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HAMILTON v FC of T

Members:
G Downes P

Tribunal:
Administrative Appeals Tribunal, Sydney (heard in Brisbane)

MEDIA NEUTRAL CITATION: [2007] AATA 1677

Decision date: 20 August 2007

ATC 2453

G Downes (President)

Background

1. The taxpayer was a full-time Commonwealth public servant in the Australian Tax Office from 1963 until his retirement in 2001. He was a contributing member of the CSS (Commonwealth Superannuation Scheme) under the Superannuation Act 1976 (Cth). Upon his retirement the taxpayer became entitled to retirement benefits including an indexed superannuation pension. The pension, with which this case is concerned, is paid out of the Consolidated Revenue Fund.

Deduction claim

2. Annuities, including superannuation pensions, are taxed under s 27H of the Income Tax Assessment Act 1936 (Cth). In the case of "an annuity that has been purchased", the assessable amount excludes any "deductible amount" (s 27H(1)(a)). To determine the deductible amount an "undeducted purchase price" must be assessed (s 27H(2)). There are alternative formulae for doing this (s 27A(1)). In the present case, the applicable formula would be determined by reference to whether the pension is a "rebatable superannuation pension". One component in being a rebatable superannuation pension is that the pension is "paid from a fund [which is]… a complying superannuation fund" (s 159SJ(1)). The issues in this case include whether the taxpayer's superannuation pension was purchased and, if it was, whether it is paid from a complying superannuation fund.

Rebate claim

3. The taxpayer may also be entitled to a rebate of tax under s 159SM. This will depend upon the pension being a "rebatable superannuation pension" and "the applicable fund" being a "taxed superannuation fund". That, in turn, depends upon there being a complying superannuation fund.

Conclusion on deduction

4. I have concluded that no purchase price should be assigned to the pension. It does not qualify by virtue of the definition of purchase price in s 27A(1) because the taxpayer's contributions were not made "only" or "solely" to obtain the pension. I have decided to exercise my discretion under s 27A(1) against including part of the contributions in a purchase price because the taxpayer has already benefited from a deduction based on his undeducted contributions relating to the payment of a different pension, commuted to a lump sum payment. Because no purchase price is attributable to any purchase, the annuity was not purchased. The taxpayer is not entitled to a deduction.

Conclusion on rebate

5. To be a "rebatable superannuation pension" the pension must be "paid from a complying superannuation fund" (s 159SJ(1)). The pension is paid out of the Consolidated Revenue Fund (s 112(2) Superannuation Act). Neither the possibility that the payments were made by the agency known as Comsuper, nor the fact that the taxpayer's contributions were previously paid into the Consolidated Revenue Fund from the CSS Fund (s 112(1) Superannuation Act), alters this. I have not formed the opinion that the pension was "in effect, funded" from a complying superannuation fund, so I do not propose to treat it as payable from such a fund (s 159ST). This is because the taxpayer has already benefited from a rebate relating to the lump sum payment, calculated by reference to his contributions other than the undeducted contributions. Accordingly, the taxpayer is not entitled to the rebate.

Statutory framework

6. I will now set out the statutory position in a little more detail. In an effort to simplify the complex web of legislation which this case requires to be analysed I will leave out all irrelevant matters. The relevant statutory tests are, however, considerably more complex than will appear. There are many other qualifying facts which need to be addressed.

Deduction

7. By s 27H(1)(a) of the Tax Act the assessable income of a taxpayer includes:

"the amount of any annuity derived by the taxpayer during the year of income excluding, in the case of an annuity that has been purchased, any amount that, in accordance with the succeeding provisions of this section, is the deductible amount in relation to the annuity in relation to the year of income."

ATC 2454

The deductible amount in relation to an annuity that has been purchased is to be calculated by reference to a formula in s 27H(2). One component of the formula is "the amount of the undeducted purchase price of the annuity". By s 27H(4) "annuity includes … a superannuation pension". Both parties agree that the applicant's pension is relevantly both an annuity and a superannuation pension.

8. There are two alternative formulae which determine the amount of the undeducted purchase price (s 27A(1)). The formula for which the Commissioner contends applies where the annuity is "not… a rebatable superannuation pension". The taxpayer contends for the alternative formula which will apply where the annuity is a rebatable superannuation pension. A rebatable superannuation pension must be "paid from… a complying superannuation fund" (s 159SJ(1)). By the same section "complying superannuation fund has the same meaning as in Part IX". Section 267, which is in Part IX, says that complying superannuation fund has the meaning given by s 45 of the Superannuation Industry (Supervision) Act 1993 (Cth). Section 45, relevantly, is as follows:

  • "(1) A fund is a complying superannuation fund for the purposes of Part IX of the Income Tax Assessment Act in relation to a year of income (the current year of income) if, and only if:
    • (a) the Regulator has given a notice to the trustee under section 40 stating that the fund is a complying superannuation fund in relation to the current year of income…"

Rebate

9. Section 159SM provides for "a rebate of tax in the taxpayer's assessment" in respect of a "rebatable superannuation pension". Section 159SJ(1) requires the pension to be paid from a fund that is a complying superannuation fund. Section 159SM(2) requires the fund to be a "taxed superannuation fund". The latter phrase is defined in s 159SJ(1) by reference to its meaning "in the ETP [eligible termination payment] Subdivision in relation to an ETP". Section 27A(1) is in that Subdivision and defines "taxed superannuation fund" so that it must be an "eligible superannuation fund". By s 27A(1) that phrase has the same meaning as in Part IX where, in s 267(1), it is defined, relevantly, as "a fund that is a complying superannuation fund, or a non-complying superannuation fund, in relation to the year of income". Although this definition encompasses non-complying superannuation funds, the requirement that a rebatable superannuation pension be paid from a complying superannuation fund means that non-complying superannuation funds are excluded from the ambit of s 159SM.

Complying superannuation fund

10. One of the matters which may arise in this case is accordingly whether there is a "complying superannuation fund". For present purposes that requires reference to the provisions of Part III of the Superannuation Act establishing "a Fund to be known as the CSS [Commonwealth Superannuation Scheme] Fund" (s 40).

11. When the taxpayer ceased to be employed by the Tax Office he became entitled to certain benefits under the CSS. He received a lump sum payment equal to his contributions and interest attributable to those contributions. To this was added employer productivity contributions and interest. To obtain this benefit as a lump sum the taxpayer made an election under s 64 of the Superannuation Act to commute a non-indexed pension to which he was otherwise entitled "into a lump sum benefit". Section 65 provides that upon an election to commute under s 64 "there shall be paid to the person a lump sum benefit equal to his or her accumulated contributions". The taxpayer was also entitled to an indexed pension which is the subject of this application.

12. Pursuant to s 112(1) of the Superannuation Act, the taxpayer's accumulated contributions to the CSS Fund were paid to the Consolidated Revenue Fund. The lump sum payment was, and the continuing pension payments are, paid out of that fund. The payments are made pursuant to s 112(2), which provides:

"Except where otherwise provided by this Act, any payment of benefit shall be made out of the Consolidated Revenue Fund, which is appropriated accordingly."

13. A CSS Board was established by s 27A of the Superannuation Act. Sections 17 and 26

ATC 2455

established a Commissioner for Superannuation and staff to assist the Commissioner. Together they constitute a Commonwealth agency, often known as ComSuper. The bulk of the Board's general powers have been delegated to ComSuper.

14. It is accepted by the Commissioner, for the purposes of the proceedings, that "the CSS is a complying superannuation fund for general purposes under Division 2 of Part 5 of the [Superannuation Supervision Act]" and that a notice was given relevantly under s 40 of the Act.

Course of the hearing

15. Prior to the hearing both parties filed statements of facts, issues and contentions which set out (the taxpayer) or summarised (the Commissioner) their submissions. At the hearing the Commissioner presented more detailed written submissions. Both sides filed further written submissions after the original hearing. These documents and the oral submissions at the hearing proceeded on the basis that the question whether there was a deductible amount depended upon a determination of the "amount of the undeducted purchase price of the annuity". No submissions were put as to whether the annuity had been purchased. Both parties proceeded on the basis that it had. Nevertheless, the Commissioner put submissions calculated to suggest that the taxpayer had not purchased the annuity even though the amount of the annuity was calculated by reference to the taxpayer's superannuation contributions. This was because the contributions funded the entitlement he took as a lump sum. The actual contributions and interest were repaid and paid to him as the lump sum. The pension under consideration was accordingly unfunded and paid out of the Consolidated Revenue Fund.

16. The Commissioner's submissions ran into difficulties when they sought to address the definition in s 27A(1) of "undeducted purchase price". The formula appears to assume that there is such a price. This is not surprising because the exercise is only necessary if the annuity "has been purchased" (s 27H(1)(a)). The Commissioner submitted that the first of two alternative meanings of "undeducted purchase price" in s 27A(1) were attracted in the present case. In such an event the undeducted purchase price includes "so much of the purchase price of the annuity or pension as was paid before 1 July 1983" and "so much … as was paid on or after 1 July 1983". There is no alternative that no payment was made. It might be thought that the formula can only operate when there is a positive purchase price. That would be, no doubt, because the formula only applies to an annuity that has been purchased. At one stage the Commissioner actually accepted that there was an undeducted purchase price of $18.00. He no longer takes this position.

17. The problems which were created by the Commissioner's case assuming a purchased annuity and then attributing nothing to the purchase price caused me to invite the parties to provide written submissions on the meaning and relevance of the phrase "in the case of an annuity that has been purchased" in s 27H(1)(a). Two sets of written submissions were filed.

18. The Commissioner's submissions accepted that his prior submissions did not address the question of whether the annuity had been purchased and suggested that the reason was that the decision on objection "went directly to the question raised by s 27H(2) namely whether there was a deductible amount".

19. To my mind the issues before the Tribunal cannot be resolved without addressing the question whether the annuity was purchased. The process of statutory interpretation necessary to make the determination may nevertheless require reference to the provisions of s 27A(1) requiring the determination of an actual purchase price as a necessary step in ascertaining the meaning of "annuity that has been purchased" in s 27H(1)(a).

20. Upon considering the parties' written submissions relating to whether there was a purchased annuity it seemed to me that those submissions did not address all the issues which I might need to determine. In particular, they did not deal with the possibility that the acquisition of the annuity might have been partly funded by the taxpayer and the consequences which might flow from that. I was also concerned that there were some outstanding issues relating to the rebate claim

ATC 2456

under s 159SM which the parties had not fully dealt with. Accordingly, I took the unusual course of publishing a document headed "Preliminary Consideration of Issues". I invited the parties to file further written submissions. They have done this. In addition, they sought a further oral hearing. That has occurred. I am now in a position to make a final decision.

The taxpayer's entitlements

21. The taxpayer was entitled to three kinds of benefit under the CSS pursuant to the Superannuation Act:

  • 1. A standard early retirement pension arising under s 59(1)(a). This pension is indexed and is not commutable to a lump sum.
  • 2. An additional early retirement pension arising under s 59(1)(b). This pension is not indexed and is commutable to a lump sum.
  • 3. A productivity benefit payable under s 110P.

22. This case is concerned with the annual taxation assessment of the taxpayer with respect to the standard early retirement pension. It is with respect to payment of that pension that the taxpayer claims a deduction under s 27H and a rebate under s 159SM.

23. Although the benefits to which the taxpayer became entitled can be separated into three components, there was no separation in the contributions he made. The taxpayer made undifferentiated contributions from his salary. The contributions were made pursuant to s 45 of the Superannuation Act. There is nothing about the way in which the contributions were assessed or paid which can be said to address the question of how the contributions were applied and, particularly, whether and how they were apportioned between the two pensions.

24. The standard early retirement pension with which this case is concerned is usually calculated in accordance with s 60 by reference to the taxpayer's final salary, length of service and age at retirement. The additional retirement pension is usually calculated in accordance with s 61 by reference to the member's accumulated contributions (including any accumulated supplementary contributions). The taxpayer was entitled, pursuant to s 64, to commute this pension, as he did, to a lump sum. The lump sum is required by s 65 to be "equal to" accumulated contributions and interest. The productivity benefit payable under s 110P was paid as a lump sum and was calculated by reference to the employer's contributions.

25. The taxpayer resigned on 28 February 2001. This was before his 55th birthday, the minimum retirement age (s 3(1)). He elected, under s 137, to defer his superannuation benefits until the minimum retirement age. The taxpayer became entitled to deferred benefits under s 138 of the same nature to which he would have been entitled if he had retired at 55. In particular, he became entitled upon reaching age 55, to the three benefits identified above.

26. Because the taxpayer retired early and made an election to defer his benefits, his standard early retirement pension was not calculated in accordance with s 60 but was calculated in accordance with s 136. It would seem that because there is no final salary in the case of such a retirement, a different method of calculating the pension is provided for. The pension is calculated by reference to the member's accumulated basic contributions and age at retirement rather than final salary, length of service and age at retirement.

27. The additional early retirement pension and the productivity benefit were payable jointly in the form of an additional early retirement pension. The taxpayer, having elected to commute this pension, was entitled to a lump sum equal to the amount of his accumulated contributions and his accumulated employer contributions.

28. An amount equal to the whole of the contributions made by the taxpayer and all interest attributable to those contributions has been paid to the taxpayer as a lump sum. Accordingly, the Commissioner says that the taxpayer's contributions cannot have gone towards the pension. However, the contributions were made as part of the overall CSS scheme. This scheme included the indexed pension with which this case is concerned. The amount of the pension, in the circumstances of this case, was calculated partly by reference to the taxpayer's contributions. It might, therefore, be said that the contributions were partly used to acquire the pension. A normal characteristic of superannuation is employer contributions. In most cases these are made contemporaneously

ATC 2457

with employee contributions. Only limited contemporaneous employer contributions are made under the CSS. Part of the "employer" contribution comes in due course from the Commonwealth, rather than the employer agency, through payments out of the Consolidated Revenue Fund. Nevertheless, the overall CSS scheme, as it applied to the taxpayer, may support an argument that the taxpayer's contributions funded his entitlement generally and should be seen as employee contributions towards all his entitlements.

The superannuation benefits received by the taxpayer

29. This application relates to the income year ended 30 June 2001. During that year the taxpayer became entitled to the indexed pension. For the part of the year during which he was so entitled, the taxpayer was paid $16,162 at the rate of approximately $1,500 (after deduction of tax) per fortnight. A total of $3,938 was withheld for taxation.

30. During the same tax year, the taxpayer received the lump sum payment of $247,965 (less $323 withheld for tax) representing proceeds of the commuted additional pension. An "ETP Payment Summary" issued by Comsuper shows that the payment was made up of the following components:

Undeducted contributions 51,535
Pre July 1983 component 127,832
Posat June 1983 untaxed component 1,955
Post June 1983 taxed component 66,642
  $247,964

The taxpayer was taxed on $74,989 of this amount by amended assessment dated 3 May 2005. That amount was calculated as follows, according to figures provided by the taxpayer:

Pre July 1983 (5% of $127,832) 6,392 (taxed at marginal rate)
Post 1983 - Taxed 66,642 (tax rate nil)
Post 1983 - Untaxed 1,955 (tax rate 15%)
  $74,989  

Deduction: Was there an annuity that has been purchased?

31. It is with this background that it becomes necessary to consider the phrase "annuity that has been purchased" in s 27H(1)(a). An annuity that has been purchased will have to yield an undeducted purchase price in accordance with s 27H(2). "Undeducted purchase price" is defined in s 27A(1). A component of an undeducted purchase price is the "purchase price". That is defined in s 27A(1) as follows:

" purchase price means:

  • (a) in relation to a superannuation pension-the sum of:
    • (i) contributions made by any person to a superannuation fund to obtain superannuation benefits consisting only of the superannuation pension; and
    • (ii) so much as the Commissioner considers reasonable of contributions made by any person to a superannuation fund to obtain superannuation benefits including the superannuation pension; and
  • (b) in relation to an annuity-the sum of:
    • (i) payments made solely to purchase the annuity; and
    • (ii) so much as the Commissioner considers reasonable of payments made to purchase the annuity and to obtain other benefits.

32. Throughout the hearing the Commissioner maintained his argument that the indexed pension was not funded from any contributions by the taxpayer and was funded solely from the Consolidated Revenue Fund. It followed that the taxpayer's contributions did not fall within sub para (a)(i) or (b)(i) of the definition. That may be true because of the existence of the words "only" and "solely" in the definition. While the analysis I have been considering may lead to the conclusion that the superannuation pension was partly acquired through the taxpayer's contributions, it cannot be said that they were made "solely" to acquire the pension or that the benefits they went towards consisted "only" of the pension.

33. 

ATC 2458

The parties agreed that, pursuant to s 112(1) of the Superannuation Act, the taxpayer's accumulated contributions were paid out of the CSS Fund into the Consolidated Revenue Fund. The Consolidated Revenue Fund is "a common fund in which are blended indistinguishably all payments made to or moneys received by the Commonwealth" (
Investment Trust v Commissioner of Stamps (SA) (1979) 145 CLR 330 at 363 per Aickin J). To the extent to which, consistently with this, it can be said that contributions paid into the CSS Fund remain a source of a benefit, this may be just as true of the standard superannuation pension paid as a pension as of the additional superannuation pension commuted to a lump sum.

34. I am not aware of any provision which specifically links additional superannuation pensions, or the entitlement to a commuted lump sum payment, with contributions, other than that they are the same amount. Section 65(1) of the Superannuation Act refers to a sum "equal" to the contribution and not to the actual funds contributed. It was asserted in the hearing that the lump sum payment was funded by the taxpayer and the pension was unfunded. There is no express basis for this assertion. The identity of the amount with the contributions does not seem to me to be enough. The indexed pension was calculated partly by reference to the taxpayer's contribution. Was not the taxpayer "contributing" to this pension entitlement, paid as such, just as much as to the entitlement he took as a lump sum? Plainly, the taxpayer would not have been entitled to opt out of that part of the scheme which led to his lump sum entitlement and to continue to be entitled to the indexed pension, without making any contributions.

35. The Commissioner asserts that the taxpayer's "contributions… were… included in the lump sum paid to him on retirement at age 55" (Submissions 18 September 2006 para 15). The preferable analysis seems to me to be that the taxpayer made contributions to the CSS. That gave him an entitlement to a number of benefits. Nothing expressly links the contributions to any particular benefit. For present purposes, each benefit is calculated by reference to the contributions. In the absence of a statutory assignment of the contributions to the additional pension or the lump sum payment which the taxpayer elected to take, the better conclusion seems to me to be that the taxpayer's contributions funded both the lump sum payment (which might have been taken as a non indexed pension) and the indexed pension.

36. It is not appropriate to employ some analogue of the rule in Clayton's Case to conclude that, because the lump sum payment was made first, that exhausted the funds sourced from contributions. Nor is it appropriate to engage in a kind of tracing exercise. Both would ignore the very nature of the Consolidated Revenue Fund. Indeed, Aickin J rejected both possibilities in the passage I have quoted from, above. Provisions such as sub paras (a)(ii) and (b)(ii) of the definition of purchase price, recognise that annuities may be partially funded by contributions. Section 112(2) applies to all parts of the taxpayer's superannuation entitlement.

37. Accordingly, the taxpayer's contributions can be seen as funding the pension and the lump sum payment although, as with most employee superannuation, the total amount to be paid out is supplemented by payments made by or on behalf of the employer. This would ordinarily lead to a conclusion that the standard early retirement pension was relevantly purchased, or at least partly purchased. It was purchased along with the additional early retirement pension.

Deduction: Was there a purchase price?

38. When it comes to the calculation of a purchase price in s 27A(1), neither sub paras (a)(i) or (b)(i) can apply, because the contributions made by the taxpayer were not "only" or "solely" referrable to the annuity. Consideration of sub para (a)(ii) or (b)(ii) is, therefore, required. This issue was not considered by the Commissioner. However, the parties accept that it is open to the Tribunal to address the matter if it considers it necessary to do so. It does not seem to me to matter whether consideration is given to sub para (a)(ii) or (b)(ii) - the result will be the same.

39. If it could be said that the taxpayer's contributions had gone only or solely towards the purchase of the additional early retirement pension, then it must follow that the standard early retirement pension was not purchased.

ATC 2459

This, of course, is now the Commissioner's primary case. If the correct view is that the taxpayer's contributions went towards acquiring both benefits, one approach would be to apportion the contributions. The correct exercise of the discretion would then seem to be to determine an amount under sub para (a)(ii) or (b)(ii) which reflects a reasonable proportion. That would be the preferable decision as to what is "reasonable". The proportion assigned to the purchase of the annuity should take account of any proportion assigned to the additional early retirement pension.

40. Although the additional early retirement pension would have been covered by s 27H if it had been paid as a pension, once it was commuted to a lump sum payment the position changed. It then stood to be dealt with pursuant to the ETP provisions of the Act and, particularly, ss 27A(1) ("Eligible termination payment"), 27AB, 27B and 27C.

41. Because the taxpayer commuted the pension before any pension payments became payable, the whole of what would have been the undeducted purchase price for the purpose of s 27H, if the whole of the contributions were so assigned, was excluded from the taxpayer's assessable income in the year he received the lump sum payment. Putting this in concrete terms, the undeducted purchase price in terms of s 27H, if one took the whole of the contributions, would be $51,535. This is shown in the analysis above as "undeducted contributions". What was excluded from the taxpayer's income in the year he was assessed for receipt of the lump sum was the "unused undeducted purchase price" as defined in s 27A(1). The definition requires reference to the same definition of "undeducted purchase price" as is required by s 27H. Because no pension payment had become payable before the pension was commuted the "unused undeducted purchase price" was the same as the "undeducted purchase price". The amount in each case is $51,535.

42. It follows that the taxpayer has already had the benefit of the whole of the undeducted purchase price being excluded from his assessable income. The financial consequence was different to what is now claimed because s 27H leads to a proportionate amount being excluded each year. However, this difference was the result of the taxpayer's election to commute the pension. What is important is that one hundred per cent of the contribution converted to an "undeducted purchase price" as defined in s 27A(1) has already been taken into account in reducing his assessable income. In these circumstances the preferable decision seems to me to be to exercise my discretion against including any sum under sub para (a)(ii) or (b)(ii). It may be that a proper approach would have been to assign some percentage of the "undeducted purchase price" to the standard early retirement pension and the remainder to the additional early retirement pension, but that is no longer possible. Because the taxpayer has had the benefit of one hundred per cent of the undeducted purchase price being excluded from his assessable income with respect to his receipt of the additional early retirement pension, the preferable and reasonable decision is not to include any contributions under the definition of purchase price in sub paras (a)(ii) or (b)(ii).

43. It follows that the standard early retirement pension yields no undeducted purchase price. Either it was not purchased or, because there is no undeducted purchase price, the deductible amount is nil. Either way, the taxpayer is not entitled to a deduction. The taxpayer fails on his first claim. It is not necessary for the purposes of this issue to consider whether the pension is paid from a complying superannuation fund. However, because this is relevant to the second issue before me I will need to consider it below.

Rebate: Is there a rebatable superannuation pension?

44. The question is whether the pension is a rebatable superannuation pension. That depends upon whether the pension is paid from a complying superannuation fund. For reasons already discussed that requires reference to s 45 of the Superannuation Supervision Act. The provision is simple and apparently straightforward. It appears to say exclusively that a fund is a complying superannuation fund "if, and only if … the Regulator has given a notice to the trustee under section 40 stating that the fund is a complying superannuation fund". Such a notice has been given. The simple conclusion might seem to follow that the legislation contains an exclusive means for

ATC 2460

determining whether there is a fund which is a complying superannuation fund and that the test is satisfied in the present case. However, the Commissioner says that it is not so simple. He notes that s 40 of the Superannuation Supervision Act authorises the Regulator to "give a written notice to the trustee of an entity stating… whether the entity is or is not a complying superannuation fund". An entity need not be a fund. Section 45 only applies to a fund. Those are the opening words. If there is no fund there is no room for s 45 to constitute anything relevantly to be a "complying superannuation fund", even if there is a notice under s 40.

45. One answer to the Commissioner's submission may be that the notice itself, by force of s 40, deems the entity to be a fund. The entity to which the s 40 notice was given was the CSS. The Commissioner accepts that the CSS Fund is a complying superannuation fund. However, this says nothing about the status of the Consolidated Revenue Fund. Merely locating a relevant complying superannuation fund does not avail the taxpayer. The relevance of a fund being a complying superannuation fund is that that is a necessary component in establishing a rebatable superannuation pension. The problem for the taxpayer is that a rebatable superannuation pension must be "paid from… a complying superannuation fund". The Commissioner says the taxpayer's pension is paid from the Consolidated Revenue Fund and not the CSS Fund.

46. At this point I must note that the Commissioner has put submissions on two supplementary bases to aid his argument that there is no relevant fund. The first submission relies upon the explanatory memorandum to the bill which included relevant amendments to the Tax Act. The second submission relies upon decisions of courts and, particularly, the High Court in
Austin v Commonwealth of Australia 2003 ATC 4042; (2003) 215 CLR 185, relating to purposive statutory interpretation.

47. The explanatory memorandum to the Taxation Laws Amendment (Superannuation) Act 1989 states that the rebate provision "is intended to compensate superannuation pensioners and annuitants for the effect of the tax on taxable contributions which applies from 1 July 1988" (EM at 6). The Commissioner's submission in reliance upon the explanatory memorandum appears to be that because no "taxable contributions" were made to the Consolidated Revenue Fund, the rebate does not apply.

48. That leads to the second submission. The thrust of this submission is that ss 40 and 45 of the Superannuation Supervision Act have to be construed in the context that they are contained in legislation relating to regulation of the superannuation industry. The incorporation of provisions from such legislation into provisions relating to taxation may require a construction which takes the latter purpose into account. Apart from relying upon general passages in
Cooper Brooks (Wollongong) Pty Ltd v Federal Commissioner of Taxation 81 ATC 4292; (1981) 147 CLR 297 at 321-323,
Harris v Commissioner of Taxation 2002 ATC 4659; (2002) 125 FCR 46 at 53 and
Project Blue Sky Incorporated v Australian Broadcasting Authority (1998) 194 CLR 355 at 382 and 384, the Commissioner relies on the reasoning of Gaudron, Gummow and Hayne JJ in Austin and, in particular, on their statement that where, as here, one piece of legislation describes a phrase as having "the same meaning as the same phrase in other legislation,… the phrase 'the same meaning' is to be taken as used at the semantic level appropriate to the respective subject matters of the two statutes" (Austin at 242). So, a "definition is not to be given the same literal application as it has in Pt IX of the [Tax Act] if to do so would cause to miscarry the hypothesis upon which it is adopted by the other statute" (Austin at 242).

49. The correctness of the process of statutory interpretation is not in doubt. However, it is not immediately apparent which aspects of the tax legislation should lead to a different emphasis in the meaning of the phrase "complying superannuation fund". The Commissioner was at pains to submit that the taxpayer received different tax treatment to members of private funds and that the deduction and rebate provisions now relied upon were enacted to compensate only those suffering the taxation treatment to which members of private funds were subjected.

50. For present purposes, however, it does not seem to me that these matters need to be dealt with. The word "fund" may sometimes

ATC 2461

be used in the Tax Act in a sense different to that in which it may be used in other legislation. It may be used in different senses in different parts of the Tax Act. For present purposes it seems to me that this is much more likely to flow from context than from the wider considerations of policy particularly relied upon by the Commissioner. I notice, for example, that the Tax Act itself defines "superannuation fund" to include "a scheme for the payment of benefits… constituted by or under a law of the Commonwealth…" (s 27A(1)). The width of this definition makes it difficult to sustain an argument that "fund" generally should have a narrower meaning in some parts of the Tax Act or that it should have a narrower meaning than its meaning in the Superannuation Act. However, it does seem to me that it can, and usually would, have a narrower meaning when used in the phrase "paid from… a… fund". Here the emphasis is on the source of a payment. It does not seem to me, for example, that the extension of the meaning of "superannuation fund" to a Commonwealth "scheme" will have the consequence that any payment under such a scheme is a payment from a superannuation fund.

51. The taxpayer's claim to a rebate can only succeed if the pension is paid from a complying superannuation fund. This can only be established if the taxpayer shows that the pension is paid from the CSS Fund or that the Consolidated Revenue Fund is itself a complying superannuation fund.

52. The taxpayer argues that in substance the pension is paid from the CSS Fund. In support of this proposition he relies upon the fact that the relevant credits to his bank account show "Comsuper" as the source and that both a payment summary and the ETP payment summary provided by Comsuper for income tax purposes show the payer's name as "Comsuper".

53. Setting aside the proposition that these documents may not be sufficient evidence of the way the payments were in fact made, it does not seem to me that they can alter the underlying legal position. Section 112 of the Superannuation Act clearly provides that the pension is to be paid out of Consolidated Revenue. That is the statutory source of the payment. It is on this underlying legal basis for the payment of the pension that taxation issues must be determined. The position is not altered by the presence of some practical mechanism by which the actual payments may pass through Comsuper. There are obvious practical reasons associated with the management of Commonwealth pensions why this might be so. The reality is that, on any view, some of the pension payments are unfunded other than by the statutory requirement that they be made out of the Consolidated Revenue Fund.

54. There remains the question of whether the Consolidated Revenue Fund might itself be a complying superannuation fund. Such a claim is contradicted by the nature of the fund itself as explained above. Notwithstanding the definition of "superannuation fund", I do not think that the Consolidated Revenue Fund is a superannuation fund for the purposes of determining whether a payment out of Consolidated Revenue is a payment from a superannuation fund.

55. It follows that the taxpayer's argument that his pension is paid from a complying superannuation fund must fail. However, the taxpayer next turns to s 159ST of the Tax Act. The section is as follows:

"For the purposes of this Subdivision, where the Commissioner is of the opinion that a particular superannuation pension:

  • (a) is not, apart from this subsection, payable from a fund; and
  • (b) is, in effect, funded from a fund;

the superannuation pension shall be treated as if it were payable from that fund".

This raises the question whether in the year of income the taxpayer's pension was "in effect, funded from a fund".

56. In the year in which the taxpayer received the lump sum payment his assessable income was affected by rebate provisions contained in s 159SA of the Tax Act. These led to the differential rates of tax shown in the calculation above including the receipt of $66,642 free of tax. It is not suggested that the rebates under this section equate to the amount of rebate claimed here. However, just as the lump sum payment benefited from exclusion of the undeducted purchase price for taxation purposes, so it also benefited from rebates relating to other components of the lump sum.

57. 

ATC 2462

The benefit obtained could not be identical to the benefit now claimed because the taxation treatment of payment of a lump sum, which will be taxed in one year, must be quite different to the taxation treatment of a pension which will be taxed in each year in which it is received. However, the different taxation treatment is a consequence of an election made by the taxpayer.

58. In a practical sense the pension paid to a taxpayer may be partly funded from contributions which find their way into the Consolidated Revenue Fund under s 112. However, much of the pension is not so funded. In practical terms the present taxpayer has already had the benefit of rebate provisions applied to his receipt of the lump sum payment. That was a consequence of the taxpayer electing to take his non-indexed pension as a lump sum. The taxpayer has had the benefit of rebate provisions associated with his contributions under the CSS through his taking the non-indexed pension in a lump sum.

59. The consequence is that the pension which is now paid to the taxpayer is not "in effect, funded from a fund". This is because most of it would, in any event, be unfunded other than by its being paid by statute out of the Consolidated Revenue Fund. To the extent that it has a source in funds (representing the taxpayer's contributions) held by the CSS Fund before being paid into the Consolidated Revenue Fund, that amount, has, for tax purposes, been treated as having been paid to the taxpayer as a lump sum payment and, accordingly, should not be treated, again for tax purposes, as funding the pension. The proper opinion to be formed under s 159ST is that the indexed pension under consideration is not "in effect, funded from a fund". The taxpayer accordingly fails in his claim to a rebate under s 159SM.

60. The result seems to be that I should simply affirm the assessments under review. However, because of the complexity of the facts underlying this case and the multiple assessments which have occurred, I propose to publish these reasons and invite the parties to consider whether they are agreed that that is the correct result.


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