The Trustee for Rane Haulage Trust and Commissioner of Taxation
[2014] AATA 733
•10 October 2014
[2014] AATA 733
Division TAXATION APPEALS DIVISION File Number(s)
2014/1420
Re
The Trustee for Rane Haulage Trust
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Deputy President S E Frost
Date 10 October 2014 Place Perth The objection decisions under review are affirmed.
..........(Sgd) SE Frost..............................................................
Deputy President S E Frost
CATCHWORDS
TAXATION - Superannuation Guarantee - Applicant had not made employer superannuation contributions by due dates - Applicant had not lodged Superannuation Guarantee Statements by due dates - Whether nominal interest charge component of Superannuation Guarantee Charge was imposed correctly - Whether assessments could be amended under section 37 of the Superannuation Guarantee (Administration) Act 1992
LEGISLATION
Superannuation Guarantee (Administration) Act 1992
CASES
Re Australian Medical Services Pty Ltd and Commissioner of Taxation (2012) 133 ALD 625
REASONS FOR DECISION
Deputy President S E Frost
10 October 2014
INTRODUCTION
In April 2013 the Commissioner notified the taxpayer that he proposed to undertake an audit of the taxpayer’s employer obligations. The audit would cover the period 1 July 2010 to 31 December 2012.
After the audit was completed the Commissioner made amended assessments of superannuation guarantee charge for the quarters ended 31 December 2010, 31 March 2011, 30 September 2011, 30 June 2012, 30 September 2012 and 31 December 2012. Those assessments were made because the taxpayer had failed, by relevant due dates, to make all the necessary contributions in respect of its employees’ superannuation.
The taxpayer objected against the assessments but the objections were disallowed. The Tribunal is now being asked to review the Commissioner’s objection decisions.
I have decided that the Commissioner’s objection decisions were correct. These are my reasons for coming to that decision.
THE REQUIREMENTS OF THE LEGISLATION
In broad terms, and subject to exceptions that do not apply here, an employer must make superannuation contributions for the benefit of its employees. It must do so for each quarter of a calendar year, and by the 28th day after the end of the quarter. For example, contributions for the quarter ended 31 March must be made to a complying superannuation fund by 28 April, for the quarter ended 30 June by 28 July, and so on. If the contributions are made at the correct rate, and on time, the employer will have no obligation to the Commissioner as far as employee superannuation is concerned. However, failure to make the correct contributions, on time, renders the employer liable to a charge called the “superannuation guarantee charge”, payable to the Commissioner.
The mechanics of the system are as follows (all references are to the Superannuation Guarantee (Administration) Act 1992 – the SGA Act):
·The superannuation guarantee charge is imposed on an employer’s superannuation guarantee shortfall for a quarter – s 16;
·The employer’s superannuation guarantee shortfall for a quarter is the sum of:
othe total of the employer’s individual superannuation guarantee shortfalls for the quarter – s 17(a);
othe employer’s nominal interest component for the quarter – s 17(b); and
othe employer’s administration component for the quarter – s 17(c).
·The employer’s individual superannuation guarantee shortfall for an employee for a quarter is calculated under s 19(1) as:
Total salary or wages paid by the employer to the employee for the quarter
multiplied by
Charge percentage for the employer for the quarter
·The charge percentage during the relevant quarters was 9 per cent (s 19(2)) – but it could be reduced under s 19(1) if, for example, s 23 applied;
·Section 23 would apply if a contribution had been paid “for the benefit of an employee” within the quarter (s 23(2)) or within the period of 28 days after the end of the quarter (s 23(6)) – in that event, the charge percentage would be reduced by applying a formula to take account of the contribution to the complying fund;
·In practical terms, if the employer had made the full contribution to a complying superannuation fund within 28 days of the end of the quarter, the charge percentage would be reduced to zero, and there would be no individual superannuation guarantee shortfall for that employee;
·If, however, the employer had paid less than the full contribution within that 28day period, then it had a superannuation guarantee shortfall for the quarter and it was required to lodge a superannuation guarantee statement by the 28th day of the second month following the end of the quarter – that is, for the quarter ended 31 March, by 28 May, and so on (s 33(1)) – but the Commissioner could allow a later date for lodgment (s 33(1A));
·Section 33(2) specifies the information that must be included in a superannuation guarantee statement – it includes the amounts of each individual superannuation guarantee shortfall for the quarter, and the name and identifying details of each employee to which they relate; the total of those shortfalls; the employer’s nominal interest component for the quarter; the employer’s administration component for the quarter; and the amount of the employer’s superannuation guarantee charge for the quarter;
·In most cases the statement has effect as an assessment of the employer’s superannuation guarantee shortfall for the quarter and the superannuation guarantee charge payable on the shortfall – s 35(1)(c);
·The assessment is taken to have been made on the day on which the statement was lodged, or the 28th day of the second month after the end of the quarter, whichever is later – s 35(1)(d);
·The Commissioner may amend assessments within specified timeframes – s 37.
It is important to keep in mind the distinction between the date by which contributions are to be made – I will call that the contribution due date – and the date by which a statement, if required, is meant to be lodged – which the legislation refers to as the lodgment day. If all the contributions are made by the contribution due date, then no statement needs to be lodged. However, a statement needs to be lodged if the contributions are late – and in that event, the employer is meant to lodge the statement by the lodgment day, which is one month after the contribution due date.
Section 46 explains when the superannuation guarantee charge is payable:
·If an employer lodges a superannuation guarantee statement on or before the lodgment day, then the charge is payable on the lodgment day;
·If an employer lodges a superannuation guarantee statement after the lodgment day, then the charge is payable on the day on which the statement is lodged.
WHAT HAPPENED IN THIS CASE?
As a result of the audit, the Commissioner found that the taxpayer had a superannuation guarantee shortfall for a number of reporting periods that were being reviewed. That led to the taxpayer lodging superannuation guarantee statements for those periods on 10 June 2013. All those statements were late – they should have been lodged in each case by the 28th day of the second month after the end of the period. Lodging the statement for the quarter ended 31 December 2010 on 10 June 2013 meant that the statement was over two years late.
Lodgment of the statements on 10 June 2013 also meant that the superannuation guarantee charge became payable on that date: s 46.
WHAT IS THIS DISPUTE ABOUT?
This dispute concerns the nominal interest component, which is dealt with in s 31 of the SGA Act:
The nominal interest component in relation to an employer for a quarter is the amount that would accrue by way of interest on the total of the employer’s individual superannuation guarantee shortfalls for the quarter if interest were calculated at the rate applicable under the regulations for the purposes of this subsection from the beginning of the quarter in question until the date on which superannuation guarantee charge in relation to the total would be payable under this Act.
So, if a statement for a quarter ended 31 March were lodged on the lodgment day (28 May), the nominal interest component would be calculated at the appropriate rate (10 per cent) from 1 January to 28 May. If the statement were lodged after 28 May, the interest component would run from 1 January to that later date of lodgment. Where, as here in the case of the quarter ended 31 December 2010, the statement is lodged over two years late, the nominal interest component is calculated for the entire period from the beginning of the relevant quarter to the delayed date of lodgment of the statement, even though the contribution may have been made only a few days after the contribution due date, some years before the statement was eventually lodged.
This is why the taxpayer has applied for review of the Commissioner’s decision. The taxpayer notes the unfairness of a so-called interest component which is calculated not by reference to the date on which the contributions are made (which were admittedly late) but by reference to the date of lodgement of a form – which is many years removed from the date of contribution.
RELIEF SOUGHT BY THE TAXPAYER
The taxpayer submits that the imposition of nominal interest component in this case is “unfair, inequitable and unreasonable”. It has urged the Commissioner, and now urges the Tribunal, to “apply s 37 of the SGA Act to amend the nominal interest component to a lesser amount”.
Section 37 deals with the Commissioner’s power to amend superannuation guarantee charge assessments. Relevantly, it provides in subsection (1) as follows:
The Commissioner may, subject to this section, at any time amend any assessment by making any alterations or additions that the Commissioner thinks necessary, whether or not superannuation guarantee charge has been paid in relation to the assessment.
The taxpayer’s submission with respect to s 37 is that the Commissioner can make any alterations that he thinks necessary. In this particular case he should make an alteration that would remove, or at least reduce, the nominal interest component.
CONSIDERATION
In Re Australian Medical Services Pty Ltd and Commissioner of Taxation (2012) 133 ALD 625 Deputy President Deutsch observed that the terms of s 31 specifying the method of calculating the nominal interest component are “clear and unambiguous”. With respect, I agree.
It appears to be a deliberate design feature of the legislation that, once a contribution is made late, then whether it is made a day late or several years late will have no bearing on the calculation of the nominal interest component. What becomes important is not the date of contribution, but the date of lodgment of the statement with the Commissioner.
The question then is whether, having regard to the clear and unambiguous terms of s 31, and the consequence (which is not in dispute) that the nominal interest component has been correctly calculated by the Commissioner, s 37 authorises an amendment to the assessments to remove or reduce that interest component. In my view, it does not.
What the Commissioner is authorised by s 37 to do is to amend an assessment by making any alterations or additions that the Commissioner thinks necessary. An alteration to an assessment would be necessary if, but only if, it brought an assessment into alignment with the Commissioner’s understanding of the facts and the law.
A simple example would be where the Commissioner had made an assessment on an initial understanding that an employee’s wages were $12,000 when in fact they were $10,000. Another example would be where the original assessment had incorrectly used a “charge percentage” of 10 when it should have been 9. In each case the Commissioner would be empowered, and indeed obliged, to amend the assessment so that it reflected the true position.
But what the Commissioner is not authorised by s 37 to do is to turn his back on the rest of the SGA Act and amend an assessment so that it is no longer in alignment with the facts and the law. He cannot pretend that wages were $10,000 when in fact they were $12,000. He cannot pretend that the charge percentage was 6 when in fact it was 9. And he cannot pretend that a statement was made in 2011 when in fact it was made in 2013.
The Commissioner is empowered, and obliged, to get assessments right according to the law. He is not empowered to make assessments which, while perhaps consistent with some undefined notion of fairness, are nevertheless contrary to the law.
DECISION
The objection decisions under review are affirmed.
I certify that the preceding 24 (twenty-four) paragraphs are a true copy of the reasons for the decision herein of Deputy President S E Frost ..........(Sgd) A Tran..............................................................
Associate
Dated 10 October 2014
Date of hearing 15 August 2014 Advocate for the Applicant Mr R Wytkin Counsel for the Respondent Fiona Vernon Solicitors for the Respondent Mr T Hill, ATO Dispute Resolution
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