Kuyper v Commissioner of Taxation AATA 282
88 ATR 603
(Decision by: Dr Gordon Hughes)
v. Commissioner of Taxation
Dr Gordon Hughes
Income Tax Assessment Act 1997 - s 292-5; s 292-465
Income Tax (Transitional Provisions) Act 1997 - s 292-20
Superannuation (Excess Concessional Contributions Tax) Act 2007 - The Act
Superannuation Guarantee (Administration) Act 1992 - The Act
Social Security Act 1947 - The Act
Tax Laws Amendment (Simplified Superannuation) Act 2007 - The Act
Minister for Community Services and Health v Chee Keong Thoo - (1988) 78 ALR 307
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Whitlock -  AATA 816
Tefonu Pty Ltd v Insurance and Superannuation Commissioner -  44 FCR 361
Chantrell v Commissioner of Taxation -  AATA 179
Schuurmans Stekhoven v Commissioner of Taxation -  AATA 62
Secretary, Department of Employment, Education and Youth Affairs v Ferguson -  76 FCR 426
Decision date: 11 May 2012
Dr Gordon Hughes
1. This is an application for review of a decision dated 19 October 2011 by the respondent not to reallocate part of the applicant's concessional contributions for the 2009-10 financial year to the 2008-09 financial year.
2. Specifically, the applicant had requested the respondent to reallocate $2,894.16 in concessional contributions received by his superannuation fund, Colonial First State - First Choice Superannuation Trust (the Fund), in July 2009 to the 2008-09 financial year.
3. The Income Tax Assessment Act 1997 (the Act) section 292-5 provides:
The object of this Division is to ensure that the amount of concessionally taxed superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of the person's life.
4. Section 292-15 of the Act states:
You are liable to pay excess concessional contributions tax imposed by the Superannuation (Excess Concessional Contributions Tax) Act 2007 if you have excess concessional contributions for a financial year.
5. Section 292-20 of the Act states:
- You have excess concessional contributions for a financial year if the amount of your concessional contributions for the year exceeds your concessional contributions cap for the year. The amount of the excess concessional contributions is the amount of the excess.
- Your concessional contributions cap is:
- for the 2007-2008 financial year--$50,000; or
- for the 2008-2009 financial year--$50,000; or
- for the 2009-2010 financial year--$25,000; or
- for the 2010-2011 financial year or a later financial year the amount worked out by indexing annually the amount mentioned in paragraph (c).
6. The Income Tax (Transitional Provisions) Act 1997 section 292-20 provides:
- This section applies if:
- you have excess concessional contributions for a financial year that:
- begins on or after 1 July 2007; and
- ends before 1 July 2012; and
- you are 50 years or over on the last day of that financial year.
- Despite section 292-20 of the Income Tax Assessment Act 1997, your concessional contributions cap for that financial year is:
- if the year is the 2007-2008 financial year-$100,000; or
- if the year is the 2008-2009 financial year-$100,000; or
- if the year is the 2009-2010 financial year-$50,000; or
- if the year is the 2010-2011 financial year-$50,000; or
- if the year is the 2011-2012 financial year-$50,000.
7. Section 292-465 of the Act states, relevantly:
- If you make an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of this Division:
- 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
- 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.
- You may apply to the Commissioner in the approved form for a determination under subsection (1). The application can only be made:
- after all of the contributions sought to be disregarded or reallocated have been made; and
- if you receive an excess contributions tax assessment for the financial year--before the end of:
- the period of 60 days starting on the day you receive the assessment; or
- if the Commissioner allows a longer period--that longer period.
- The Commissioner may make the determination only if he or she considers that:
- there are special circumstances; and
- making the determination is consistent with the object of this Division.
- In making the determination the Commissioner may have regard to the matters in subsections (5) and (6) and any other relevant matters.
- 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.
- 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:
- 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
- the extent to which you had control over the making of the contribution.
8. Paragraph 72 of the Practice Statement Law Administration 2008/1 (The Commissioner's discretion to disregard all reallocated concessional and non-concessional contributions for a financial year) (PS LA 2008/1) provides that:
A contribution made by 28 July ... will ... be counted for the purposes of the SGAA [Superannuation Guarantee (Administration) Act 1992] as a contribution made for the quarter commencing 1 April of the previous financial year. However, for Division 292 purposes it is counted as being made in the next financial year. It is possible that counting the contribution for that later year could produce excess concessional contributions.
9. Paragraph 12 of Taxation Ruling TR 2010/1 Income Tax: Superannuation Contributions provides:
[A]s a general rule, the contribution will be made when the funds are received by the Superannuation provider.
Consideration of issues
10. The applicant was employed as a pilot by Sunstate Airlines Pty Ltd, operating as QantasLink (the Employer).
11. The Employer made superannuation contributions for the applicant's benefit to the Fund during the relevant period.
12. The applicant had arranged for part of his salary to be paid by way of monthly salary sacrificed superannuation contributions into the Fund. The applicant managed the amount of those contributions.
13. Pursuant to section 292-20(2) of the Income Tax (Transitional Provisions) Act 1997, the applicant's concessional contributions cap for the year ending 30 June 2010 was $50,000.
14. In the financial year ended 30 June 2010, the Employer made contributions totalling $52,195.96 into the applicant's Fund. This created an excess concessional contribution of $2,195.96.
15. The excess contribution was a direct result of a contribution on 8 July 2009 of $2,508.28 by way of salary sacrifice contribution.
16. Under section 5 of the Superannuation (Excess Concessional Contributions Tax) Act 2007, tax is imposed at the rate of 31.5% on the amount of concessional contributions by which a taxpayer exceeds the concessional contributions cap in a financial year. The respondent issued the applicant with a notice of assessment for excess contributions tax $691.70 on the amount of the excess contribution.
17. The applicant was of the view that the respondent was in error. He had provided first and last pay slips received for the 2008-09 financial year together with a spread sheet showing deductions made and their progressive totals. The applicant was of the opinion that he had ensured that his contribution stayed below the cap by approximately $700. He believed that if any other contributions had been made, these were outside his authorisation or control.
18. The applicant explained that the miscalculation arose out of the fact that he assumed employer contributions made in July 2009 would be applied to the 2008-09 financial year. He explained that if he had known that the contribution made in July 2009 would apply to the financial year ending 30 June 2010, he would have adjusted his salary sacrifice contribution during that year in order to ensure that the concessional cap was not exceeded.
19. The applicant explained to the Tribunal, and the Tribunal accepts, that he was particularly conscientious in monitoring employer contributions. He asserted that on many occasions he liaised with the Employer's pay mistress to vary the payments on projected salary levels in order to stay within permissible limits.
20. The relevant provision of the Act is section 292-465. For the applicant to succeed, he must establish the existence of special circumstances for the purposes of that section. If special circumstances did exist, a determination that the Commissioner's discretion should be exercised in the applicant's favour would have to be consistent with the object of Division 292 of the Act. Regard would further have to be given to whether it was reasonably foreseeable to the applicant when the relevant contribution was made that it could result in an excess concessional contribution.
21. The respondent contended that the concessional contribution could not be deemed to have been made other than in the financial year in which it was received by the Fund.
22. The respondent relies upon reports by the Fund in order to determine whether a contribution cap has been exceeded. In this instance the Fund reported employer contributions of $52,195.96 for the 2009-10 financial year.
23. The respondent contended that there were no special circumstances for the purposes of section 292-465 of the Act.
24. The respondent cited Minister for Community Services and Health v Chee Keong Thoo (1988) 78 ALR 307, in which Burchett J stated:
...there [must] be something unusual or different to take the matter out of the ordinary course...
25. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal observed, in the context of section 102 of the Social Security Act 1947 (Cth), that the expression special circumstances was by its very nature incapable of precise or exhaustive definition, adding that it was necessary to consider whether, in context, the circumstances in question were unusual, uncommon or exceptional.
26. In Groth v Secretary, Department of Social Security  FCA 1708, Kiefel J observed that special circumstances required something which took the events in question out of the usual or ordinary case, adding (at page 545):
It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
27. A similar approach was adopted by the Tribunal in Secretary, Department of Families, Housing, Community Services and Indigenous Affairs v Whitlock  AATA 816, where the Tribunal observed (at paragraph 40):
It is sufficient to note that whilst "special circumstances" are not capable of being defined, ordinarily what is looked for is whether something about the case takes if out of the usual and distinguishes it from other cases.
28. The respondent cited a number of authorities to the Tribunal in support of the proposition that ignorance of the law did not, of itself, constitute special circumstances: Re Ivovic and Director-General of Social Services  AATA 57; Tefonu Pty Ltd v Insurance and Superannuation Commissioner  44 FCR 361; Case 23/96 (1996) 96 ATC 278; Re Kerr and Federal Commissioner of Taxation  67 ATR 710.
29. The respondent also cited various authorities in support of the proposition that a misinterpretation of, or miscalculation in respect of, the application of the law, made in good faith by the taxpayer, did not amount to special circumstances: AAT case 11,379 (1996) 34 ATR 1175; Chantrell v Commissioner of Taxation  AATA 179; In Schuurmans-Stekhoven v Commissioner of Taxation  AATA 62.
30. The respondent also cited Schuurmans-Stekhoven as an example of a decision by the Tribunal that the payment of contributions by an employer into a superannuation fund shortly after the end of a financial year should not be reallocated to the previous year on the grounds of special circumstances, notwithstanding that the consequences for the applicant were unfortunate, particularly as the applicant had acted in good faith. Relevantly, Senior Member McCabe, who constituted the Tribunal, accepted the respondent's submission in that matter that the fact many taxpayers might have experienced the same consequences as [the applicant] tended to emphasise there was nothing special about [the applicant's] position.
31. Schuurmans-Stekhoven was subsequently cited with approval by Senior Member Sweidan in Naude and Commissioner of Taxation  AATA 130 and in Leckie and Commissioner of Taxation  AATA 129.
32. The respondent referred the Tribunal to paragraph 36 of the PS LA 2008/1 which provides that [t]he following factors in isolation would not generally amount to the existence of special circumstances that make the imposition of the tax unjust, unreasonable or inappropriate:
Ignorance of the law - a claim that a person was ignorant of the law would not, generally speaking, be regarded as "special circumstances" unless other factors exist which would make the ignorance of misconception reasonable or understandable in the circumstances, such as where incorrect advice was provided to the person by the ATO.
33. The respondent also referred the Tribunal to the Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Act 2007, which introduced section 292-465 into the Act. The Explanatory Memorandum states, in paragraph 1.117, in relation to special circumstances:
The courts have considered what "special circumstances" means in many different contexts. It is clear from the case law that special circumstances are unusual circumstances, or circumstances out of the ordinary. Where the circumstances are special or vary from case-to-case as the context requires, but in this context they must make it unjust, unreasonable or inappropriate to impose the liability for excess contributions tax.
34. The respondent contended that special circumstances did not exist solely by virtue of the fact that the error arose from a misunderstanding by the applicant as to the date upon which his contributions were received by the Fund. Whether based on ignorance of fact or ignorance of the law, it was an error on the part of the applicant which gave rise to the excess concessional contributions.
35. In this regard, the respondent emphasised that there had been a consistent pattern of contributions by or on behalf of the applicant between 1 July 2007 and 19 July 2010. Accordingly, the applicant was in a position to anticipate that the final contribution relevant to the financial year ending 30 June 2009 would in fact be received in July 2009. There was nothing in the applicant's salary sacrifice arrangement with the Employer which specified when contributions were to be made and which would therefore have misled him or induced a misunderstanding in some way.
36. The applicant strongly disagreed with this contention. He asserted that whilst during the financial year ending 30 June 2008 payments had been made by 8 July each month, they were often paid earlier. Payments were, in his contention, clearly made on a large variety of dates.
37. The respondent further contended that regardless of the circumstances confronting the applicant, a decision to reallocate the contributions would not be consistent with the object of Division 292 of the Act.
38. The object of Division 292 is to ensure that the amount of concessionally taxed superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of the persons' life. The respondent contended that the notion that a contribution be gradual indicated that contributions were to be made regularly over time, and the value of the contributions should not be excessive in nature. It was for this reason that the legislature had imposed limits on the amount of concessionally taxed superannuation contributions which a taxpayer could make to their superannuation in a financial year.
39. On the question of foreseeability, the respondent contended that an objective standard had to be applied and this would assume an accurate knowledge by the applicant of the amounts and manner of operation of the contribution caps. The contributions had consistently been made by the employer to the applicant's fund on or about the 8th day of each month. In the absence of inconsistent or erratic behaviour in this regard by the employer, it was reasonably foreseeable that the payment in question would be made on or about 8 July 2010.
40. The respondent's submission on this point is consistent with the approach adopted by Mansfield J in Secretary, Department of Employment, Education and Youth Affairs v Ferguson  76 FCR 426 who stated (at 440):
The use of the expression "reasonably foreseeable" is common place. It imports an objective assessment about a set of facts as they apply to a particular circumstance or to a particular person. To say that, as here, they direct attention to the particular person does not import the need to determine the actual state of mind of that person. It is to direct the objective assessment of the relevant facts in relation to a particular person, with that person's health, knowledge and background. Some persons would be able to reasonably foresee circumstances more readily than others..
41. The applicant, who was not legally represented, did not challenge the respondent's presentation of the relevant legal principles. In any event, the Tribunal accepts the respondent's overview of the law as accurate.
42. The applicant strongly contested the issue of reasonable foreseeability. He asserted that given the employer's past payment history, it was reasonable for him to rely on the employer making payments on or prior to the end of the financial year.
43. The applicant, in any event, insisted that on his understanding of the relevant legal principles, principles of fairness supported his contention that the excess contribution received in the financial year ending 30 June 2010 should be reallocated to the previous year. The applicant was, in effect, contending that special circumstances existed. In summary, the basis of the applicant's contention was that he had no control over when his Employer would pay contributions to the fund. However, he kept careful records regarding contributions made by the Employer so as to ensure that the contributions cap was not breached. He had done everything within reason to ensure that he did not incur excess contributions tax.
44. The respondent's position was that the applicant had either misunderstood the facts surrounding the contributions, or misunderstood the law regarding the date the contributions were taken to have been made. The respondent contended that this did not warrant a finding that special circumstances existed. Contrary to the applicant's assertions, the Employer followed a consistent pattern of paying in arrears of the salary entitlements from which they were calculated. It should have been reasonably foreseeable to the applicant that, in the circumstances, a payment would be made on or about 8 July 2009, the legal effect of which was that this contribution would be applied to concessional contribution calculations for the year ending 30 June 2010.
45. The applicant, who was self-represented, intelligently argued his case before the Tribunal.
46. A number of the applicant's contentions, however, were of no persuasive value to the Tribunal. The Tribunal does not accept the applicant's contentions that the respondent acted in a manifestly unjust or dishonest fashion, nor does it accept that the Tax and Superannuation Laws Amendment (2012 Measures No. 1) Bill, introduced on 1 March 2012, has any bearing on these proceedings.
47. The applicable legislation is clear in its wording and its intent. It was not disputed that there was an excess concessional contribution into the applicant's Fund in the financial year ended 30 June 2010.
48. It is not difficult to sympathise with the applicant's situation. He clearly intended to comply with the legislation and was conscientious in his attempt to do so. Unfortunately, however, he miscalculated. The legislation is clear and it has been correctly applied by the respondent in these circumstances.
49. The applicant undoubtedly considered that special circumstances were an inappropriate description of the situation in which he found himself. This may be true in a lay sense but it is not consistent with the meaning of that term as used in section 292-465(3) of the Act.
50. The applicant appeared to take offence at the application of the maxim ignorance of the law is no excuse, emphasising that he was well versed in the relevant statutory requirements. The applicant's stance was understandable to the extent that he was clearly well aware of the statutory limits on employer contributions. However, it appears that he was unaware of the extent of the taxpayer's responsibility to ensure that those limits were not exceeded.
51. For the requirements of section 292-465(3) to be satisfied, it is clear from the authorities that a situation must be out of the ordinary. A late contribution by an employer into an employee's superannuation fund following the end of a financial year is not of itself something out of the ordinary - indeed, in the Tribunal's experience, it is a common occurrence. It is not a circumstance unique to the applicant's situation. This, in turn, made the scenario reasonably foreseeable for the purposes of section 292-465(6) of the Act. The Tribunal is not persuaded that, on the basis of past contribution practices, the applicant was entitled to assume that the final contribution relevant to the financial year ended 30 June 2009 would in fact be made on or before 30 June 2009.
52. For the above reasons, the decision under review is affirmed.