Decision impact statement
Bornstein and Commissioner of Taxation
Court Citation(s):
[2012] AATA 424
2012 ATC 10-257
88 ATR 316
Venue: Administrative Appeals Tribunal
Venue Reference No: 2011/5143
Judge Name: McCabe SM
Judgment date: 6 July 2012
Appeals on foot: No.
Decision Outcome: Adverse
Impacted Advice
Impacted Practice Statements:
Subject References:
Excess contributions tax
Excess concessional contributions tax
Précis
Outlines the ATO's response to this case that concerns whether it was appropriate to disregard or allocate to another year one or more superannuation contributions made by a company, to relieve the taxpayer from excess concessional contributions tax.
Brief summary of facts
The applicant was the sole director, secretary and shareholder of Benefel Pty Ltd (the Company), and at all material times was remunerated for his services by the Company. The Company had previously made (and did subsequently make) a single annual superannuation contribution for the applicant just prior to the end of each financial year. The applicant was responsible for making these payments as the director of the Company. Each of these contributions fulfilled the company's superannuation guarantee obligations and included an additional 'voluntary' amount above the required minimum contribution.
The applicant was absent from Australia on a business trip during the period 21 June 2007 to 9 July 2007. An employer contribution of $42,385 was made on 10 July 2007 for the quarter ending 30 June 2007. The company then made an employer contribution of $50,000 on 26 June 2008, for the quarter ending 30 June 2008.
As a result of these payments being made in the same financial year, the applicant exceeded the $50,000 concessional contributions cap in the 2008 financial year by $42,385, and was assessed to excess concessional contributions tax on this amount for the 2008 financial year.
The applicant applied to the Commissioner to have the $42,385 contribution allocated to the 2007 financial year because of special circumstances. The applicant contended that he understood that there would be no adverse consequences for any person if the Company were to make a contribution for the June 2007 quarter by 28 July 2007. The applicant stated that his conclusion was based on advice previously obtained from his tax adviser and his understanding of information obtained from the ATO website.
The Commissioner did not exercise the discretion to reallocate the contribution and this decision was confirmed on the objection decision
Issues decided by the Administrative Appeals Tribunal
The Tribunal decided that the Commissioner's objection decision refusing to exercise the discretion provided in section 292-465 of the Income Tax Assessment Act 1936 should be set aside and that the discretion should be exercised in favour of the applicant.
In determining that the discretion should be exercised in favour of the applicant, the Tribunal stated "there must be something about the circumstances [of the] case that mark it out as being different or rare or unusual or otherwise distinguishable from the ordinary run of cases" to constitute special circumstances.
The Tribunal held that, while a mere "misunderstanding of one's obligations is not enough to constitue special circumstances", there was "a 'perfect storm' of events, miscommunications and misunderstandings that combined to leave the taxpayer in an unusual and unfortunate position". The Tribunal decided that "in all of the circumstances, ...it would be appropriate to treat his case differently".
The Tribunal was also satisfied that reallocating the contribution made on 10 July 2007, to the 2007 financial year was consistent with the object of Division 292 of the Income Tax Assessment Act 1936. The evidence had established that the applicant "was building up his superannuation by making gradual contributions over the course of his life, as the Division intends
ATO view of Decision
The Commissioner accepts that the decision to exercise the discretion in favour of the applicant was open to the Tribunal based on the finding that there was "a 'perfect storm' of events, miscommunications and misunderstandings". The ATO accepts that more than one conclusion on whether there were 'special circumstances' could be drawn from the findings of fact.
The decision of the Tribunal is consistent with the Commissioner's stated view on the exercise of the discretion contained in PS LA 2008/1.
Relevantly, paragraph 37 of PS LA 2008/1 provides:
"Each individual case will present a unique set of circumstances that need to be considered and weighed up in forming an opinion. It may not be helpful to focus too closely on each particular circumstance and ask whether it is special. Of itself, one particular matter is unlikely to be special for there would be many other individuals in a similar situation. The question is whether, when the relevant circumstances of the individual and the making of the relevant contribution are looked at in their entirety, they may be fairly described as unusual, uncommon or exceptional so as to warrant the exercise of the discretion."
The ATO will continue to administer section 292-465 of the ITAA 1997 consistently with the guidleines contained in PS LA 2008/1.
Administrative Treatment
Implications for ATO Precedential documents (Public Rulings & Determinations etc)
Nil
Implications for Law Administration Practice Statements
Nil
Legislative References:
Income Tax Assessment Act 1997 (ITAA 1997)
292-465
Case References:
Kuyper and Commissioner of Taxation
[2012] AATA 282
Leckie and Commissioner of Taxation
[2012] AATA 129
McMennemin and Commissioner of Taxation
[2010] AATA 573
2010 ATC 10-145
79 ATR 898
Naude and Commissioner of Taxation
[2012] AATA 130
Paget and Commissioner of Taxation
[2012] AATA 334
2012 ATC 10-251
Peaker and Commissioner of Taxation
[2012] AATA 140
2012 ATC 10-238
Rawson and Commissioner of Taxation
[2012] AATA 322
2012 ATC 10-250
Schuuurmans-Stekhoven and Commissioner of Taxation
[2012] AATA 62
82 ATR 731
Tran and Commissioner of Taxation
[2012] AATA 123
2012 ATC 10-236