Ward and Commissioner of Taxation (Taxation)

This matter concerned an appeal by Mr Colin Ward against a decision of the Commissioner of Taxation to disallow his objection to an excess contributions tax assessment for the 2010/2011 financial year. The dispute arose from Mr Ward’s non-concessional contribution of $450,000 to a superannuation fund in July 2008, which, due to the operation of the "bring forward rule," meant he had no capacity for further non-concessional contributions in the 2008/2009 and subsequent two financial years. This resulted in his subsequent contribution in 2010/2011 exceeding his cap, attracting the excess contributions tax. The appeal was heard by Deputy President Gary Humphries of the Administrative Appeals Tribunal.

The primary legal issue before the Tribunal was whether Mr Ward's circumstances constituted "special circumstances" that would permit the Commissioner to disregard or allocate his excess contributions to another tax year under section 292-465 of the *Income Tax Assessment Act 1997* (Cth). This determination was to be made consistently with the object of Division 292, which is to ensure that the amount of concessionally taxed superannuation benefits received by a person results from contributions made gradually over their lifetime. The Tribunal was required to consider whether the $450,000 contribution, which was sourced from a combination of Mr Ward's and his wife's cashed-out superannuation benefits, the sale of a property, and savings, represented contributions made gradually over Mr Ward's life.

The Tribunal reasoned that, following the Federal Court's decision in *Commissioner of Taxation v Dowling* [2014] FCA 252, a lump sum contribution that is not exclusively derived from superannuation savings accumulated over a taxpayer's lifetime cannot be considered consistent with the object of Division 292. In *Dowling*, the Federal Court held that a lump sum contribution from a husband to his wife's superannuation fund, made as part of an arrangement to preserve pension entitlements, did not represent contributions made gradually over the wife's lifetime. Applying this principle, the Tribunal found that only a minority of the funds Mr Ward contributed were from his own previously accumulated superannuation benefits, with the majority coming from other sources. Therefore, the contribution could not be said to represent contributions made gradually over his life, and the discretion under section 292-465(1)(b) was not enlivened.

Consequently, the Tribunal affirmed the Commissioner's decision of 7 June 2013 to disallow Mr Ward's objection. Despite acknowledging the harshness and unfairness of the outcome, given Mr Ward's intentions and the professional advice he received, the Tribunal was bound by the Federal Court's authoritative interpretation of the relevant legislative provisions. The Tribunal reiterated its previous comment that the strict application of the law resulted in a severe penalty and urged the Commissioner to reconsider the enforcement of the penalty, or for the Minister for Finance to consider an act of grace payment.