The impact of this case on ATO policy is discussed in Decision Impact Statement: Ward and Commissioner of Taxation (2013/3760 ).
WARD v FC of TMembers:
SE Frost DP
J Popple SM
Administrative Appeals Tribunal, Canberra
MEDIA NEUTRAL CITATION:
 AATA 138
SE Frost (Deputy President) and J Popple (Senior Member)
1. The ordinary meaning conveyed by the text of s 292-465(9)(a) of the Income Tax Assessment Act 1997 (the ITAA 1997 ) leads to a result that is manifestly absurd. To ascertain the meaning of that provision, we can give consideration to the explanatory memorandum to the Bill for the Act that inserted the provision in the ITAA 1997. Interpreting s 292-465(9)(a) in this way, it follows that the Tribunal has jurisdiction to review the decision that is the subject of this review.
2. On 23 November 2012, the Commissioner of Taxation issued a notice of assessment of excess non-concessional superannuation contributions tax for the year ended 30 June 2011 to Mr Colin Ward. On 4 December 2012, Mr Ward applied to the Commissioner for a determination under s 292-465(1) the ITAA 1997 that a specified amount of Mr Ward's non-concessional superannuation contributions for the relevant year be disregarded. On 14 March 2013, the Commissioner decided not to make such a determination. On 26 April 2013, Mr Ward lodged an objection against that decision. On 7 June 2013, the Commissioner disallowed the objection.
3. On 2 August 2013, Mr Ward applied to the Tribunal, relying on s 14ZZ of the Taxation Administration Act 1953 (the TA Act ) and s 29(1) of the Administrative Appeals Tribunal Act 1975, for review of the Commissioner's decision to disallow the objection. During a telephone directions hearing on 13 January 2015, the question arose whether the Tribunal has jurisdiction to review that decision.
4. The parties subsequently asked the Tribunal to consider and decide, as a preliminary question, whether the Tribunal has jurisdiction in relation to Mr Ward's review application. In the circumstances we agreed it was appropriate to decide that question as a preliminary issue and we asked the parties for written submissions on the question. We chose to decide the question on the papers.
5. Because of the significance of the question raised, the Commissioner decided to grant funding to Mr Ward under the Australian Taxation Office's Test Case Litigation Program, but limited to the question of jurisdiction.
ATC 6629The jurisdiction question
6. The Commissioner decided not to make a determination under s 292-465(1) about Mr Ward's non-concessional superannuation contributions. The jurisdiction question is whether that decision was one against which Mr Ward could object under s 292-245. If it was not, then there was no objection for the Commissioner to disallow and, therefore, no "reviewable objection decision" (for the purposes of s 14ZZ(1) of the TA Act) for this Tribunal to review.
The 2010 amendments
7. On 3 August 2010, the Tribunal decided in McMennemin and Federal Commissioner of Taxation
8. On 17 November 2010, s 292-465(2) was amended, and ss 292-465(8) and (9) were inserted, by the Superannuation Legislation Amendment Act 2010 (the
292-465 Commissioner's discretion to disregard contributions etc. in relation to a financial year
- (1) If you make an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of this Division:
- (a) all or part of your *concessional contributions for a *financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination; and
- (b) all or part of your *non concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination.
- (2) You may apply to the Commissioner in the *approved form for a determination under subsection (1). The application can only be made:
- (a) after all of the contributions sought to be disregarded or reallocated have been made; and
- (b) if you receive an *excess contributions tax assessment for the *financial year-before the end of:
- (i) the period of 60 days starting on the day you receive the assessment; or
- (ii) if the Commissioner allows a longer period-that longer period.
- (3) The Commissioner may make the determination only if he or she considers that:
- (a) there are special circumstances; and
- (b) making the determination is consistent with the object of this Division.
- (4) In making the determination the Commissioner may have regard to the matters in subsections (5) and (6) and any other relevant matters.
- (5) The Commissioner may have regard to whether a contribution made in the relevant *financial year would more appropriately be allocated towards another financial year instead.
- (6) The Commissioner may have regard to whether it was reasonably foreseeable, when a relevant contribution was made, that you would have *excess concessional contributions or *excess non concessional contributions for the relevant *financial year, and in particular:
- (a) if the relevant contribution is made in respect of you by another person-the terms of any agreement or arrangement between you and that person as to the amount and timing of the contribution; and
- (b) the extent to which you had control over the making of the contribution.
- (7) The Commissioner must give you a copy of the determination.
- (8) A determination under this section may be included in a notice of assessment.
Review of determinations
- (9) To avoid doubt:
- (a) you may object under section 292-245 against an *excess contributions tax assessment made in relation to you on the ground that you are dissatisfied with a determination that you applied for under this section; and
- (b) for the purposes of paragraph (e) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977, the making of a determination under this section is a decision forming part of the process of making an assessment of tax under this Act.
9. On 17 March 2011, the Full Court of the Federal Court in
Federal Commissioner of Taxation v Administrative Appeals Tribunal
The 2013 amendments
10. Division 292 of the ITAA 1997 was also amended by the Tax Laws Amendment (Fairer Taxation of Excess Concessional Contributions) Act 2013.
The problem with s 292-465
11. The Tribunal's jurisdiction in this review turns on whether a person can object against the Commissioner's decision not to make a determination under s 292-465. This is the same situation as arose in McMennemin. The question in this review is whether the 2010 amendments mean that the Commissioner's decision is a decision against which Mr Ward can object. If it is not, then there was no objection for the Commissioner to disallow and, therefore, no "reviewable objection decision" (for the purposes of s 14ZZ(1) of the TA Act) for this Tribunal to review.
12. The efficacy of the 2010 amendments to s 292-465 was discussed by the Tribunal in Hope and Commissioner of Taxation.
... the question arises whether s 292-465(9)(a) permits a person to object against an [Excess Contributions Tax] assessment on the ground of dissatisfaction with the Commissioner's decision to refuse to make a determination. It is clear that it permits an objection to be made on the ground of dissatisfaction with the determination that has been made but, to my mind, it is not at all clear that it allows an objection to be made when the Commissioner has not made a determination at all on the person's application.
per Forgie DP.  AATA 877at 
A "manifestly absurd" result
13. Section 292-465(9)(a)-whose insertion was one of the 2010 amendments-provides that a person may object only "on the ground that you are dissatisfied with a determination that you applied for under this section". The ordinary meaning conveyed by the expression "a determination that you applied for under this section" is a determination in the terms that the person applied for. But a person would never be dissatisfied if the Commissioner made the determination that the person asked for. So, if the words were given their ordinary meaning, the only taxpayers entitled to object could not do so, because they would not be dissatisfied with the outcome, and those who were dissatisfied would not have a right to object despite that dissatisfaction. That would mean that the 2010 amendments, although evidently intended to remedy the outcome in McMennemin, had no practical effect.
14. Section 15AB of the Acts Interpretation Act 1901 relevantly provides:
15AB Use of extrinsic material in the interpretation of an Act
- (1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
- (b) to determine the meaning of the provision when:
- (ii) the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.
- (2) Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of an Act includes:
- (e) any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted;
15. For the purposes of s 15AB(1)(b)(ii), the ordinary meaning conveyed by the text of s 292-465(9)(a) leads to a result that is manifestly absurd: namely, that the only people who can object against the Commissioner's decision are those who have no complaint with it. Accordingly, we can give consideration to extrinsic material in ascertaining the meaning of that provision. The explanatory memorandum to the Bill that became the amending Act is part of that extrinsic material: s 15AB(2)(e).
Giving consideration to the explanatory memorandum
16. The explanatory memorandum to the Superannuation Legislation Amendment Bill 2010 includes the following in relation to the inserted ss 292-465(8) and (9) of the ITAA 1997:
The Commissioner may include notice of a determination made in a notice of assessment. The amendments also clarify that a person may object to an excess contributions tax assessment on the grounds that they are dissatisfied with the Commissioner's determination or the Commissioner's decision not to make a determination.
Explanatory memorandum, Superannuation Legislation Amendment Bill 2010 at [4.32].
17. Giving consideration to the explanatory memorandum in ascertaining the meaning of s 292-465(9)(a), it is clear that that provision should be interpreted so as to grant a right to object where a person is dissatisfied with the Commissioner's determination or the Commissioner's decision not to make a determination.
Implying words in s 292-465
18. As McHugh J explained in
Newcastle City Council v GIO General Ltd:
Extrinsic material cannot be used to construe a legislative provision unless the construction of the provision suggested by that material is one that is "reasonably open".
Even if extrinsic material convincingly indicates the evil at which a section was aimed, it does not follow that the language of the section will always permit a construction that will remedy that evil. If the legislature uses language which covers only one state of affairs, a court cannot legitimately construe the words of the section in a tortured and unrealistic manner to cover another set of circumstances. As Brennan CJ and I said in . CIC Insurance Ltdv Bankstown Football Club Ltd (1997) 187 CLR 384at 408
IW v City of Perth,
even when a court adopts a purposive construction to remedial legislation it "is not at liberty to give it a construction that is unreasonable or unnatural." (1997) 191 CLR 1 at 12.
Nevertheless, when the purpose of a legislative provision is clear, a court may be justified in giving the provision "a strained construction"
to achieve that purpose provided that the construction is neither unreasonable nor unnatural. If the target of a legislative provision is clear, the court's duty is to ensure that it is hit rather than to record that it has been missed. ; Kingstonv Keprose Pty Ltd (1987) 11 NSWLR 404at 422 . Sutherland Publishing Co Ltdv Caxton Publishing Co Ltd  Ch 174at 201 As a result, on rare occasions a court may be justified in treating a provision as containing additional words if those additional words will give effect to the legislative purpose. In , citing Lord Diplock in “The Courts as Legislators”, Kingstonv Keprose Pty Ltd (1987) 11 NSWLR 404at 424 The Lawyer and Justice(1978) at 274.
Jones v Wrotham Park Estates,
Lord Diplock said that three conditions must be met before a court can read words into legislation. First, the court must know the mischief with which the statute was dealing. Second, the ;  AC 74at 105 . Kingstonv Keprose Pty Ltd (1987) 11 NSWLR 404at 422–423
ATC 6632court must be satisfied that by inadvertence Parliament had overlooked an eventuality which must be dealt with if the purpose of the legislation is to be achieved. Third, the court must be able to state with certainty what words Parliament would have used to overcome the omission if its attention had been drawn to the defect.
19. In this case, from the explanatory memorandum, we know the mischief with which the 2010 amendments were dealing: namely, the absence of a right to object against a decision by the Commissioner to refuse to make a determination under s 292-465. We can also be satisfied that, by inadvertence, Parliament overlooked an eventuality which must be dealt with if the purpose of the 2010 amendments is to be achieved: namely, where a person applies for a determination under s 292-465(1) and is dissatisfied with the outcome.
20. We also know the words that Parliament would have used to overcome the omission if its attention had been drawn to the defect. It would have used words in s 292-465(9)(a) that made it clear that there is a right to object where a person is dissatisfied with the Commissioner's determination or the Commissioner's decision not to make a determination. That construction is reasonably open. It is not unnatural. It does not involve construing the words of the section in a tortured or unrealistic manner. On the contrary, it is the only construction that gives s 292-465(9)(a) a reasonable and realistic meaning, consistent with what Parliament clearly intended.
21. The Commissioner's decision not to make a determination was a decision against which Mr Ward could-as he did-object. It follows that the Commissioner could-as he did-disallow Mr Ward's objection. The decision to disallow the objection was a "reviewable objection decision" for the purposes of s 14ZZ(1) of the TA Act, and the Tribunal has jurisdiction to review that decision.