Vincent Trantino and and and Commissioner of Taxation
[2013] AATA 178
[2013] AATA 178
Division TAXATION APPEALS DIVISION File Number(s)
2012/2411
Re
Vincent Trantino
APPLICANT
And Commissioner of Taxation
RESPONDENT
CORRIGENDUM
Tribunal Dr Gordon Hughes, Member
Date 5 April 2013 Place Melbourne Member Hughes made a Decision under s 43 of the Administrative Appeals Tribunal Act 1975 (the Act) on 28 March 2013.
In accordance with s 43AA(1) of the Act the Tribunal directs that the text in the reasons for decision be altered in the following way:
1. deleting the following words in paragraph 42:
… within the meaning of 318 of the 1936 Act, for the purposes of section 82AAC(2) of the Transition Act.
and replacing them with:
… within the meaning of section 318 of the 1936 Act, for the purposes of section 82AAC(2) of the 1936 Act.
2. deleting the words Transition Act in paragraph 43 and replacing it with 1936 Act.
.................[sgd]....................................
Dr Gordon Hughes, Member
[2013] AATA 178
Division TAXATION APPEALS DIVISION File Number(s)
2012/2411
Re
Vincent Trantino
APPLICANT
And Commissioner of Taxation
RESPONDENT
CORRIGENDUM
Tribunal Dr Gordon Hughes, Member
Date 2 April 2013 Place Melbourne Member Hughes made a Decision under s 43 of the Administrative Appeals Tribunal Act 1975 (the Act) on 28 March 2013.
In accordance with s 43AA(1) of the Act the Tribunal directs that the text in the reasons for decision be altered in the following way:
3. deleting the following words on page 14:
Counsel for the Applicant Mr David Foulds, in-house counsel
Solicitors for the Applicant Mr Peter Gillies – Pitcher Partners Advisors Pty Ltd
4. and replacing them with:
Representatives for the Applicant Mr David Foulds and Mr Peter Gillies – Pitcher Partners Advisors Pty Ltd
..................[sgd]...................................
Dr Gordon Hughes, Member
[2013] AATA 178
Division TAXATION APPEALS DIVISION File Number(s)
2012/2411
Re
Vincent Trantino
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Dr Gordon Hughes, Member
Date 28 March 2013 Place Melbourne The Tribunal affirms the decision under review.
......................[sgd]..................................................
Dr Gordon Hughes, Member
Catchwords
TAXATION – Excess non-concessional contributions – multiple deductions from associated employers – whether employer contributions are to be aggregated when determining applicant's transitional non-concessional contributions cap
Legislation
Income Tax (Transitional Provisions) Act 1997 section 292-80
Income Tax Assessment Act 1936 sections 82AAC, 318
Cases
Saeed v Minister for Immigration and Citizenship [2010] HCA 23
Minister of Homelands Affairs of the Commonwealth v Charles Zentai [2012] HCA 28
REASONS FOR DECISION
Dr Gordon Hughes, Member
28 March 2013
BACKGROUND
The applicant sought a review of an objection decision by the respondent which assessed the applicant's excess non-concessional contributions for the tax period ending 30 June 2007 at $105,113. As a consequence of the objection decision, the applicant was required to pay excess non-concessional contributions tax of $48,877.50 for the income year.
The ultimate question for the Tribunal was whether:
(a)multiple deductible contributions from associated employers should be aggregated when determining whether the applicant's transitional non-concessional contributions cap had been exceeded; or
(b)each employer's contribution should be separately measured against the applicant's deductible limit.
Put more specifically, the question was whether:
(c)each of the applicant's two associated employers in the relevant period could make separate contributions up to applicant's deduction limit of $105,113 without impacting his non-concessional contributions cap of $1,000,000; or
(d)the aggregate of those employer contributions was not to exceed $105,113.
LEGISLATION
The Income Tax (Transitional Provisions) Act 1997 (the Transition Act) section 292-80 provides:
Application of excess non-concessional contributions tax from 10 May 2006 to 1 July 2007
(1)The object of this section is to apply (with modifications) provisions relating to excess non-concessional contributions tax in respect of certain contributions made during the period that:
(a) begins on 10 May 2006; and
(b) ends just before 1 July 2007.
(2) The provisions are as follows:
(a) Subdivision 292-C of the Income Tax Assessment Act 1997 (excess non-concessional contributions tax);
(b) any other provision of that Act, or of any instrument made under that Act, to the extent that it relates to the operation of that Subdivision;
(c) any other provision of any other Act, or of any instrument made under any other Act, to the extent that it relates to the operation of that Subdivision.
Example: Section 390-65 in Schedule 1 to the Taxation Administration Act 1953.
(3) Those provisions apply in relation to that period, and do so as if:
(a) that period were the 2006-2007 financial year; and
(b) the amount of a person's non-concessional contributions for that financial year:
(i) did not include the amount of the person's excess concessional contributions for that financial year; and
(ii) if subsection (6) applies--included the amount mentioned in that subsection; and
(iii) included each contribution covered under subsection (7) in respect of the person; and
(c) the person's non-concessional contributions cap for that financial year were $1,000,000; and
…
(5) Subsection (6) applies if:
(a) contributions are made in respect of a person (the first person ) in either or both of the following periods:
(i) 10 May 2006 to 30 June 2006;
(ii) 1 July 2006 to 30 June 2007; and
(b) those contributions are allowable as a deduction for another person under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act).
(6) The amount to be included in the first person's amount of non-concessional contributions under subparagraph (3)(b)(ii) is the sum of:
(a) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(i), to the extent that they exceed the first person's deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made; and
(b) the amount of those contributions made in the period mentioned in subparagraph (5)(a)(ii), to the extent that they exceed the first person's deduction limit (within the meaning of subsection 82AAC(2A) of the Income Tax Assessment Act 1936) for the income year of the other person in which the contributions were made.
...
Section 82AAC (now repealed) of the Income Tax Assessment Act 1936 (the 1936 Act) provided (at the relevant time):
(1) The amount of a contribution made by a taxpayer is allowable as a deduction to the taxpayer for the year of income of the taxpayer in which the contribution was made if:
(a)the contribution was made to a fund for the purpose of making provision for superannuation benefits payable for another person (whether or not the benefits are payable to a dependant of the other person if the other person dies before or after becoming entitled to receive the benefits); and
(b)the fund is a complying superannuation fund, within the meaning of Part IX, in relation to the year of income of the fund in which the contribution is made; and
(c) one or more of these applies:
(i) the other person was an eligible employee;
(ii)the contribution reduces the taxpayer's charge percentage in respect of the other person under section 22 or 23 of the Superannuation Guarantee (Administration) Act 1992;
(iii) the other person was an employee for the purposes of that Act.
(2) The total of the deductions allowable under subsection (1) for contributions made by a taxpayer, or by a taxpayer and one or more associates of the taxpayer, in a year of income in respect of a particular person must not exceed the person's deduction limit for the year of income (worked out under subsection (2A))
(2A) A person's deduction limit for a year of income is worked out:
(a)by identifying the day in the year of income, or the last day in the year of income, on which the taxpayer, or any of the associates of the taxpayer, made a contribution in respect of the person, where a deduction would have been allowable to the taxpayer, or to the associate, under subsection (1) for that contribution (assuming subsection (2) had not been enacted); and
(b)by working out the age reached by the person as at the end of that day; and
(c)if the year of income is the 1994-95 year of income – by applying the following table:
Age in years
Deduction limit
Under 35
35 to 49
50 and over
$9,000
$25,000
$62,000
and
(d)if the year of income is a later year of income – by applying that table subject to the indexation arrangements set out in subsection (2B).
…
The effect of section 292-80(3)(b) is that where section 292-80(6) of the Transition Act applies, the taxpayer's deductible (employer) contributions for that financial year must be included in the amount of his or her non-concessional contributions.
Pursuant to section 292-80(3)(c) of the Transition Act, the applicant's non-concessional contributions cap for the financial year ending 30 June 2007 was $1,000,000.
Section 292-80(6) of the Transition Act applies in circumstances where section 292-80(5) stipulates that it applies. Section 292-80(5) states that, among other things, subsection (6) applies if deductible contributions have been made during the period in question.
Section 292-80(6)(b) of the Transition Act provides that to the extent such contributions exceed the taxpayer's deduction limit within the meaning of section 82AAC(2A) of the 1936 Act, they are to be included in the taxpayer's amount of non-concessional contributions.
Section 82AAC(2) of the 1936 Act needs to be read in the context of sections 82AAC(1) and 82AAC(2A).
Section 82AAC(1) of the 1936 Act provided that superannuation contributions made by an employer could be deducted by that employer.
Section 82AAC(2) imposed a limit on the amount of allowable deductions for contributions made by a taxpayer and one or more associates of a taxpayer, with such limits to be determined by reference to section 82AAC(2A) of the 1936 Act.
Section 82AAC(2A) provided a formula for determining a person's deduction limit for a year of income. The deduction limit for a person in the applicant's age bracket (50 years plus) for the year ending 30 June 2007 was $105,113.
CONSIDERATION OF ISSUES
The applicant was a member of the Trantino Superannuation Fund (‘the Fund’).
On 26 August 2009 the Fund lodged an amended Member Contributions Statement, stating that in the financial year ended 30 June 2007, the applicant had made non-concessional contributions of $1,000,000; and that employer contributions had totalled $210,226.
The employer contribution of $210,226 comprised $105,113 from Construction Engineering (Aust) Pty Ltd (a trustee of the Construction Engineering Unit Trust) (‘CEA’) and $105,113 from Murdunna Nominees Pty Ltd (trustee of the V Trantino Family Trust) (‘Murdunna’). The applicant was a director of CEA and Murdunna.
The parties agreed that CEA and Murdunna were associates as defined in section 318 of the 1936 Act.
The specific question before the Tribunal was whether sections 292-80(3)(b)(ii) and 292-80(6) of the Transition Act applied to include both amounts of $105,113 in the applicant's non-concessional contributions for the 2007 financial year.
The Tribunal was required to consider whether the reference in section 292-80(6)(b) of the Transition Act to contributions which exceeded the taxpayer's deduction limit, within the meaning of section 82AAC(2A) of the 1936 Act, applied to the aggregate of all employer contributions or separately in respect of each different employer's contributions, where those employers were associates within the meaning of section 318 of the 1936 Act.
The issue arises because section 292-80(6)(b) of the Transition Act requires the inclusion in the taxpayer's non-concessional contributions cap of contributions which exceed the taxpayer's deduction limit within the meaning of subsection 82AAC(2A) of the 1936 Act. Section 82AAC(2A)(a) provides that a taxpayer's deduction limit is determined by reference to contributions by the taxpayer and any associates of the taxpayer…(assuming subsection (2) had not been enacted). Subsection (2) is the provision which requires the aggregation of contributions by associates in determining the total allowable deductions in a year of income.
THE APPLICANT’S SUBMISSIONS
The applicant contended that, given the wording of section 292-80(6)(b) of the Transition Act and section 82AAC(2A) of the 1936 Act, it was necessary to disregard the effect of section 82AAC(2) (limiting the deduction available to entities that are associates). The applicant contended that the Tribunal should simply look to whether there were contributions that would be deductible under the provisions of section 82AAC(1).
The applicant submitted that only to the extent that a contribution from an individual employer exceeded the limit, would it be counted against the transitional non-concessional contributions cap. In other words, the limit for each separate employer which contributed for the applicant, whether the employers were associates or not, was $105,113 each because subsection (2A) specifically required that the effect of section 82AAC(2) be ignored.
The applicant insisted that under section 292-80(6) of the Transition Act, each employer's contribution should separately be measured against the deduction limit of $105,113 In this case, neither of the employer contributions exceeded the limit; and therefore no employer contributions should be measured against the transitional non-concessional contributions cap, and no excess non-concessional contributions tax was payable.
The applicant argued that there was nothing in section 292-80(6) that required an employer contribution to be measured against the transitional non-concessional contributions cap simply because the contribution was not deductible to the employer. Subsection (6) only picked up contributions made by a given employer that exceeded the deduction limit as set out in section 82AAC(2A) of the 1936 Act.
THE RESPONDENT’S SUBMISSIONS
The respondent contended that the applicant's deduction limit for the 2007 income year was an aggregate of $105,113 in respect of all contributions made by all of the applicant's associated employers.
The respondent contended that the applicant's construction of section 292-80(6) of the Transition Act would result in a disparity in the case of contributions made by two or more associated employers. There would be an inconsistency of outcome depending on the number of contributing employers and the degree to which those employers were associated, within the meaning of section 318 of the 1936 Act. The respondent submitted that this was at odds with Parliament's intention.
The amount of the applicant's contributions in the 2007 financial year was $210,226. Accordingly, the respondent contended, if it was found that Murdunna had made a contribution to the Fund of $105,113 on 28 June 2007, then the allowance for both Murdunna and CEA was exhausted upon that contribution being made. No additional contribution made by either Murdunna or CEA would be deductible.
It followed, according to the respondent, that the amount to be included in the applicant's non-concessional contributions under section 292-80(3)(b)(ii) of the Transition Act was therefore $105,113 This being the amount by which the contributions (made in the period between 1 July 2006 and 30 June 2007) exceeded the applicant's deduction limit for the 2007 income year.
CONSTRUCTION OF SECTION 292-80 OF THE TRANSITION ACT
The respondent referred to the Explanatory Memorandum to the Tax Laws Amendment (Simplify Superannuation) Bill 2006, as it related to section 292-80 of the Transition Act, in support of its interpretation.
On the question of whether the construction of section 292-80(6)(b) was intended to produce the same outcome regardless of how many contributing taxpayers were involved, the respondent referred to paragraph 1.107 of the Explanatory Memorandum, which states:
Excess non-concessional contributions tax and the associated administration arrangements will apply with the following modifications:
…
•contributions in excess of a person's age-based deduction limit will be counted as a non-concessional contribution (as these contributions are undeducted employer contributions)
[schedule 1, item 25, sections 292-80(5) and (6) of the Income Tax (Transitional Provisions) Act 1997]
The applicant contended that the respondent did not have a right to refer to the Explanatory Memorandum as the meaning of the section was clear on its face while the Explanatory Memorandum was ambiguous and unclear.
The applicant emphasised that under section 15AB of the Acts Interpretation Act 1901, extraneous material that was not part of an Act could be referred to in interpreting the provisions of the Act where the extraneous material was capable of assisting the ascertainment of the meaning of the provisions, subject to various qualifications.
In this instance, the applicant contended, the respondent was not referring to paragraph 1.107 of the Explanatory Memorandum for the purpose of enhancing or modifying the meaning of section 292-80, which was unambiguous. The respondent had failed, in the applicant's contention, to identify what parts of section 292-80 it considered to be ambiguous or obscure.
In this regard, the applicant referred to the High Court decision of Saeed v Minister for Immigration and Citizenship [2010] HCA 23 in which a majority emphasised that statements as to legislative intention made in explanatory memoranda could not in themselves overcome the need to carefully consider the words of the statute in ascertaining its meaning.
The applicant also referred to Minister of Homelands Affairs of the Commonwealth v Charles Zentai [2012] HCA 28, in which the majority of the High Court emphasised that the ordinary principles of statutory interpretation were not to be displaced in deference to any understanding espoused by the executive arm of government.
The applicant further contended that, even if it was appropriate to refer to the Explanatory Memorandum, it did not offer sufficient insight or clarity about how the provisions should work. The Explanatory Memorandum referred to capturing contributions which were undeducted employer contributions, being a term which did not appear in the Tax Laws Amendment (Simplify Superannuation) Bill 2006, nor anywhere else in taxation legislation prevailing at the time. The applicant submitted that, based on the understanding of the law that prevailed in the year ending 30 June 2007, there was no such thing as undeducted employer contributions, as employer contributions were specifically excluded from being undeducted contributions.
TRIBUNAL'S CONSIDERATION
Dealing first with the Explanatory Memorandum, the Tribunal considers it unnecessary to make a decision on whether it should be referred to when interpreting section 292.80 of the Transition Act. The Tribunal does not regard the provisions in question as ambiguous or unclear. In any event, the Tribunal finds the Explanatory Memorandum itself to be unhelpful on the point in issue.
The Tribunal is of the opinion that the respondent's interpretation of section 292.80(6)(b) of the Transition Act and section 82AAC of the 1936 Act are correct.
Ultimately, the difference between the parties related to the interpretation of sections 292-80(5)(b) and (6)(b) of the Transition Act.
The Tribunal finds that, pursuant to sections 292-80(3)(b)(ii), (5)(a)(ii) and (6) of the Transition Act, contributions had been made by CEA and Murdunna in respect of the applicant during the period 1 July 2006 to 30 June 2007.
For the purposes of section 82AAC(1) of the 1936 Act, the contributions made by CEA and Murdunna were allowable as a deduction for those respective entities.
CEA and Murdunna were associates of the applicant, within the meaning of 318 of the 1936 Act, for the purposes of section 82AAC(2) of the Transition Act.
The applicant's deduction limit for the purposes of section 82AAC(2)(A) of the Transition Act was $105,113.
The combined contributions of CEA and Murdunna were $210,226.
None of the above facts, ultimately, was in dispute.
The question, therefore, was whether, for the purpose of determining whether the applicant's deduction limit of $105,113 had been exceeded, it was appropriate to aggregate the contributions of CEA and Murdunna (in which case the deduction limit would clearly have been exceeded by $105,113) or whether it was appropriate to consider the respective contributions of CEA and Murdunna separately (in which case the applicant's deduction limit would not have been exceeded).
After taking into account the facts which were agreed between the parties, the one question remaining for the Tribunal, under section 292-80(6)(b) of the Transition Act, was whether those contributions [made by CEA and Murdunna] …exceed [the applicant's] deduction limit [of $105,113] within the meaning of subsection 82AAC(2)(A) of the 1936 Act. The reference in section 292-80(6)(b) to those contributions is a reference to contributions made in the period mentioned in subparagraph (5)(a)(ii).
Section 292-80(5)(b) refers to those contributions [that is, the contributions of $105,113] [which] are allowable as a deduction for another person [that is, CEA and Murdunna] under subsection 82AAC(1) of the Income Tax Assessment Act 1936 (apart from subsection 82AAC(2) of that Act).
There is no question that paragraph (b) of section 292-80(5) is unfortunately drafted. The intent and effect of the words apart from subsection 82AAC(2) is that section 82AAC(2), (which aggregates contributions made by associates of the taxpayer when determining the total deductions allowable) has no application. In other words, any number of associates of the taxpayer could make separate contributions up to the taxpayer's deduction limit.
While this interpretation has some superficial merit, it is not sustainable under close analysis. It is also at odds with the clear intent of the legislation.
In the Tribunal's opinion, the words apart from subsection 82AAC(2) clearly convey an intention that when determining whether contributions exceed the taxpayer's deduction limit for the purposes of section 292-20(6)(b) of the Transition Act, regard should be had to contributions which are allowable as a deduction under section 82AAC(1) of the 1936 Act, without taking account of any limits imposed on the total of allowable deductions as prescribed in section 82AAC(2) of the 1936 Act.
The limits imposed by section 82AAC(2) are not intended to be considered in determining whether section 292-80(6) applies – it is only relevant to have regard to the amount of contributions made by a taxpayer, or any associates of the taxpayer, in determining whether section 292-80(6)(b) applies.
It is not logical to extrapolate that by virtue of section 292-80(5)(b) of the Transition Act, section 82AAC(2) of the 1936 Act should be ignored when applying section 292-80(6)(b), as opposed to determining whether it applies at all.
In other words, as a consequence of section 292-80(5)(b), section 292-20(6)(b) of the Transition Act applies. The effect of that application is that the contributions made by separate employers, who were associates of the taxpayer for the purposes of section 82AAC(1) of the 1936 Act, must still be aggregated as required by section 82AAC(2). With the consequence that the applicant's deduction limit within the meaning of section 82AAC(2A) was exceeded. On this interpretation – which in the Tribunal's opinion is the only logical interpretation – the contributions of CEA and Murdunna must be aggregated for the purposes of section 292-80(5)(b) of the Transition Act. It follows that section 292(6)(b) applies; and that those contributions, as aggregated, exceed the taxpayer's deduction limit of $105,113 by the sum of $105,113.
DECISION
For the above reasons, the Tribunal affirms the decision under review.
I certify that the preceding 55 (fifty‑five) paragraphs are a true copy of the reasons for the decision herein of
Dr Gordon Hughes.
...................[sgd]........................................
K. Randall, Associate
Dated: 28 March 2013
Date of hearing 27 February 2013 Counsel for the Applicant
Mr David Foulds, in-house counsel
Solicitors for the Applicant
Mr Peter Gillies – Pitcher Partners Advisors Pty Ltd
Counsel for the Respondent Mr Peter Nicholas Solicitors for the Respondent Mr Nicholas Kennedy – Australian Taxation Office, Legal Services Branch
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