VX98D and Australian Prudential Regulation Authority - [2000] AATA 250

DECISION AND REASONS FOR DECISION [2000] AATA 250

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V98/1183

GENERAL ADMINISTRATIVE DIVISION )

Re VX98D
Applicant

And Australian Prudential Regulation Authority
Respondent

DECISION

Tribunal Deputy President B.M. Forrest

Mr D.L. Elsum, AM, Member
Mr W.G. McLean, Member

Date28 March 2000
PlaceMelbourne

Decision The decision under review is affirmed.

.........(Sgd. B.M. Forrest)............
Deputy President
SUPERANNUATION – Superannuation supervisory levy – lodgment of annual returns of fund - late lodgment amount of levy imposed – whether returns lodged late – exercise of discretion to remit late lodgment amount of levy – decision under review affirmed.
Occupational Superannuation Laws Amendment Act 1991
Superannuation Supervisory Levy Act 1991 ss. 5, 6(1) and (2)
Superannuation (Excluded Funds) Supervisory Levy Imposition Act 1991
Occupational Superannuation Standards Act 1987 ss. 15DA, 15DB and 15DF
Superannuation Entities (Taxation) Act 1987
Superannuation (Excluded Funds) Taxation Act 1987
Australian Prudential Regulation Authority Act 1998

REASONS FOR DECISION

28 March 2000 Deputy President B.M. Forrest Mr D.L. Elsum, AM, Member Mr W.G. McLean, Member

This is an application for review of a decision made on 31 March 1998 by a delegate of the Insurance and Superannuation Commissioner ("the Commissioner") confirming an earlier decision by another delegate on 28 January 1998 to refuse to remit the whole or part of a late lodgment amount of levy payable by the applicant in relation to the late lodgment of the 1991-92 and 1992-93 annual returns of the Superannuation Fund ("the Fund") of which the applicant is trustee. The decision under review was communicated to David Mond & Associates ("David Mond"), accountants for the Fund in a letter dated 9 April 1998.
The levy regime was introduced by the Occupational Superannuation Laws Amendment Act 1991 (No. 55 of 1991) which enabled collection of a superannuation supervisory levy on superannuation funds imposed by the Superannuation Supervisory Levy Act 1991 (No. 61 of 1991) ("the Levy Act") which from 1 July 1998 became entitled the Superannuation (Excluded Funds) Supervisory Levy Imposition Act 1991. The levy, which was intended as a cost recovery measure for the supervision of the superannuation industry, commenced with the annual returns for the 1990-91 income year and is due and payable on the lodging of annual returns. The levy had two components, a basic levy and a late lodgment amount to be added to the basic levy when a return is lodged after a grace period of 14 days following the specified date of lodgment.
The former s. 15DA of the Occupational Superannuation Standards Act 1987 (No. 97 of 1987) subsequently entitled Superannuation Entities (Taxation) Act 1987 ("SETA") on 1 July 1994, and now entitled Superannuation (Excluded Funds) Taxation Act 1987 ("SEFTA") from 1 July 1998, created a liability on trustees who lodge a return to pay a levy. Under s. 15DB levy is due and payable at the time of lodgment of the return. Under s. 15DF the Commissioner has a discretion to remit the whole or part of a late lodgment amount of levy.
The respondent authority, the Australian Prudential Regulation Authority ("APRA") was created by the Australian Prudential Regulation Authority Act 1998 (No. 50 of 1998) which came into force on 1 July 1998. APRA took over many of the functions of the Commissioner including the functions relevant to a consideration of this matter.
The relevant legislative provisions, as at 15 April 1993 and 15 January 1994, that is, when the 1991-92 and 1992-93 returns were respectively due were as follows:
"s. 15DA Liability to levy
15DA. The trustees who lodge a return under subsection 12(1), 14(1) or 15B(1) are liable to pay a levy on that lodgment.
…...
s. 15DF Remission of levy and penalties
15DF. The Commissioner may remit the whole or a part of the following:
(a) so much of an amount of levy as represents a late lodgment amount;
(b) an amount of late payment penalty."
The imposition and amount of levy payable is defined in the Levy Act:
"Imposition of superannuation supervisory levy
5. Levy payable in accordance with section 15DA of the Occupational Superannuation Standards Act 1987 is imposed.
Amount of Levy
6. (1) The amount of levy payable on the lodgment of a return for a year of income is the sum of:
(a) the amount (in this section called the "basic levy amount") ascertained in accordance with the regulations; and
(b) if the return is lodged after the end of the period of grace for the return - the late lodgment amount worked out under subsection (2).
(2) The late lodgment amount is the amount obtained by:
(a) calculating, for each levy month any part of which occurs in the period commencing at the beginning of the first levy month after the end of the period of grace for the return and ending on the day the return is lodged, whichever is the greater of the following amounts:
    (i) the amount calculated using the following formula and rounded up
to the nearest whole dollar:
Basic levy x 0.2
                 amount       12
where:
"Basic levy amount" means the basic levy amount for the return;
(ii) the amount calculated using the following formula and rounded up
to the nearest whole dollar:
Minimum basic levy amount x 0.125
where:
    "Minimum basic levy amount" means the minimum basic levy      amount for the year of income; and
(b) aggregating those amounts.
..."
The facts are in dispute. Briefly, it was asserted on behalf of the applicant that the 1991-92 return was lodged in March 1993 and the 1992-93 return lodged in December 1993. Evidence was given on behalf of the applicant by Mr Paul Sim, an accountant and senior associate with David Mond, and a former employee Mr Phillip Lagos, also an accountant. Mr Sim said that although he had some involvement with the applicant's affairs he was not responsible for the lodging of the annual returns of the Fund and did not do so. That was, he said, the responsibility of Mr Lagos. Consequently, Mr Sim's evidence was of limited assistance.
It was not in dispute that on 21 November 1996 David Mond wrote to the Insurance & Superannuation Commission ("the Commission") in the following terms (omitting formal parts and tax file number):
"We forward herewith the 1991/92 and 1992/93 Annual Returns of the [applicant] Superannuation Fund for your urgent attention.
These returns were lodged in 1993 and 1994 respectively but apparently have been lost or misplaced in the system."
This letter and enclosures were received by the Commissioner on 25 November 1996. On 8 January 1997 David Mond wrote to the Commission requesting that late lodgment amounts be remitted on the basis that the returns were actually lodged (see letter dated 21 November 1996) and receipt confirmed by the Commission's office.
In January 1998 the Commissioner refused the request for remission. David Mond requested reconsideration of the decision, maintaining that the returns were lodged within the required time and that the Commissioner had failed to record the lodgment. Subsequently in a facsimile message on 10 June 1998 David Mond forwarded a copy of two letters to the Commission on the letterhead of Specialized Management & Consultancy Services (a business associated with David Mond) the first dated 23 September 1993 which read:
"Further to your letter and advice dated 9th September, 1993, please find enclosed the following ISC Returns for the year ended 30th June, 1992.
[two other named superannuation funds]
All information is now complete as per your request."

and the second dated 31 August 1994 which read:

"Enclosed are the following ISC Returns for the year ended 30th June, 1993:-
[the Fund and four other named superannuation funds]"

It should be said here that APRA and its predecessor have no record of having received either of these letters or of having written to David Mond on 9 September 1993 (see contents of first letter) in relation to the Fund. The applicant was unable to produce any correspondence from the Commissioner dated 9 September 1993. In a further letter to the Commission dated 22 June 1998 David Mond maintained that the returns were lodged, "but apparently no lodgment fee was paid". The lodgment fee was enclosed with the letter of 22 June 1998.
The request for remission was refused on the basis the Commissioner's records show the relevant returns were not received until 25 November 1996.
According to Mr Sim, the letter of 21 November 1996 to the Commission was prompted by an amended income tax assessment which had been issued to the applicant in November 1996 because the Fund did not have a compliance certificate. Subsequently, the Commissioner certified that the Fund satisfied the conditions set out in the Superannuation Entities (Taxation) Act 1987 and advised the taxation office accordingly.
In cross examination Mr Sim, agreed that no acknowledgment was received of the 23 September 1993 or 31 August 1994 letters. He agreed that it was usual practice in David Mond's office for the trustee of a fund to provide a cheque in payment of the basic levy and for the cheque to accompany the lodgment of the return.
Following an indication given by the Tribunal of a provisional view it had formed on the evidence heard, Mr Mond who represented the applicant arranged for Mr Lagos to give evidence. Mr Lagos was employed by David Mond from 1991 to 1996. In evidence Mr Lagos confirmed he had the primary responsibility in the office for the accountancy work of the Fund. It was usual practice for superannuation fund returns to be prepared at the same time as income tax returns. However he was unable to shed any light on the present matter. He had no recollection of the letters 23 September 1993 and 31 August 1994 to the Commission, or if payment of levy was made when fund returns were lodged. He was also under the impression that during the relevant years it was compulsory for superannuation funds to lodge returns. Mr Lagos' evidence did not take the matter any further.
Ms Julie Fitch was called by the respondent. She was employed by the respondent and its predecessor for 10 years until September 1999. From 1989-96 her duties were in processing annual returns and she was a supervisor in the area between 1992-96. Her duties included the processing of receipts of payment of levies, letters requesting remittance of late lodgment levies and documentation for referral to the legal branch in relation to remission decisions.
In a witness statement she detailed the practice of the processing of returns:
"…
When annual returns were first received by the ISC (prior to November 1995) the mailbags containing these annual returns were opened at a designated "mail only" table. There were two staff members involved in this process for security reasons, as there would usually be cheques representing the basic levy attached to the annual returns. The annual returns were stamped with the date of receipt and were coded in the "office only" section of the return. They were then batched into bundles of 25, given a header sheet detailing the amount of money received and assigned a batch date (representing the date of receipt) and batch number for that day. The returns were then placed in order of date of receipt on a shelf ready for processing. The batches were then processed in date received order. Details of the annual return including date received and levy paid were then entered into the database.
A completed annual return, (accompanied by the correct basic levy) that was recorded as "satisfactory" on the database would be automatically issued with a compliance certificate within 3 to 6 months of the return being recorded on the database. The compliance certificates were downloaded onto a diskette and forwarded to an outside mailing house. The outside mailing house would then print and mail the compliance certificates out to the funds. Any fund that required an earlier notification was issued with a manual compliance certificate on request to the processing centre via telephone, facsimile or letter.
The Australian Taxation Office was, on a regular basis, given a list of the complying funds which had completed and lodged their annual returns with the appropriate levy.
If an annual return was received unaccompanied by the levy payable, it would be stamped with the date of receipt, placed in a separate tray and returned to the lodger to be lodged with the basic levy payable. These annual returns were not recorded on the database.
Annual returns, which were not accompanied by the correct amount of the basic levy, were stamped with the date of receipt and recorded on the database. An invoice for the outstanding amount of the levy was issued. The annual return would remain in "suspense", that is the computer system would not issue a compliance certificate until the outstanding amount was paid or waived.
…
If the ISC had received an incomplete return from the applicant (accompanied by the relevant levy cheque), then the annual return would have been sent back to the applicant with advice of details of the deficiencies in the annual return within 6 months of receipt. The fact of the annual return being incomplete, (due to missing trustee's and auditor's signatures) would have been recorded on the database. The database does not indicate incomplete lodgement of the annual returns for [the Fund] in relation to the 1991/92 or 1992/93 years. The database indicates that these annual returns were lodged on 25 November 1996."
In regard to the applicant's assertion of having lodged the relevant returns, while the Tribunal accepts that it was the practice of David Mond to lodge superannuation fund returns in batches, the letter dated 23 September 1993 to the Commission provides no support at all for the applicant's claim of lodgment of the 1991-92 return at that time for the simple reason that neither of the two fund returns said to have been included in that letter is that of the Fund. Nor is there any evidence of the Fund return being otherwise lodged on or about that time or at any other time prior to 25 November 1996.
The letter to the Commission dated 31 August 1994 states that the 1992-93 return of the Fund is included but there is also no record of this letter having been received by the Commissioner's office. The fact that there is no record of receipt of the returns on the respondent's database or that a certificate of compliance was ever issued which was the practice within 3-6 months of being so recorded after a completed return had been lodged and the correct levy paid (see evidence of Ms Fitch) provides support for an inference to be drawn that the return was not lodged as claimed. Further significant support is given to the strength of the inference by the absence of any evidence before the Tribunal of payment of levy at any time prior to actual payment in 1998.
In the relevant years lodgment of the annual returns of a superannuation fund was voluntary. However if a fund wished to receive a notice of compliance in order to qualify for income tax concessions, then a return had to be completed and lodged. It is in our view stretching credibility to accept that an accounting firm via its associated business, Specialized Management & Consultancy Services, employed to undertake accounting and taxation work for the Fund and familiar with the lodging of returns to regulatory authorities, and with the knowledge that a levy is payable on lodgment, would have lodged returns without at least making some reference to the levy, if payment was not included when lodged.
Further, a fair reading of the contents of the letter dated 22 June 1998 from David Mond to the Commission in which waiver or part remission of the late lodgment amount is requested, leaves the clear impression that the author tacitly acknowledged that the 1992 and 1993 returns were not lodged when they were due and attributed responsibility for this to a staff member "who failed to perform his duties as required".
We find as a probability that the annual returns of the Fund for the years 1991-92 and 1992-93 were lodged in November 1996 and not before.
The next question is whether there are any circumstances which would warrant the exercise of the discretion in s. 15DF to remit the whole or part of the late lodgment amount. A copy of the guidelines approved by the Commissioner for the guidance of officers in determining whether to exercise the discretion under s. 15DF in relation to the 1993-94 and earlier years of income were included in the material before the Tribunal. While the guidelines do not have statutory force and are not binding on the Tribunal, it is proper that the Tribunal has regard to them in determining this matter. The guidelines set out a list, not exhaustive, of the circumstances in which discretion should generally be exercised. They are:
"1. the fund has been wound up;
2.the fund is a small fund, ie. has less than $10,000 in assets, and had $1,000 or less in contributions for the most recent year of income;
3.the death, or serious illness, or one of:

a trustee;
the accountant responsible for preparing the return;
the administrator of the fund;
4.the bankruptcy, insolvency, or receivership of the sponsoring employer;
5.the appointment of a judicial manager to the life office where the assets of the fund are invested;
6.legal action against the trustees of the fund which has affected finalisation of the funds accounts;
7.substantiated cases of incorrect information being given by an officer of the ISC;
8.delays by the ISC in providing information;
9-10. (relevant only to 1994-95 and later years);
11.the fund has a minimal balance:
if the current balance is less than $10,000 the whole late levy may be remitted
if the current balance is between $10,000 and $30,000 the late levy may be reduced to $200."

The guidelines also outline circumstances in which the discretion should generally not be exercised:
"1.the return was late because of ignorance of ISC requirements by the trustee or accountant;
2.incorrect information was provided by bodies other than the ISC eg. life offices, accountants."
Mr Mond submitted that the late lodgment amounts should be remitted in part if not in full because the Commissioner breached a duty of care to members of superannuation funds. As we understood the submission it was said that as the legislation in the area of superannuation has undergone significant change and amendment over a number of years there was a duty on the Commissioner to notify trustees if returns had not been lodged, referring by way of analogy to the final notice procedure employed by the Australian Taxation Office in relation to the lodging of income tax returns.
We do not consider that the respondent as a regulatory authority is under a duty of care in the sense of giving rise to liability in negligence by ensuring that persons likely to be affected by the exercise of the statutory powers of the authority are aware of their responsibilities, especially so when the applicant was under no legal obligation to furnish a return in the relevant years. Lodgment was necessary only if a compliance notice was required for concessional income tax treatment. That is not to say that authorities have no role to play in this regard, rather the reverse, that it is reasonable to expect that an authority will facilitate public awareness, typically with publicly available information pamphlets, circulars and releases to accountants and other professional advisers and the superannuation industry generally in addition to the instructions provided for completing returns.
In the present case there was nothing in the evidence to suggest any negligent misstatement or representation on the part of the Commissioner to the applicant or of any relationship between the Commissioner and the applicant which could be equated with the duty of care by professional advisers to exercise professional competence which if breached may ground a liability in negligence. In our view the applicant's submission in regard to duty of care is without substance.

In submissions, Mr Mond complained that the guidelines for the exercise of discretion were not readily available. Whatever difficulty was experienced in obtaining the guidelines is irrelevant to the merits of the present matters and cannot constitute a ground for remission. No substantive reason has been advanced as to why the returns were late. The primary position of the applicant, that the returns were lodged, we do not, as stated, accept. Furthermore there is nothing in the evidence to suggest that the applicant's circumstances fall within any of the circumstances described in the guidelines or any other relevant circumstance as would warrant the exercise of discretion in the applicant's favour. Certainly none was raised by the applicant.
For these reasons the decision under review is affirmed.
I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President B.M. Forrest
Mr D.L. Elsum, AM, Member
Mr W.G. McLean, Member
Signed:         .....................................................................................
  Personal Assistant
Date/s of Hearing  16 November 1999
Date of Decision  28 March 2000
For the Applicant  Mr D. Mond
For the Respondent                 Mr C. Fogarty, General Counsel, APRA