This decision concerns the discretion to disregard or allocate to another year one or more superannuation contributions made to relieve the taxpayer from excess concessional contributions tax.
These are the facts as outlined in the Decision Impact Statement by the ATO.
The taxpayer had a long-standing salary sacrifice agreement with his employer under which he agreed to forgo certain amounts of salary in exchange for superannuation contributions made by his employer. The agreement did not require the employer to make the relevant contributions at any particular time.
The taxpayer was paid his wages once a month. The taxpayer’s payslip recorded the amount of salary sacrificed to fund the employer superannuation contribution. The payslip also separately showed the amount the employer was required to contribute to meet its superannuation guarantee obligations.
The taxpayer received member statements from his superannuation fund twice each financial year for the periods ending 31 December and 30 June.
The employer usually made contributions to the taxpayer’s superannuation fund in the month following the sacrifice. However in respect of the salary sacrificed amounts for the months of April, May and June 2009, the employer made a single contribution in July 2009 (after the end of the relevant financial year).
The taxpayer sought review of the Commissioner’s decision not to allocate amounts received by the superannuation fund in July 2009 to June 2009. The taxpayer contended that he had had 15 months’ worth of superannuation contributions made for him in the 2009-10 financial year as his employer had paid the salary sacrifice contributions for the months of April, May and June 2009 in July 2009.
The taxpayer stated that he was aware of the concessional contributions cap and had tried to stay within it by monitoring his payslips and adjusting his level of salary sacrifice amounts to remain within the relevant caps. His payment summary for the 2009-10 year also supported his belief that his employer had paid only $40,000 in salary sacrifice contributions to his fund for the year.
The taxpayer stated he did not consider the member statement received from his superannuation fund showing when contributions were received by his fund in relation to the periods ending 30 June 2009 or 31 December 2009 when adjusting the salary sacrifice agreement during the 2009-10 financial year.
Section 292-15 of the Income Tax Assessment Act 1997 (ITAA): 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.
Section 292-465(1) of the ITAA 1997: 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.
Section 292-465(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.
Section 292-465(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…
Whether the facts outlined above amount to “special circumstances”, such as to invoke the discretion in subsection 292-465(1) of the ITAA
The onus of satisfying that “special circumstances” exist lies upon the Applicant.
Recent decisions of the AAT have adopted a narrow interpretation of ‘special circumstances’. This was particularly reflected in the decision of Tran v Commissioner of Taxation  AATA 123, where it was held that circumstances will not be special unless they are out of the ordinary. Allen J in this decision stated that this was definition was misconceived.
The judge proceeded to refer to a number of decisions including Smith, Kertland and Bornstein, all of which discussed the definition of ‘special circumstances’. Consequently, Allen J concluded that a distinction could not meaningfully be drawn between matters external to the operation of the Act and matters which are the product of the strict application of the Act. As such, it could not be said that circumstances of injustice or unfairness arising from the strict application of the Act could be excluded from amounting to ‘special circumstances’ for the purposes of the Act.
Accordingly, it was held that special circumstances did exist in this matter in that, despite his checking from his payment advices, the Applicant was positively misled by his employer, improperly in my opinion, retaining amounts directed to superannuation and making late payments.
Consequently, the decision under review is to be set aside and payments made to the Applicant’s superannuation fund on 28 and 29 July 2009 should be attributed to the financial year ended 20 June 2009.