PYE v FC of T

BJ McCabe SM

Administrative Appeals Tribunal


Decision date: 13 February 2004

BJ McCabe (Senior Member)

This is an application for review of a decision of the Commissioner of Taxation (the respondent) of 18 December 2002. The respondent decided not to remit any components of the Superannuation Guarantee Charge (``SGC'') levied under the Superannuation Guarantee (Administration) Act 1992 (``the Act''), and to apply a penalty under Part 7 of the SGAA for the years ending 30 June 1998, 30 June 1999 and 30 June 2000.

2. The Tribunal heard the matter on 23 January 2004. Mr Pye attended the hearing and represented himself. The respondent was represented by Mr Aftanas. The applicant gave oral evidence at the hearing.

3. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. The only other document exhibited was a copy of the applicant's wage books.

The facts

4. The applicant owns a transport business in Roma. He is an employer and pays wages to employees who drive trucks for his business. In the financial years ending 30 June 1998, 30 June 1999 and 30 June 2000, he made superannuation contributions to all his employees in the form of cash payments, with the exception of Mr Russell Johnson for whom he made payment into an AMP superannuation account (T6 f45).

5. In February 2001 a Superannuation Desk Audit Questionnaire was issued to the applicant, requesting details of the super- annuation support provided to the applicant's employees. The Commissioner did not receive a response to the questionnaire.

6. In July 2002 the Commissioner raised Superannuation Guarantee Default Assessments for the years in question. These were based on copies of group certificates lodged by the applicant with the Commissioner.

7. The applicant objected to the assessments on 12 September 2002. On 18 September 2002, the respondent disallowed the objection. This decision is under review.

The law

8. The purpose of the Act is to ensure that all employees receive a certain minimum level of superannuation support. In situations where employers have a superannuation guarantee shortfall, they must lodge a superannuation guarantee statement: s 33. If a superannuation guarantee statement is not lodged by an employer, s 36 says the Commissioner may make an assessment of the superannuation guarantee shortfall and therefore the SGC payable on the shortfall. This is an ``assessment'' under s 6 of the Act. Section 42 allows employers to object to assessments in the manner set out in Part IVC of the Taxation Administration Act 1953.

9. Section 17 of the Act provides the superannuation guarantee shortfall has three components:

  • • The total of the individual superannuation guarantee shortfalls for the year;
  • • The nominal interest component (s 31);
  • • The administration component (s 32).

10. Under s 19, the individual superannuation guarantee shortfall is calculated to be a certain percentage of the employee's quarterly salary and wages. The percentages for the relevant years are found in s 21 as 6%, 7% and 7% for the years ending 30 June 1998, 1999 and 2000 respectively.

11. A penalty under Part 7 of the Act also applies to employers who fail to provide a superannuation guarantee statement when required to do so by the legislation: s 59.


12. In a general submission the applicant contended that some or all of the SGC, the General Interest Charge, and Part 7 penalty should be remitted. He submitted that he has suffered personally and financially from the drought. He said he should be shown leniency for his mistake which was made in ignorance of the law and without ill intent. I note the applicant did not have access to professional advice during this period.

13. The respondent conceded the applicant made cash payment to his employees which he identified as ``super''. However the respondent argued these payments did not satisfy the requirements of s 22 or s 23 of the Act and thus cannot reduce the applicant's SGC.

14. The respondent maintained the Late Payment Penalty and the General Interest Charge levied under s 49 are not ``assessments'' under s 6. Therefore they cannot be the subject of a Part IVC objection or of an application for review to this Tribunal. Further there is no discretion under the Act to

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remit or waive the nominal interest component or the administration component of the charges.

Findings of the Tribunal

15. The Tribunal finds the applicant's objection dated 12 September 2002 was a general objection to the ATO's assessments under s 42 of the Act. An ``assessment'' is defined in s 6 of the Act as:

``(a) the ascertainment of an employer's superannuation guarantee shortfall in a year and of the superannuation guarantee charge payable on the shortfall; or

(b) the ascertainment of additional superannuation guarantee charge payable under Part 7.''

16. This means the Tribunal has jurisdiction to review the ATO's decision in relation to the assessment of the SGC, and the assessment of the Part 7 penalty.

17. The Tribunal does not have jurisdiction to review the ATO's decision in relation to the Late Payment Penalty or GIC, imposed under s 49. These cannot be the subject of an objection under s 42 because they are not an ``assessments'' as defined in s 6. That is a problem for the applicant since the decision under review related to an objection under s 42.

Superannuation guarantee charge

18. Section 36(1) allows the Commissioner to calculate a SGC based on an assessment of the superannuation guarantee shortfall. Section 36(2) provides that

``... the superannuation guarantee shortfall is taken to be the amount that in the Commissioner's opinion might reasonably be expected to be the shortfall.''

The ATO assessed the applicant's superannuation guarantee shortfall to be $3830.07 for the financial year ending 30 June 1998, $6325.48 for the financial year ending 30 June 1999, and $8821.90 for the financial year ending 30 June 2000 (T7 f57: these figures calculated by adding superannuation shortfall, nominal interest and administration charge, as per s 17 of the Act). The respondent's assessment of the shortfall was filed as f13, 21, 31 of the T documents.

19. These figures are based on copies of relevant group certificates held by the Commissioner (T4 f13-42).

20. I find these figures accord with the requirement of s 36(2), in that they represent an amount that in the Commissioner's opinion might reasonably be expected to be the shortfall.

21. In his original application for review, the applicant stated he made superannuation contributions into a recognised superannuation fund for an employee named Mr Russell Johnson (T6 f45). I note that in the respondent's assessment of the applicant's superannuation shortfall for the financial year ending 30 June 1999, the respondent calculated the applicant's contribution to Russell Johnson's super- annuation as zero (T4 f21). I have no reason to believe the respondent has erred in making these calculations.

22. It follows the decision must be affirmed in so far as it relates to the assessment of the SGC.

Part 7 penalties

23. Section s 59(1) of the Act provides:

``If an employer other than a government body refuses or fails to provide, when and as required under this Act, a superannuation guarantee statement or information relevant to assessing the employer's liability to pay superannuation guarantee charge for a year, the employer is liable to pay, by way of penalty, additional superannuation guarantee charge equal to double the amount of superannuation guarantee charge payable by the employer for the year.''

That is, a maximum penalty of 200% of the SGC may be levied. The Commissioner has discretion as to how the penalty should be applied in each case.

24. The Superannuation Guarantee Ruling SGR 94/3 provides guidelines as to how the ATO should exercise discretion in applying the Part 7 penalty. According to the SGR 94/3, the guidelines are not exhaustive, they are merely illustrative. Each case must be considered on its own facts.

25. The Tribunal notes in particular the guideline described in paragraph 24 of SGR 94/3. It provides that there is a flat 10% penalty applies where the employer fails to lodge a SG statement.

26. The respondent has assessed the applicant's Part 7 penalty to be 10% for each relevant financial year.

27. I considered the applicant's personal circumstances in some detail. He is trying to

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run a business under what are clearly difficult circumstances. The long-running drought in central Queensland has had a particularly severe effect on his transport business, a fact which has official recognition in the form of a certificate from the Queensland Rural Adjustment Authority. The bankruptcy of a major client in 1998 had catastrophic financial ramifications from which his business still suffers. He also has the commitments of a husband and father raising four children.

28. I have great sympathy for the applicant. However I do consider the Part 7 penalty to be appropriate in these circumstances. The maximum possible penalty is 200% of the SGC. The respondent has levied a 10% penalty. I find this represents a lenient position, especially having regard to the flat 10% penalty that applies for failure to lodge SGC statements.


29. Based on these reasons, the Tribunal affirms the decision under review.

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