P Gerber SM
Administrative Appeals Tribunal
Dr P. Gerber (Senior Member)
The issue in this application involves, in the main, a question of statutory construction. The facts are simple, not seriously challenged and can be briefly stated.
2. The applicant, as well as his wife, have had a lifelong association with Gympie. At the time of the hearing, the applicant was 30 years of age. He is, at the time of handing down my decision, nearly two years older. The evidence disclosed that opportunities for unskilled labour in Gympie were, at all relevant times, scarce. This notwithstanding, the applicant had, prior to joining the Queensland Railway Department (``the railway'') in 1978, an enviable and unbroken employment record, albeit, due to the exigencies of business closures, with a number of different employers. Anxious to buy a home in Gympie and requiring bank finance, he approached the local bank manager who ``suggested that I get into a permanent job so I could get a loan through the bank''. It was as a direct result of this interview that he put his name down as an applicant for employment with the railway, being the only means available to him to obtain bank finance. He was in due course offered a temporary job as a fireman with the railway in May 1978, and made ``permanent'' after he passed an examination in early 1979. The applicant, who gave oral evidence, impressed as an extremely honest, intelligent and reliable witness, whose evidence I unhesitatingly accept. He gave a vivid account of his employment history with the railway, involving numerous transfers away from home, all of which ``cost me money'', until he was finally transferred back to Gympie in 1981, where, at the time of the hearing of this application, he was still residing and working with the railway, having in the meantime nearly paid off his home loan. He informed me that he is now looking for other employment or starting his own little business. He made it abundantly clear that the railway had served its purpose - the backstop to home finance - and that the sooner he could obtain other employment the better. Despite rigorous cross-examination by Mr Curran, of learned counsel for the Crown, the applicant was adamant in his stand that he always regarded his employment with the railway as a temporary means to an end, and that he had at all times intended to terminate that employment when those means had been served. The relevance of all this to the present application is to be found in a mésalliance between a railway by-law and Subdiv. AB of the Income Tax Act.
3. To complete the factual narrative, in 1979, that is after the applicant had joined the railway, he entered into a contract of insurance with the AMP Society and paid his first premium ($484) in that year. He was adamant that he did not join the State superannuation fund, which he could have elected to do within six months of becoming ``permanent'', ``because at no time did I intend staying in the railway, so I saw no benefit in joining it''. In the year now under review (1981), the applicant, in his return, deducted an amount of $484 as his contribution to a non-employer sponsored superannuation fund, which the Commissioner disallowed for reasons which are succinctly set out in the reg. 35 statement (as it was then known):
``To be entitled to a deduction under section 82AAT of the Act, the taxpayer must qualify as an `eligible person' as that term is defined in section 82AAS. The taxpayer does not so qualify, in that during the relevant year it was reasonable to expect that superannuation benefits as defined would be provided for him upon retirement, other than from contributions made wholly by himself and other than from income or accretions arising from such contributions.''
4. To comprehend this argument, it will be necessary to set out the various statutory provisions and the railway by-law relied on by the Crown. Commencing with cl. 26(b) of Queensland Railway By-Law No. 690 of 1955, this states:
``Should it become necessary for an employee to be retired from the service [because of permanent ill-health, defective eyesight, or other cause rendering him physically or mentally unfit to perform his regular duties], or because he has attained the age fixed by the Government as the age at which employees of the Commissioner shall be retired, there shall be paid to him as a retiring allowance a sum equal to salary or wages at the rate he was receiving at the date of retirement for a period according to the following scale, but in no case, excepting with the special approval of the Commissioner, shall such rate be more than the rate applicable to his permanent classification:
To any such employee who has for a period of at least fifteen years continuously been in the service, three months; to any such employee who has for a period of at least twenty years continuously been in the service, four and a half months; to any such employee who has for a period of at least twenty-five years continuously been in the service, six months; a proportionate time and pay being allowed for intermediate service between the periods: Provided that the Commissioner may grant to any such employee who has for a period of at least ten years but not more than fifteen years continuously been in the service, a retiring allowance for a period equal to that proportion of three months that the period such employee has continuously been in the service bears to fifteen years... Provided, also, that for any such period herein referred to no employee shall be entitled to receive any emoluments other than salary.''
5. Turning to the Income Tax Assessment Act, sec. 82AAT provides for deductions for superannuation contributions by eligible persons.
``82AAT(1) Subject to subsection (2), there shall be allowed as a deduction from the assessable income of an eligible person of a year of income the amount of any contribution, or the sum of the amounts of any contributions, made by the eligible person during the year of income and after 19 August 1980 to a qualifying superannuation fund, being contributions made to obtain superannuation benefits for the eligible person or, in the event of the death of the eligible person, for the dependants of the eligible person.
82AAT(2) The deduction allowable to a taxpayer under this section from the assessable income of a year of income shall not exceed $1,200.''
Eligible person is defined in sec. 82AAS(2) as follows:
``82AAS(2) Subject to subsection (3), a person (in this subsection referred to as the `relevant person') is an eligible person in relation to a year of income for the purposes of this Subdivision unless -
- (a) during the whole or a part of the year of income circumstances existed by reason of which it was reasonable to expect that superannuation benefits would be provided for the relevant person upon retirement or for dependants of the relevant person in the event of the death of the relevant person (whether or not any condition other than the retirement or death of the relevant person would be required to be satisfied in order that those benefits be provided); and
- (b) to the extent to which those benefits would be attributable to the year of income -
- (i) the benefits would be wholly or partly attributable to contributions made to a superannuation fund in relation to the relevant person by a person other than the relevant person; or
- (ii) the benefits would, in whole or in part, be paid out of moneys that would not represent -
- (A) contributions made by the relevant person to a superannuation fund;
- (B) contributions made by the relevant person under a scheme for the payment of benefits upon retirement or death, being a
ATC 362scheme constituted by or under a law of the Commonwealth or of a State or Territory; or
- (C) income or accretions arising from contributions referred to in sub-subparagraph (A) or (B).
82AAS(3) Where, apart from this subsection, a person would not be an eligible person in relation to a year of income for the purposes of this Subdivision by reason of the operation of subsection (2) in relation to a part only of a year of income and the Commissioner, having regard to -
- (a) the period or periods during the year of income or during any preceding year of income during which circumstances of the kind specified in that subsection existed in relation to the person; and
- (b) such other matters as the Commissioner thinks relevant,
is of the opinion that it is reasonable that the person should be treated as an eligible person in relation to the year of income for the purposes of this Subdivision, the person shall be deemed to be an eligible person in relation to the year of income for the purposes of this Subdivision.''
6. The Crown submitted that the applicant was not an ``eligible person'' as defined. This is how the argument was developed:
- (i) to be an ``eligible person'' as defined, the Commissioner can only look to the circumstances which exist in the year under review and none other;
- (ii) when one turns to the year under review, the Commissioner is confined to the circumstances as they then exist and must ask himself whether - objectively considered - it was ``reasonable to expect'' that superannuation benefits would be provided for the taxpayer on retirement (or for dependants in the event of the death of the taxpayer).
7. Counsel sought to persuade me that the phrase ``reasonable to expect'' should be interpreted in much the same way as the term ``reasonably foreseeable'' is applied in the law of torts, a submission which conjures up a somewhat piquant picture of the Commissioner of Taxation as the ``reasonable man'' who gets to work on the Clapham omnibus whom A.P. Herbert described in Fardell v. Potts as ``this excellent but odious character''.
8. Mr Curran went so far as to suggest that even if the Commissioner knew that a taxpayer intended shortly to resign from an employment which provided an employer-supported retirement benefit (and thereby depriving himself of the opportunity to receive the disqualifying emolument), it would nevertheless be ``reasonable to expect'' that superannuation benefits would be provided. To do otherwise would be applying subjective criteria which, so Mr Curran sought to persuade me, was clearly not intended by Parliament and would result in administrative chaos. Counsel sought additional comfort for his ``objective'' approach from the words in brackets in sec. 82AAS(2)(a) (``whether or not any condition other than the retirement or death of the relevant person would be required to be satisfied in order that those [superannuation] benefits be provided'').
9. I reluctantly accept counsel's submission that sec. 82AAS poses an objective test, viz. that the Commissioner must ask himself, year by year, if there are circumstances existing in part or the whole of that year that make it reasonable to expect that the person will have ``superannuation benefits'' (which include individual benefits, pensions and retirement allowances; cf. sec. 6 of the Tax Act) provided for him or her or for his or her dependants. I therefore ask myself - sitting notionally in the Commissioner's chair in 1981 - whether it was objectively reasonable that this taxpayer would have such expectations. I do not know what material the Commissioner had when he made his decision on the objection. However, no evidence of any kind was called before me other than the sworn testimony of the applicant that he looked on his employment with the railway as a purely temporary stopgap. That is not enough. The kind of evidence one would look for is the statistical likelihood of a 25-year-old married man, with no special skills, spending the next 15 or so years working for the railway and joining the State service superannuation scheme (voluntary for his classification) and/or not suffering an injury in that employment which would entitle him to weekly payments of workers compensation for total incapacity, any of which events constituting a disqualification to the entitlement to this impugned ``superannuation benefits''. In
ATC 363the absence of such evidence, I can only conclude that the decision that the applicant was not an ``eligible person'' as defined cannot be overturned. It is trite to point out that it is for the applicant, who bears the onus of proof, to demonstrate that there were circumstances by reason of which it was unreasonable to expect that superannuation benefits would be provided, an onus which, on the meagre evidence provided, he has failed to discharge. I accept Mr Curran's submission that a mere intention to resign from an employment providing an employer-supported superannuation scheme is not a ``condition'' as stated in the Act which would metamorphose the applicant into an ``eligible person''.
10. I am also satisfied that to regard the mere 30 pieces of silver, provided by Railway By-Law No. 690 of 1955, as ``superannuation'' constitutes a betrayal of the relief Parliament intended to provide ``for persons in gainful occupations for whom no provision for superannuation benefits on retirement or death is funded by an employer'' (see the explanatory memorandum re Income Tax Assessment Bill No. 4, explaining the purpose of sec. 82AAS and 82AAT). Since this humble fireman can hardly be regarded as the Slutzkin of the railways, something must have got lost in translation. In an earlier case (Case R77,
84 ATC 532), involving the same issue, I noted (at p. 538) that ``It may be thought that this glaring discrepancy is a matter which should be brought to the attention of the Legislature''. In that case, I was part of the majority which allowed the applicant's reference. That case was heard in Cairns when neither side had the benefit of counsel. I now accept, having heard Mr Curran's well reasoned argument, that my earlier decision is wrong.
11. This case was heard in July 1986. I have delayed handing down my decision until now because in the same month another case, involving a railway worker who had similarly claimed a deduction for his contribution to a private superannuation fund, was heard before a Full Tribunal presided over by his Honour Spender J. Due to the Federal Court's heavy workload, no decision has yet been handed down. On the one hand, I am deeply conscious of the fact that a decision, on what may well involve the same point, from so distinguished a source would be of enormous value, both to the parties to this application and to me. On the other hand, I cannot ignore the cumulative anxiety which is inevitably engendered by long delays. Weighing up these competing considerations, I have concluded that I should not hold up my decision any longer.
12. For these reasons, I uphold the Commissioner's decision on the objection.