XGDM and Commissioner of Taxation (Taxation and business)
[2025] ARTA 57
•24 January 2025
XGDM and Commissioner of Taxation (Taxation and business) [2025] ARTA 57 (24 January 2025)
Applicant:XGDM
Respondent: Commissioner of Taxation
Tribunal Number: 2023/6819
Tribunal:Deputy President Thompson SC
Place:Perth
Date:24 January 2025
Decision:The Tribunal affirms the decision under review.
………………….[sgd]……………………
Deputy President
CATCHWORDS
TAXATION – application for review of an objection decision – Commonwealth Superannuation Scheme – excess non-concessional contributions tax – general transfer balance cap – calculation of total superannuation balance – Lump Sum method – Transfer Value method
LEGISLATION
Administrative Review Tribunal Act 2024 (Cth) – ss 12, 23
Governance of Australian Government Superannuation Schemes Act 2011 (Cth)
Income Tax Assessment Act 1997 (Cth) – ss 282-85(1), 292-80, 292-85, 307-5, 307-205(2), 307-230
Superannuation Act 1976 (Cth) – ss 3, 46(2), 55, 58(3), 62, 110P(1A), 110Q, 135
Superannuation (Excess Non-concessional Contributions Tax) Act 2007 (Cth) - s 5
Taxation Administration Act 1953 (Cth) – s 14ZL, Schedule 1 s 97-25
Taxation (Interest on Overpayments and Early Payments) Act 1983 (Cth) – ss 8A(1)(a), 8E(1)(d)
Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 (Cth)
CASES
Landcom v Commissioner of Taxation [2022] FCA 510; (2022) 114 ATR 639
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
SECONDARY MATERIALS
Commonwealth, Parliamentary Debates, House of Representatives, 9 November 2016, 3383
Pearce and Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 8th ed, 2014)
Explanatory Memorandum, Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016
Statement of Reasons
INTRODUCTION
The Applicant has been a Commonwealth Public Servant since early 1980. For his entire employment he has contributed to the Commonwealth Superannuation Scheme (CSS) at the mandatory minimum required rate of 5% of his gross salary. During the financial year 2022, and now, he remains employed by the same public sector entity which he joined in 1980.
In November 2022, the Applicant received an Excess Non-concessional Contributions Tax (ENCCT) determination for the income year ended 30 June 2022, having apparently exceeded the total superannuation balance cap of $1.7 million as at 30 June 2021 and was thereby liable to ENCC tax.[1] This came as a surprise to the Applicant as the CSS had informed him that, as of 1 July 2021, he had a total benefit amount of $612,982.30 and as of 30 June 2022, he had a total benefit amount of $606,368.91.[2]
[1] Exhibit R2, T3; an amended determination for the 2021 – 2022 financial year was issued on 4 July 2023: Exhibit R2, T5.
[2] Exhibit R2, T41.
The Applicant was issued with a Notice of Assessment dated 28 February 2023,[3] which he objected to on 24 April 2023.[4] The objection was disallowed on 31 July 2023,[5] and he then made this application to the Administrative Appeals Tribunal.[6]
[3] Exhibit R2, T4.
[4] Exhibit R2, T8.
[5] Exhibit R2, T2.
[6] Exhibit R2, T1. On 14 October 2024 the Administrative Appeals Tribunal was replaced by the Administrative Review Tribunal.
It is common ground that given the Applicant has at all times continued in employment with the Commonwealth Public Service, his superannuation was, in 2022, and remains, in the accumulation phase and not in the retirement phase.
BACKGROUND
Legislative framework
There are four separate pieces of legislation which fall for consideration in respect to the main issue in this matter. These are:
(a)the Income Tax Assessment Act 1997 (ITAA 97);
(b)the Taxation Administration Act 1953 (TAA);
(c)the Superannuation Act 1976 (Superannuation Act); and
(d)the Superannuation (Excess Non-concessional Contributions Tax) Act 2007 (ENCCTAct).
I set out below the relevant sections of this legislation.
ITAA 97
Section 292-80 of the ITAA 97 provides:
You are liable to pay *excess non-concessional contributions tax imposed by the Superannuation (Excess Non-concessional Contributions Tax) Act 2007 if you have *excess non-concessional contributions for a *financial year.
Section 292-85 of the ITAA 97 relevantly provides:
(1) You have excess non-concessional contributions for a *financial year if:
(a) you receive one or more *excess non-concessional contributions determinations for the financial year; and
(b) the excess amount stated in the most recent of those determinations exceeds the sum of any amounts paid in response to release authorities issued in relation to those determinations; and
(c) section 292-467 of this Act does not apply to you for the financial year.
(1A) The amount of your excess non-concessional contributions is:
(a) if no amounts were paid as described in paragraph (1)(b) — the excess amount stated in that most recent determination; or
(b) otherwise — the amount of the excess worked out under paragraph (1)(b).
(2) Your non-concessional contributions cap for a *financial year is:
(a) unless paragraph (b) applies — the amount (the general non-concessional contributions cap for the year) that is 4 times your *concessional contributions cap under subsection 291-20(2) for the year; or
(b) if, immediately before the start of the year, your *total superannuation balance equals or exceeds the *general transfer balance cap for the year — nil.
Section 307-205(2) of the ITAA 97 provides:
The accumulation phase value of an individual’s *superannuation interest, at a particular time when the interest is not in the *retirement phase, is:
(a) if the regulations specify that value or a method for determining that value — that value; or
(b) otherwise — the total amount of the *superannuation benefits that would become payable if the individual voluntarily caused the interest to cease at that time.
Section 307-230(1) of the ITAA 97 relevantly provides:
Your total superannuation balance, at a particular time, is the sum of the following:
(a) if you have one or more *superannuation interests that are not in the *retirement phase — the *accumulation phase values, at that time, of each such interest;
TAA
Section 97-25 of Schedule 1 to the TAA provides:
(1) If your *non-concessional contributions for a *financial year (the contributions year) exceed your *non-concessional contributions cap for the contributions year, the Commissioner must make a written determination stating:
(a) the amount of the excess; and
(b) the amount of your associated earnings worked out under section 97-30; and
(c) the following amount (the total release amount):
Amount of the excess + (.85 * amount of your associated earnings)
(2) A determination under this section is an excess non-concessional contributions determination.
(3) The Commissioner may amend a determination at any time.
(5) Notice of a determination given by the Commissioner under this section is prima facie evidence of the matters stated in the notice.
Superannuation Act
Section 3 of the Superannuation Act defines:
(a)eligible employee to mean, amongst others, ‘a person who is a permanent employee’; and
(b)minimum retiring age to mean, relevantly, ‘the age of 55 years’.
Section 58(3) of the Superannuation Act provides:
Where a person ceases to be an eligible employee because:
(a) if the person has attained his or her minimum retiring age—the person is retired, otherwise than at his or her own request;
(aa) in the case of an SES employee—the person retires under section 37 of the Public Service Act;
(b) the person’s employment or appointment is terminated on a ground similar to a ground specified in section 76D, 76L or 76W of the Public Service Act 1922, as in force immediately before its repeal;
(d) except in the case of a temporary employee—his or her position or office ceases to exist, whether by reason of its being abolished or otherwise;
(h) the person retires, or the person’s employment or appointment is terminated, in prescribed circumstances;
the person shall, for the purposes of this Act, be deemed to have retired involuntarily.
Section 62(2B) of the Superannuation Act relevantly provides:
If the person has reached the age of 55 years at the time when he or she ceases to be an eligible employee and provides CSC[7] with a statement to the effect that he or she has retired from the workforce upon so ceasing, the person is (subject to subsection (2CA)) entitled, in lieu of pension and lump sum benefit to which, if the election had not been made, the person would be entitled under section 55 or 59, to payment of:
[7] CSC is the Commonwealth Superannuation Corporation.
(a) if paragraph (b) does not apply, a lump sum benefit equal to the sum of:
(i) 3.5 times the amount of the person’s accumulated basic contributions; and
(ii) the amount of the person’s accumulated supplementary contributions (if any); or
(b) if the person had, at any time before ceasing to be an eligible employee, received a partial invalidity pension, a lump sum benefit equal to the sum of:
(i) the amount worked out using the formula:
Actual contributions +(Notional contributions x 2.5); and
(ii) the amount of the person’s accumulated supplementary contributions (if any).
Section 110P(1A) of the Superannuation Act relevantly provides:
Where a person:
(a) ceases to be an eligible employee; and
(b) was a productivity employee immediately before so ceasing or earlier;
a productivity benefit becomes payable in respect of the person.
Section 135(1) of the Superannuation Act defines the transfer value for a person who has ceased to be an eligible employee to include:
Subject to subsections (1AA) and (1A), the amount of any transfer value payable under this Division to or in respect of a person who has ceased to be an eligible employee is an amount equal to the sum of:
(a) 3½ times the amount of the person’s accumulated basic contributions; and
(b) the amount of the person’s accumulated employer contributions (if any); and
(c) the amount of the person’s accumulated supplementary contributions (if any); and
(d) the amount of benefit (if any) payable in respect of the person under Part VIAB; and
(e) the amount of benefit (if any) payable in respect of the person under Subdivision B of Division 2 of Part IX.
ENCCT Act
Section 5 of the ENCCT Act provides that excess contributions are taxed at the rate of 47% of the excess non-concessional contributions for a financial year.
Summary of the legislative scheme
In summary, the scheme of the legislation provides that if a person’s:
(a)superannuation is in the accumulation phase, and
(b)their total superannuation balance is equal to or more than the transfer balance cap, and
(c)they make non-concessional contributions to their superannuation fund,
they will be liable to pay ENCCT at the rate of 47% of the non-concessional contributions made.
Prior to levying the ENCCT, the Commissioner must issue a determination to the person.
Sections 307-205(2) and 307-230(1) of the ITAA 97 were inserted by the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 (Amendment Act). The Amendment Act was part of a package of amendments to superannuation legislation which were aimed at making the taxation and regulation of the superannuation system fairer and more sustainable, and to provide more flexibility and choice.[8] Amongst other reforms, the package introduced the transfer balance cap which limited the total amount of superannuation that an individual can transfer into their tax free retirement phase.[9] That cap was $1.6 million for the financial years ending 30 June 2018 to 30 June 2021, and rose to $1.7 million for the 2022 and 2023 years.
[8] Explanatory Memorandum, Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016 (EM) [1.1].
[9] EM at [1.11].
It is important to note that the operation of the legislative scheme does not imply that a taxpayer, specifically the Applicant in this matter, has acted inappropriately in any way. Whilst the Amendment Act and ENTCC were aimed primarily at people who used superannuation for tax minimisation, estate planning or capital preservation,[10] the impact of the changes on this Applicant and others in his position,[11] is in no way a negative reflection on them or their superannuation savings strategy.[12]
[10] Commonwealth, Parliamentary Debates, House of Representatives, 9 November 2016, 3383.
[11] That is, long term public sector employees, aged over 55 years, in a defined benefit scheme.
[12] Ts 46, 21.
Facts
The Applicant joined the Commonwealth public service in January 1980 and has remained employed by the same entity since that time. He is now aged over 60 and was, in the 2022 financial year, aged over 55. At the time of him joining the public sector he was required to join the CSS, a superannuation scheme established by the Superannuation Act, which is now administered by the Commonwealth Superannuation Corporation (CSC).[13]
[13] The CSC is the trustee for the CSS, established under the Governance of Australian Government Superannuation Schemes Act 2011 (Cth).
The CSS is a defined benefit fund,[14] as a result of which, the Applicant is unable to claim tax deductions for his contributions.[15]
[14] A defined benefit fund is one where the benefit paid to a member is calculated according to a formula, generally specified in the deed governing the fund, or, as in this case, specified in the legislation governing the fund. By contrast, an accumulation fund is one where the benefit payable to the member is the total of all contributions, plus earnings on those contributions, less fees and taxes.
[15] Exhibit R2, T8, 26.
At the time of joining the CSS, the Applicant understood that he was required to contribute 5% of his gross annual salary. The contributions made by the Applicant were what are now known as non-concessional contributions. Unbeknownst to the Applicant, he could in fact have elected under section 46(2) of the Superannuation Act to make a nil contribution as he is an eligible employee as defined in section 3 of that Act.[16]
[16] Exhibit R2, T8, 26.
In the 2021 and 2022 financial years, the Applicant contributed to his superannuation at the rate of 5% of his gross salary.[17] He received a letter dated 18 November 2022[18] from the Commissioner advising that he was liable for ENCCT in the amount of $2,906.85, as he had exceeded the $1.7 million transfer balance cap (First Determination). [19]
[17] Exhibit A1, S1, 3; Exhibit A1 at [7].
[18] Exhibit R2, T3, 11.
[19] Which is a determination under section 282-85(1) of the ITAA 97.
Having received the First Determination, and in anticipation of receiving an assessment, on 10 January 2023 the Applicant paid the tax of $2,906.85.[20]
[20] Exhibit A1 at [10].
The Commissioner issued an assessment on 28 February 2023, with a due date for payment of 24 March 2023.[21] The Applicant objected to the assessment on 24 April 2024,[22] and the objection was disallowed on 31 July 2023.[23] This application was commenced on 15 September 2023.[24]
[21] Exhibit R2, T4.
[22] Exhibit R2, T8.
[23] Exhibit R2, T2.
[24] Exhibit R2, T1.
On 4 July 2023, the Commissioner issued an amended determination of ENCCT for the 2022 financial year to the Applicant (Second Determination).[25] An amended assessment was then issued on 7 July 2023.[26] The amended assessment reduced the original ENCCT liability by $107.85.[27] In light of the fact that the Applicant had already paid the ENCCT, he was refunded $107.85.
[25] Exhibit R2, T5.
[26] Exhibit R2, T6.
[27] The change was as a result of a minor historical miscalculation in the Applicant’s superannuation account.
The Applicant’s interest in the CSS, as at 30 June 2021, was comprised of:[28]
(a)accumulated basic contributions of $457,657.09;
(b)accumulated employer contributions[29] of $155,085.11;
(c)accumulated supplementary contributions of $240.10; and
(d)transfer amounts of $0.
[28] Exhibit A1, S1, 4.
[29] Called the “productivity component”, in accordance with section 110Q of the Superannuation Act.
THE ISSUES
The primary issue for determination in this matter is whether, as at 30 June 2021, the Applicant’s total superannuation balance was in excess of the $1.7 million general transfer balance cap.
In addition, the Applicant has raised issues as to the validity of the amended assessment, and his entitlement to interest on the $107.85 which was overpaid by him.
THE HEARING AND THE EVIDENCE
The hearing took place on 13 November 2024 via video link.
The following were admitted as evidence:
(a)Exhibit A1 – Applicant’s Statement of Facts, Issues & Contentions, including annexures S1 – S10, dated 9 July 2024;
(b)Exhibit R1 – Respondent’s Amended Statement of Facts, Issues & Contentions, dated 4 November 2024; and
(c)Exhibit R2 – Section 37 T-Documents, labelled T1 – T42, filed 16 October 2023.[30]
[30] Now section 23 of the Administrative Review Tribunal Act 2024 (ART Act).
Each of the parties filed written submissions, which I have also had regard to.
CONSIDERATION
Total superannuation balance
The operation of sections 292-80 and 292-85 of the ITAA 97 compels the payment of ENCCT if a person has non-concessional contributions which are in excess of their non-concessional contributions cap. This in turn requires calculation of whether the person’s total superannuation balance immediately before the start of the financial year in question, exceeds the general transfer balance cap. Therefore, if the Applicant’s total superannuation balance was $1.7 million or more as at 30 June 2021, he cannot make any non-concessional contributions to his superannuation in the 2022 financial year without incurring ENCCT. It follows that the central issue to be determined in this matter is whether the Applicant’s total superannuation balance was $1.7 million or more, as at 30 June 2021.
To ascertain the Applicant’s total superannuation balance as at 30 June 2021, section 307-230(1) of the ITAA 97 requires the calculation of the accumulation phase values of all of a taxpayer’s superannuation interests, which in this case is the Applicant’s interest in the CSS fund. Section 307-205(2) of the ITAA 97 provides that the ascertainment of the accumulation phase value of the Applicant’s superannuation is to be done by reference to the regulations, if any, [31] or under section 307-205(2)(b). No relevant regulations have been made, so the only alternative available is to calculate “the total amount of the superannuation benefits that would become payable if the individual voluntarily caused the interest to cease at that time”.[32] How that is to be done is at the heart of this matter.
[31] Section 307-205(2)(a) of the ITAA 97.
[32] The term “superannuation benefits” is defined in section 307-5 of the ITAA 97 by reference to an exhaustive table of payments.
The Applicant contends that his total superannuation balance as at 30 June 2021 was less than $1.7 million as the CSC had miscalculated the accumulation phase value[33] of his superannuation. He submits that the CSC is unable to calculate the accumulation phase value of his superannuation because it depends upon variables which are unknown as at 30 June 2021, including his age at retirement, years of service and final salary. He also says that it is unascertainable because of the impact on how he might take his superannuation, that is, as a lump sum, or pension, or a combination of these components, which in turn is dependent on whether he ceases employment voluntarily or involuntarily. He submitted that the correct amount to use for the calculation is his total benefit amount of $612,982.30. This amount however does not meet the requirements of section 307-205(2) of the ITAA 97, as it does not value the interest if the Applicant voluntarily caused his interest to cease, and so it must be rejected.
[33] Section 307-205(2) of the ITAA 97.
The Applicant also says that any calculation as at 30 June 2021 would be notional only. This is correct, and is a point stressed by the Commissioner. The statute requires the valuation of the interest on a particular date, on the assumption that the taxpayer “voluntarily caused the interest to cease”.[34]
[34] Ibid.
The Applicant also submits that the phrase “at that time” in section 307-230(1)(a) is unclear, having potentially three meanings: 30 June 2021, 1 July 2021, or the date the Applicant ceases his employment.[35] In my view the phrase is not unclear when read in the context of the phrase “at a particular time” in section 307-230(1); it requires a calculation to be done as at the time relevant to the question which it is being sought to be answered, and plainly means 30 June 2021 in this case.
[35] Exhibit A1 at [51].
The Commissioner does not directly engage with the question of whether the CSC miscalculated the accumulation phase value, but instead submits that the calculation of the Applicant’s total superannuation balance must be grounded in an objectively ascertainable method to be found in the Superannuation Act, being the legislation which governs the particular superannuation scheme the Applicant is a member of. I accept that submission. It is consistent with the scheme of administrative law and decision making of which the Commissioner is a part, it is consistent with the principle that taxing statutes should be interpreted strictly but not in a way to defeat the purpose of the legislature,[36] and it provides an objective mechanism for the ascertainment of a taxpayer’s total superannuation balance.
[36] See Pearce AO and Geddes, Statutory Interpretation in Australia (LexisNexis Butterworths, 8th ed, 2014) at [9.35]; Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at [69] – [70].
By contrast, if the Applicant is correct and the accumulation phase value is unascertainable, so that the total superannuation balance is unascertainable, the legislative purpose of the Amendment Act insofar as it applies to imposing ENCCT on superannuation interests in the accumulation phase, would fail.
Therefore, to paraphrase the statute, the task is to ascertain the total superannuation benefits that would become payable if the Applicant voluntarily caused his interest in the CSS to cease as at 30 June 2021.[37]
[37] Section 307-205(2)(b) of the ITAA 97.
A particular difficulty which arises here is that the CSS is a defined benefit scheme with the effect that a member cannot generally cease his or her interest in the scheme, even when they retire. On taking voluntary retirement, a member’s interest in the scheme moves from being in the accumulation phase to being in the retirement phase. In this case, by way of example, if the Applicant had voluntarily chosen to retire on 30 June 2021, he would have received a lump sum payment, which is able to be calculated, plus an ongoing pension under section 55 of the Superannuation Act. The value of the ongoing pension is however unascertainable because it depends on the Applicant’s future longevity, which is unknown. This presents a difficulty which I deal with below.
The Commissioner points to two “pathways” in the Superannuation Act which can be used to undertake the hypothetical calculation required by section 307-205(2)(b) of the ITAA 97, being:
(a)the Lump Sum method, calculated pursuant to section 62(2B), plus a payment under section 110P(1A); and
(b)the Transfer Value method, calculated under section 135.
Hypothetical starting point
As noted above,[38] one of the difficulties in this matter is identifying a scenario in which the Applicant voluntarily ceases his interest in the CSS, given that the CSS is a defined benefit fund.
[38] See [41] above.
The starting premise is that ceasing employment and ceasing an interest in a superannuation fund are two separate and distinct events which do not always take place at around the same time.
As is clear, voluntary retirement will not result in a voluntary cessation of the Applicant’s interest in the CSS. However, under the Superannuation Act, an involuntary retirement from his current employment will.
Section 58(3)(a) of the Superannuation Act deems a person to be ‘retired involuntarily’ if they are aged over 55 and are retired other than at their own request.
Given that the Applicant had reached the minimum retiring age at 30 June 2021, he could have been involuntarily retired from his employment with his current employer and thereby cease to be an eligible employee.[39] If that had happened two options were available which permitted him to make a choice to voluntarily cease his interest in the CSS.
(a)Under the first option, he is entitled under section 62 of the Superannuation Act to make an election to permanently retire from the workforce and receive a lump sum benefit. If he chose that option his interest in the CSS would cease voluntarily and the lump sum paid to him would be calculated in accordance with the Lump Sum Method identified above.
(b)Under the second option, the Applicant could elect to take up employment with another public service employer with its own superannuation scheme, in which case, assuming he met any transfer conditions, he could elect to transfer his interest in the CSS to the superannuation fund operated by the new employer. If this option were chosen, the Applicant’s interest in the CSS would cease voluntarily and the amount to be transferred to the new scheme would be calculated in accordance with the Transfer Value method identified above.
[39] Section 58(3)(a) of the Superannuation Act.
Neither the Applicant nor the Commissioner were able to identify any other methodology under the Superannuation Act which would fit within section 307-205(2)(b) including importantly, that the ‘individual voluntarily caused the interest to cease’. I therefore accept that the two methods identified by the Commissioner are the only methods available under the Superannuation Act which result in the Applicant’s entire interest in the CSS ceasing, involve the Applicant voluntarily making an election to cease his interest in the fund, and result in a definitive, albeit hypothetical, value calculated as at 30 June 2021.
Lump Sum method
The lump sum benefit provided by section 62(2B) of the Superannuation Act is predicated on the taxpayer having reached 55 years of age and retired from the workforce. The calculation to be undertaken under section 62(2B) is:
(3.5 x 457,657.09[40]) + 240.10[41] = (1,601,799.82) + 240.10 = $1,602,039.92
[40] Accumulated basic contributions, see [28(a)] above.
[41] Accumulated supplementary contributions, see [28(c)] above.
Whilst the Applicant submitted that I should ignore section 110P(1A) of the Superannuation Act because section 62(2B) does not explicitly mention it as part of the equation, I cannot ignore it when section 307-205(2)(b) of the ITAA 97 requires the calculation of ‘the total amount of the *superannuation benefits that would become payable’. Given that the Applicant would meet the criteria for the payment of a benefit under section 110P(1A) if he ceased his interest in the CSS, it is a mandatory part of the calculation of his hypothetical total superannuation benefits.
The total superannuation benefit calculated under the Lump Sum method is therefore:
$1,602,039.92 +$155,085.11[42] = $1,757.125.03
[42] Accumulated employer contributions, see [28(b)] above.
Transfer Value method
Section 135 of the Superannuation Act calculates the benefit to be transferred to a different superannuation fund in circumstances where the taxpayer ceases employment with his current public service employer and commences employment with a different public service employer with a different superannuation fund. The calculation to be undertaken under section 135 is:
(3.5 x 457,657.09[43]) + 155,085.11[44] + 240.10[45] = (1,601,799.82) + 155,085.11 + 240.10 = $1,757.125.03
[43] Accumulated basic contributions, see [28(a)] above.
[44] Accumulated employer contributions, see [28(b)] above.
[45] Accumulated supplementary contributions, see [28(c)] above.
Preferrable method
As is apparent, the total superannuation benefit payable for the purposes of section 307-205(2)(b) is the same in this Applicant’s circumstances whether it is calculated under the Lump Sum Method or the Transfer Balance Method. The Commissioner submitted that I may determine which is the preferrable method for adoption by him, and that if I were to choose to do so, the Transfer Balance Method is the preferable method, principally because it would be more widely applicable given the Lump Sum Method is not available to all employees, specifically the majority of those under age 55.
In my view I should not determine the preferrable calculation method to be adopted. The question does not require an answer in this case and it would be more appropriate to determine that question where the facts on which the question arose led to a different outcome depending on the method used, so that the question could be answered with the benefit of more targeted submissions, particularly in respect to the policy considerations arising if both methods applied but different results ensued. I am however satisfied that either method is suitable if the result is the same, as in this matter.
Validity of the assessment
The Applicant asserts that the amended assessment issued on 7 July 2023[46] is invalid for two reasons, first that it was issued as a result of the Second Determination which itself did not contain information that was necessary under section 97-25 of Schedule 1 of the TAA, and secondly, because it was issued “well after” the First Determination.[47]
[46] Exhibit R2, T5.
[47] Exhibit A1 at [24].
Section 97-25(1) of Schedule 1 of the TAA requires three figures to be provided, as set out in the table below.
Item First determination Second Determination Amount of excess[48] 6,184.80 5,955.40 Associated earnings[49] 633.00 0.00 Total release amount[50] 6,722.85 0.00 [48] Section 97-25(1)(a).
[49] Section 97-25(1)(b).
[50] Section 97-25(1)(c).
The Second Determination was issued after the Applicant had paid the tax, arising from the discovery of an administrative error apparently made by the CSS. The amounts for associated earnings and total release amount in the Second Determination were zero because they did not arise, given the tax had already been paid at the time the determination was made. Consequently, the Second Determination is correct.
As to the timing issue, section 97-25(3) of Schedule 1 of the TAA permits the Commissioner to amend a determination at any time.
In any event, the Tribunal does not have jurisdiction to determine whether an assessment is invalid, because the Tribunal’s jurisdiction arises from statute and is predicated on an assessment being valid, hence the necessity for a taxpayer to show that an assessment is excessive.[51]
[51] See Landcom v Commissioner of Taxation [2022] FCA 510; (2022) 114 ATR 639 at [133] – [135].
Interest
The Applicant seeks interest on the overpayment of $107.85.
There is no statutory right to interest on the early payment of the full amount of tax paid by the Applicant, or on the overpayment of $107.85 by the Applicant. This is because:
(a)section 8A(1)(a) of the Taxation (Interest on Overpayments and Early Payments Act 1983 (Interest Act) sets out a list of taxes which, if paid more than 14 days prior to their due date, accrue interest from the Commissioner, however, ENCCT is not one of the taxes listed;
(b)section 8E(1)(d) of the Interest Act sets out a list of taxes which, if overpaid, entitle the taxpayer to receive interest from the Commissioner on the overpayment in certain circumstances, however, ENCCT is not one of the taxes listed; and
(c)there is no other applicable legislative provision which would entitle a taxpayer to interest on early paid or overpaid ENCCT.
In any event, Part IVC of the TAA does not provide any statutory objection right in respect to interest. Specifically, section 14ZL(1) only provides an avenue for objection to a person who is dissatisfied with “an assessment, determination, notice or decision, or with a failure to make a private ruling”. The payment of interest on a refund of overpaid tax of any description does not fit within the scope of Part IVC. This Tribunal is only empowered to hear reviews of decisions where a statute provides a right of review,[52] so in the absence of a statutory right of review granted, relevantly, by the TAA, the Tribunal is without jurisdiction.
[52] Section 12 ART Act.
DECISION
For the reasons set out above, the decision is affirmed.
I certify that the preceding sixty four (64) paragraphs are a true copy of the reasons for the decision herein of Deputy President Clare Thompson SC
............................[signed].....................................
Associate
Dated: 24 January 2025
Date of hearing: 13 November 2024 Solicitors for the Applicant: Self-represented Counsel for the Respondent: Mr S Pack Solicitors for the Respondent: Australian Taxation Office, Litigation and Legal Services
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