Tran v Commissioner of Taxation
[2012] AATA 123
•28 February 2012
[2012] AATA 123
Division TAXATION APPEALS DIVISION File Number(s)
2011/4442
Re
Souraya TRAN
APPLICANT
And
COMMISSIONER OF TAXATION
RESPONDENT
DECISION
Tribunal Dr Gordon Hughes, Member
Date 28 February 2012 Place Melbourne Decision Summary
The Tribunal affirms the decision under review.
[sgd] Dr Gordon Hughes
.................................................
Member
Excess Contributions Tax – excess contribution resulting from reliance upon media reports – whether interpretation of the law based upon incorrect media reports is insufficient to constitute special circumstances
Legislation
Income Tax (Transitional Provisions) Act 1997
Income Tax Assessment Act 1997 sections 292-5; 292-20(2); 292-85(2), (3) and (4); 292‑465(3), (4), (5) and (6)Cases
Case 23/96 96 ATC 278
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Beadle v Director-General of Social Security (1984) 6 ALD 1
Re Ivovic v Director-General of Social Services [1981] AATA 57,
Re Kerr v Federal Commissioner of Taxation (2007) 67 ATR 710,Re Whitlock v Secretary, Department of Families, Housing, Community Services
and Indigenous Affairs (2010) 54 AAR 1,
Tefonu Pty Ltd v Insurance and Superannuation Commissioner (1993) 44 FCR 361
Secondary Materials
PS LA 2008/1: The Commissioner's discretion to disregard or reallocate concessional and non-concessional contributions for a financial year
REASONS FOR DECISION
The Tribunal was asked to determine whether the applicant's excess superannuation contributions of $9,016 for the financial year ended 30 June 2008 should be disregarded or allocated to another financial year.
The applicant was over the age of 65 during the financial year in question. During that year, she made non-concessional contributions of $159,016 to two superannuation funds, the Victorian Superannuation Fund and the Aida Superannuation Fund.
The parties do not dispute that the applicant was only entitled to make contributions of $150,000 in the year ended 30 June 2008 before becoming liable to excess contributions tax. This is the effect of sections 292-85(2) and 292-20(2) of the Income Tax Assessment Act 1997 (the Assessment Act).
The applicant told the Tribunal that she had initially contributed $139,016 in non‑concessional contributions in the relevant year, under the supervision of her financial adviser. She then made a subsequent contribution of $20,000 on her own initiative without seeking professional advice.
The respondent issued a notice of assessment for excess contributions tax in respect of $9,016 together with excess contributions tax liability of $4,192.44.
The applicant asserted that her contributions were based on her interpretation of media reports, via television and newspaper, to the effect that non-concessional contributions of up to $450,000 could be made over a period of three years. She argued that the information as released via the media was incomplete because it failed to mention special conditions applicable to individuals over the age of 65 years.
The Income Tax (Transitional Provisions) Act 1997 amended the Assessment Act. It was introduced into parliament on 7 December 2006 and provided a $150,000 annual limit on non-concessional contributions from 1 July 2007. People aged less than 65 were able to bring forward two years of non-concessional contributions, enabling $450,000 to be contributed in one year with no further contributions allowed in the next two years. The legislation received Royal Assent on 15 March 2007.
The applicant argued that her error was attributable to special circumstances for the purposes of section 292-465(3) of the Assessment Act.
The respondent pointed to Practice Statement Law Administration PS LA 2008/1, The Commissioner's discretion to disregard or reallocate concessional and non-concessional contributions for a financial year, which describes the following as not constituting special circumstances:
(a)misunderstanding the law;
(b)tax payer error;
(c)effects of changes to a legislative scheme; and/or
(d)the ordinary financial consequences of the imposition of a tax on a tax payer.
The applicant's sole assertion was that her incorrect understanding of the law was a consequence of inaccurate media information. In essence, she was seeking a determination that the excess allocation of superannuation funds should be disregarded or reallocated to a subsequent year. In this regard, section 292-465 of the Assessment Act is relevant in that it provides the Commissioner with the ability, in certain circumstances, to disregard or reallocate contributions made by a taxpayer.
Section 292-465(3) of the Assessment Act is of specific relevance to this application. It provides that:
The Commissioner may make the determination only if he or she considers that:
(a) there are special circumstances; and
(b) making the determinations consistent with the object of this Division.
Section 292-465(5) provides the Commissioner with the ability, specifically, to consider whether a contribution should be more appropriately allocated to a different financial year.
The term special circumstances has been considered on numerous occasions by the Tribunal and by the Federal Court of Australia.
In the context of social security legislation, the Tribunal was referred by the respondent to Re Beadle and Director-General of Social Security (1984) 6 ALD 1, Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Re Whitlock v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs, (2010) 54 AAR 1 and Re Ivovic and Director-General of Social Services [1981] AATA 57.
The Tribunal was referred to other decisions, such as Tefonu Pty Ltd v Insurance and Superannuation Commissioner (1993) 44 FCR 361, Case 23/96 96 ATC 278, and Re Kerr v Federal Commissioner of Taxation (2007) 67 ATR 710.
The consistent interpretation adopted by the courts and by this Tribunal in these decisions has been that whilst each case must turn on its merits, circumstances will not be special unless they are out of the ordinary. The prime determinant is not the extent of the taxpayer's misfortune but rather the uniqueness of events which has given rise to that misfortune. It has consistently been observed that an innocent mistake or ignorance of the law does not, in itself, constitute special circumstances.
Section 292-465(3) of the Assessment Act has two limbs. Paragraph (a) refers to special circumstances. Paragraph (b) states that, in addition to special circumstances, the Commissioner can only exercise his or her discretion to disregard or reallocate a contribution when it would be consistent with the object of Division 292.
It is unnecessary for the Tribunal to determine whether the second limb applies because, for the reasons explained in this decision, the Tribunal is of the opinion that special circumstances do not exist. In any event, the respondent emphasised that the object of Division 292 of the Assessment Act included the discouragement of contributions exceeding the cap. The respondent contended that it would be inconsistent with the object of Division 292 to exercise a discretion in circumstances where excess contributions resulted from inadvertence, ignorance or incorrect advice, or from a relatively trivial excess contribution.
The Tribunal is of the opinion that the applicant's claim cannot succeed. There was clearly an excess contribution which, in the absence of special circumstances, renders her liable to excess contributions tax.
The legislation does not contemplate special circumstances as including simple errors, albeit innocent errors or other mistakes which are made in good faith. It is relevant that the applicant was unable to identify the specific news item upon which she relied. Neither could she point to an incorrect dissemination of information by the respondent.
Even if the Tribunal was to accept that the applicant correctly interpreted a media report which failed to mention the effect of the legislation on persons over the age of 65 , it may well have been the case that the incorrect information was conveyed as a consequence of media editing as opposed to incorrect information issued by the respondent.
A prudent person in the applicant's position should have sought professional advice as to the operation of the law, and it is notable that applicant apparently chose not to consult her existing financial adviser when making the final contribution which took her over the limit.
In the absence of evidence that the respondent published incorrect and misleading information, the Tribunal considers that a choice by the applicant to rely upon media reports, and not to seek professional advice, constituted a decision to proceed at her own risk.
For the above reasons, the Tribunal dismisses the application and affirms the decision under review.
24. I certify that the preceding 23 (twenty-three) paragraphs are a true copy of the reasons for the decision herein of Dr Gordon Hughes, Member.
[sgd] Dianne Eva
Clerk
Date 28 February 2012
Date of hearing 20 February 2012 Advocate for the Applicant Self-represented Advocate for the Respondent Ms Anna Longley, Australian Taxation Office, Legal Services Branch
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