Vernik and Commissioner of Taxation (Taxation)

The case of *Vernik and Commissioner of Taxation* concerned a dispute over excess transfer balance tax liability. The applicant, Mr. Vernik, was the recipient of three retirement phase superannuation income streams. The Commissioner of Taxation determined that Mr. Vernik had exceeded the $1,600,000 cap on the total amount transferable into the retirement phase of superannuation as at 1 July 2017. Despite Mr. Vernik commuting a portion of his superannuation balance to address the excess, he disputed the resulting tax liability.

The primary legal issues before the court were whether the Commissioner had correctly determined the period of the excess transfer balance, and whether the Commissioner possessed any discretion to adjust or waive the excess transfer balance tax liability assessed. Mr. Vernik argued that he should have been afforded a grace period, contending that he was not aware of his excess transfer balance until he was formally notified by the Commissioner on 3 January 2018, and that the superannuation funds had not reported the relevant values to the Commissioner until later dates.

The court found that the Income Tax Assessment Act 1997 (ITAA 1997) does not provide the Commissioner with discretion to waive or adjust excess transfer balance tax liabilities. The court reasoned that the tax liability is based on the period of excess, not on when the taxpayer is informed of the excess. The court noted that the Commissioner acted in a timely manner, given the dates on which the superannuation funds provided the necessary information. Furthermore, the transitional provisions for a grace period did not apply to Mr. Vernik as his excess transfer balance exceeded $100,000 and remained in existence as at 1 January 2018.

Consequently, the Tribunal affirmed the Commissioner's decision, finding that the excess transfer balance period was correctly determined as commencing on 1 July 2017 and ending on 8 August 2018. The court was satisfied that the excess transfer balance tax liability of $2,867.85, as detailed in the notice of assessment, had been calculated in accordance with Division 294 of the ITAA 1997.