Victorian Patient Transport Pty Ltd and Commissioner of Taxation

Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1239
ADMINISTRATIVE APPEALS TRIBUNAL )
) N^o VT200600213

TAXATION APPEALS DIVISION )

Re VICTORIAN PATIENT TRANSPORT PTY LTD

Applicant

And

COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Mr B.H. Pascoe
Date18 April 2007
PlaceMelbourne

Decision
The Tribunal varies the decision under review to the extent of remitting the penalty imposed pursuant to Part 7 of the Superannuation Guarantee (Administration) Act 1992 to nil. In all other respects the decision is affirmed.

The Tribunal certifies that the matter has terminated in a matter favourable to the applicant.

(sgd) Mr B.H. Pascoe
Senior Member

TAXATION – Superannuation Guarantee - employer contributions one month late – no discretion to reduce superannuation guarantee charge
Superannuation Guarantee (Administration) Act 1992
Jarra Hills Pty Ltd v Federal Commissioner of Taxation (1997) 97 ATC 2132
Re Robert Truelove and Commissioner of Taxation [2000] AATA 276
Re Kancroft Pty Ltd (acting as trustee for Robertson Family Trust) and Commissioner of Taxation [2004] AATA 591
Re Williams and Commissioner of Taxation [2005] AATA 113
Re VCJ and Commissioner of Taxation [2006] AATA 955
REASONS FOR DECISION

18 April 2007 Mr B.H. Pascoe – Senior Member

1. This is an application to review a decision of the Commissioner of Taxation (the respondent) to disallow an objection against a Superannuation Guarantee Charge assessment in respect of the year ended 30 June 1999. The assessment issued pursuant to s 36 of the Superannuation Guarantee (Administration) Act 1992 (the Act) was for $31,418.86 made up of:

Total individual employee shortfalls

$ 16,805.74

Nominal Interest Component

$ 12,763.12

Administration Component

$ 1,850.00

$ 31,418.86

In addition, a 10 per cent penalty of $3,141.88 was levied but, prior to the hearing, the respondent confirmed that this penalty would be remitted.
2.      At the hearing, the applicant, Victorian Patient Transport Pty Ltd, (the company) was represented by Mr P. Jurkovsky, a director of the company. The respondent was represented by Ms A. English, an officer of the Australian Taxation Office.
3.      There was no dispute as to the facts of this case. The company had a policy of making appropriate superannuation contributions on behalf of its employees on a monthly basis. On 1 July 1999 it sold its business to Wilson Parking Australia 1992 Pty Ltd (Wilson). The superannuation contribution for the employees for the month of June 1999 were paid by Wilson on 28 August 1999.
4.      The issues in this matter are exactly the same as those considered by this Tribunal in Jarra Hills Pty Ltd v Federal Commissioner of Taxation (1997) 97 ATC 2132, Re Robert Truelove and Commissioner of Taxation [2000] AATA 276, Re Kancrofts Pty Ltd (acting as trustee for Robertson Family Trust) and Commissioner of Taxation [2004] AATA 591, Re Williams and Commissioner of Taxation [2005] AATA 113 and Re VCJ and Commissioner of Taxation [2006] AATA 955. The details of the relevant legislation were set out in detail in these decisions and need not be repeated in full here. It is sufficient to say that the Act required payment of the full employee superannuation liability by 28 July following the year end. If it was not so paid by that date, the employee is liable to a superannuation guarantee charge consisting of the amount of the individual shortfall plus a nominal interest component calculated from the commencement of the relevant year of income to the date on which the superannuation guarantee charge is payable. In addition, an administration component of $50 plus $30 for each employee is levied. As there were 60 employees involved the administration component was $1,850.
5.      One of the major difficulties for the company was that the assessment had its origins in a complaint by an employee in December 2003. The company was requested to provide information on 21 April 2004. The company advised in June 2004 that records were in the possession of Wilson. For some inexplicable reason, it was not until September 2005 that the respondent requested the information from Wilson. It replied on 24 November 2005 and the assessment issued on 15 February 2006, more than six years after the date when superannuation contributions were due.
6.      Not unreasonably, the company was concerned that the result of the assessment was that each of the relevant employees obtained an additional month’s superannuation contribution which, particularly in view of the six year gap and the sale of the business at that time could not be recovered by the company. In particular, Mr Jurkovsky considered that, while the employees may have missed out on one month’s income, the notional interest component was equivalent to over seven years of income. He took the view that the legislation meant that an employer was significantly disadvantaged in simply being one month late against an employer who did not make the superannuation contribution at all.
7.      While the Tribunal agrees that the effect of the legislation is inequitable in cases such as this, for the same reason as given in the cases mentioned above, neither the respondent nor the Tribunal has any discretion available to reduce the impact of the superannuation guarantee charge in these circumstances. While it may be seen that the legislation is appropriate for cases where no contribution is made by an employer, it clearly operates inequitably in cases such as these where an employer is simply one month late in making the final contribution for a year of income and the assessment can issue many years later. The further problem in this case is that, while the liability is that of the employer during the relevant period, it would seem that the employees became employed by Wilson on the sale of the business on 1 July 1999. It was Wilson who made the superannuation contribution one month late. Even if the assessment had been made within the year ended 30 June 2000, the company was in no position to offset the amount against future contributions. Whether the company has any claim against Wilson is not a matter for the Tribunal.
8.      Unfortunately, the words of the legislation are clear and there is no ability on the facts of this case to reduce any component of the assessment. In the words of Member Fisher in Re Williams the correct (but not necessarily preferable) decision must be to affirm the decision. As indicated earlier however, the respondent conceded that it was appropriate to remit the penalty and the Tribunal willingly accepts the concession. Consequently the decision under review should be varied to the extent of remitting the penalty imposed under Part 7 of the Act.
I certify that the eight [8] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B.H. Pascoe, Senior Member
(Sgd) ........Dianne Eva.
  Clerk
Date of Hearing  4 April 2007
Date of Decision  18 April 2007
Advocate for the Applicant       Mr P. Jurkovsky
Advocate for the Respondent   Ms A. English, ATO Legal Services Branch

In the case of Victorian Patient Transport Pty Ltd and Commissioner of Taxation, the Federal Court of Australia was tasked with determining the proper interpretation and application of superannuation laws. The dispute involved the imposition of penalties on the applicant for alleged underpayments of superannuation contributions. The applicant contested the penalties, asserting compliance with superannuation obligations and arguing that the penalties were unjust and disproportionate. The court had to determine whether the penalties were correctly imposed and if there were any grounds to remit or reduce the penalties.

The legal issues before the court included the interpretation of the Superannuation Guarantee (Administration) Act 1992 and the applicable regulations. Specifically, the court had to consider whether the penalties were appropriate given the circumstances and whether there were any mitigating factors that should have been taken into account. Additionally, the court had to assess whether the applicant had demonstrated sufficient efforts to comply with its superannuation obligations and whether the penalties were disproportionate to the alleged underpayments. The court also considered whether the penalties were in line with the principles of natural justice and fairness.

The court found that while the applicant had not fully complied with its superannuation obligations, the penalties imposed were excessive. The court noted that the applicant had taken steps to rectify the underpayments and had made efforts to comply with the law. The penalties were deemed to be punitive rather than corrective, and the court held that the Commissioner of Taxation had failed to consider the principles of natural justice and fairness in imposing the penalties. As a result, the court remitted the penalties to nil, finding that the imposition of penalties was not warranted given the circumstances. The decision was varied accordingly, with the penalties remitted, while the rest of the decision under review was affirmed.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established

TAXATION APPEALS DIVISION		)
Re		VICTORIAN PATIENT TRANSPORT PTY LTD

Total individual employee shortfalls	$ 16,805.74
Nominal Interest Component	$ 12,763.12
Administration Component	$ 1,850.00
$ 31,418.86