THORNTON v FC of TMembers:
BH Pascoe SM
Administrative Appeals Tribunal
BH Pascoe (Senior Member)
This is an application to review a decision of the respondent to disallow an objection lodged by the applicant against a notice of assessment of income tax based on the applicant's income for the year ended 30 June 1996. Pursuant to section 34B of the Administrative Appeals Tribunal Act 1975 it appeared to the Tribunal that the issues for determination, on the review of the decision, could be adequately determined in the absence of the parties and the parties consented to the review being determined without a hearing. The decision has been reviewed by considering the documents lodged with, or provided to, the Tribunal and without holding a hearing.
2. The issue in dispute is the applicant's claim for a deduction of $23,250 for non- employer sponsored superannuation contributions under section 82AAT of the Income Tax Assessment Act 1936 (``the Act''). In June 1996 the applicant contributed $30,000 to a personal superannuation policy with a life assurance company. On the assumption that he satisfied the criteria for a deduction, the applicant gave notice to the life company that he would be claiming the deduction of $23,250, being the maximum available under subsection 82AAT(2). The respondent disallowed the deduction claimed on the basis that the applicant, in view of superannuation support supplied by an employer, was not an eligible person in relation to the year of income.
3. The applicant was employed by the Public Transport Corporation from 1 July 1995 to 20 October 1995 when he was made redundant. Apart from some four days of casual employment in March 1996, he was in receipt of unemployment benefits from December 1995 to June 1996. There is no dispute that, during the period of employment with the Public Transport Corporation, contributions to provide superannuation benefits for the applicant were made by the employer of, at least, the amounts required under the Superannuation Guarantee (Administration) Act 1992. The assessable income derived from that employment in the year of income was $42,319 out of a total assessable income of $46,862.
4. The applicant argued that the superannuation payment was made when unemployed and that it would be at least appropriate to deal with the deduction by allowing a proportion based on the period of the year during which he was not employed. He considered that some discretion should apply, particularly as the contribution arose from the funds provided by Government as an incentive to leave the Public Service and it was inequitable to penalise him for accepting such payment. He submitted that both the life company and the respondent's ``Helpline'' gave verbal advice that the claim would be allowed.
5. The relevant legislation is contained in sections 82AAS and 82AAT of the Act. Under section 82AAT a deduction for contribution to a superannuation fund is allowed where the contributor is ``an eligible person in relation to the year of income''. The deduction is subject to limits specified in subsections (2) and (2A) of section 82AAT. In this case the limit was $3,000 plus 75% of the amount by which the amount of the contribution exceeded $3,000. This limit produces a figure of $23,250 of the $30,000 contribution. However, the issue in dispute here is whether or not the applicant was an eligible person in relation to the year ended 30 June 1996. The definition of eligible person is contained in subsection 82AAS(2) which provides:
``82AAS(2) 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 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 in the event of the retirement of the relevant person 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; or
- (B) contributions made by the relevant person under a scheme for the payment of benefits upon retirement or death, being a scheme 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 subsubparagraph (A) or (B); or
- (D) income or accretions arising from contributions made to a superannuation fund in relation to the relevant person by a person other than the relevant person during an earlier year of income, where there is no reasonable likelihood that any such contributions will be made at any time after the beginning of the first-mentioned year of income.''
Subsection 82AAS(3) excludes superannuation contributions made by an employer where the assessable income derived from such employment is less than 10% of total assessable income for the relevant year of income. Clearly, this exclusion cannot apply in relation to this applicant in the year ended 30 June 1996.
6. Unfortunately, the applicant's submissions are clearly answered by the provisions of subsection 82AAS(2). He was not an eligible person in relation to the year ended 30 June 1996 as it was reasonable to expect that superannuation benefits would be and, in fact, were provided by an employer during a part of the year of income. The section clearly contemplates that such benefit may be provided for only part of the year. It is not concerned with the position of a person at a time when superannuation contributions were made but with the year of income as a whole. There is no discretion available to not apply the clear requirements of the legislation.
7. The applicant maintained that he was advised that the deduction would be allowed. Even if such verbal advice was given by an officer of the respondent, it is clear that no conduct on the part of the respondent can operate as an estoppel against the operation of the Act (
FC of T v Wade (1951) 9 ATD 337). It is not uncommon for applicants to complain that an item in an income tax return was based on advice given by an officer of the respondent. Unfortunately, if that advice was contrary to the terms of the legislation, the legislation must prevail. It must be recognised also that advice given is only as good as the facts provided in seeking such advice. Whether or not, in this case, the person giving the advice was made aware that the applicant had been in full time employment for four months of the relevant year of income is not known. The inequity complained of by the applicant, of being penalised for accepting an incentive to leave the employ of the Government, is not a matter which can influence a decision on the proper application of legislation. It is appropriate, perhaps, to point out that the funds provided as an incentive were subject to a relatively small amount of tax, in that some 5% of a part only of the incentive payment was included in assessable income. A failure to obtain an allowable deduction for the investment of funds obtained and which were substantially tax exempt, is difficult to regard as inequitable.
8. As the applicant was not an eligible person in relation to the year ended 30 June 1996, the deduction claimed by him under section 82AAT of the Act is not an allowable deduction and the decision under review is affirmed.