, given that the annual statement was not submitted on time.  Indeed, even in the resolution of this matter, the first questionnaire sought by the Commissioner was not responded to at all.  In addition, Ms Hopton informed the Tribunal that if Mr Pikos could have the records resolved with ANZ Super, then the respondent might consider the amount of penalty charge even further.  However, even though this is the only provision where some discretion can be exercised by the Tribunal, the facts do not reveal any circumstance which might justify a further reduction in that penalty, given the already significant reduction by the Commissioner, the initial failure to provide the annual statement and the present outstanding superannuation guarantee amounts with ANZ Super.  In the course of dealing with this matter, the applicant now has detailed accurate summaries prepared by the ATO, which he could endeavour to have his Accountant or Solicitor act on his behalf in resolving the matter with ANZ Super.  It seems to me that until those matters are resolved, there will be no justification for considering a reduction in penalty based on the percentage penalty to be applied.  The applicant needs to resolve the outstanding entitlements of his present and former employees with ANZ Super.

18. In the circumstances, the amount of SGC payable has been properly ascertained by the ATO. The amount of the Part 7 penalty has also been correctly calculated and applied.

19.For the above reasons, I affirm the decision under review.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, RFD, Senior Member

Signed:         .....................................................................................
           F. Kamst, Legal Research Officer

Date/s of Hearing  3 September 2007         
Date of Decision  4 October 2007
For the Applicant  Mr M Pikos
For the Respondent                  Ms D Hopton, Solicitor