Longcake and Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Administrative Appeals Tribunal (2012/0354)
Judgment date: 30 August 2012
Date published: 20 November 2012

Summary of decision:
Outlines the ATO's response to this case which concerned whether it was appropriate to disregard or allocate to another year superannuation contributions made by a company to relieve the taxpayer from excess concessional contributions tax.

Overview of facts:
The taxpayer was employed during the 2009-10 year. His employer made contributions to two superannuation funds in the relevant period: AMP and Tasplan. | By a signed document dated 30 June 2008, the taxpayer requested to salary sacrifice superannuation contributions equal to 55% of his gross remuneration" and "100% of any bonus entitlements" that "accrued in respect of the future period commencing 1/7/2008 ... and if applicable ending 30/6/2009 be paid to AMP". | By letter to the taxpayer dated 1 July 2008, the employer confirmed that salary sacrifice arrangement. The letter stated, in part, that any such contributions "will be paid to your superannuation fund on a monthly basis". | The taxpayer established a similar salary sacrifice arrangement for the 2009-10 financial year. For services performed that year, contributions were to be made to Tasplan and not AMP. | Contributions were made to AMP in July 2009. The contributions were not made monthly and were irregular. The contributions were recorded by AMP as being received on 7 and 8 July 2009. | In working out his employer's contributions to Tasplan for the 2010 year, the taxpayer did not take into account any contributions made to AMP, including those made in July 2009. The Tribunal found the taxpayer had no knowledge of the amount contributed to AMP for him in July 2009. | As a consequence, the taxpayer exceeded his $50,000 concessional contributions cap for the 2010 financial year by $21,551.44 and was assessed to excess concessional contributions tax on this amount for the 2010 income year. | The taxpayer applied to the Commissioner to have the $21,551.44 contribution allocated to the 2009 financial year because of special circumstances. | The Commissioner did not exercise the discretion to reallocate the contribution and this decision was confirmed on objection. | Issues decided by the 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 1997 should be set aside and that the discretion should be exercised in favour of the taxpayer. | The Tribunal found, that all of the employer's salary sacrifice contributions in respect of the 2008-09 year were required by the salary sacrifice arrangement to be made by monthly contributions to AMP by 30 June 2009. The Tribunal concluded that the employer's contributions to both AMP and Tasplan followed an irregular pattern and that the contributions made to AMP in July 2009 were a significant part of the irregularity. The Tribunal found that those amounts were part of the amounts intended to be paid in relation to the 2008/2009 year and that payments from 1 July 2009 were intended to be made to Tasplan. | The Tribunal found that the taxpayer was not aware of the irregularity of payments until some ten months after the end of the relevant financial year when informed of the excess contributions by the ATO in a letter. Consequently, the Tribunal concluded that it was not reasonably foreseeable that the taxpayer would exceed his concessional contributions cap in the 2009-10 financial year. | The Tribunal determined that special circumstances existed, there being "particular circumstances which set this case apart from the usual or ordinary". The Tribunal listed six factors which together comprised special circumstances in this case: • the taxpayer had sought to arrange his affairs so that the concessional contribution cap was not exceeded, • the decision to switch his contributions to a new superannuation fund, • the July 2009 payments to AMP were intended for the 2008/2009 financial year, • it was not reasonably forseeable that the contributions tax would be exceeded, • the taxpayer expected contributions to be made in a timely manner, and • the taxpayer was not aware of the irregularity of the contributions. | • the taxpayer had sought to arrange his affairs so that the concessional contribution cap was not exceeded, • the decision to switch his contributions to a new superannuation fund, • the July 2009 payments to AMP were intended for the 2008/2009 financial year, • it was not reasonably forseeable that the contributions tax would be exceeded, • the taxpayer expected contributions to be made in a timely manner, and • the taxpayer was not aware of the irregularity of the contributions. | The Tribunal stated that "a degree of injustice and unfairness would be caused to the taxpayer" if the objection decision was allowed to stand. | The Tribunal stated it "would be appropriate to allocate part of the concessional contributions made in the relevant year (2009-10) to the 2008-09 year, provided such a decision is consistent with the relevant object of the legislation. In the circumstances of this case, the Tribunal found that "reallocation of contributions into the previous financial year is entirely consistent with the essential object of the relevant Division of the Act".

Issues decided:
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 1997 should be set aside and that the discretion should be exercised in favour of the taxpayer. The Tribunal found, that all of the employer's salary sacrifice contributions in respect of the 2008-09 year were required by the salary sacrifice arrangement to be made by monthly contributions to AMP by 30 June 2009. The Tribunal concluded that the employer's contributions to both AMP and Tasplan followed an irregular pattern and that the contributions made to AMP in July 2009 were a significant part of the irregularity. The Tribunal found that those amounts were part of the amounts intended to be paid in relation to the 2008/2009 year and that payments from 1 July 2009 were intended to be made to Tasplan. The Tribunal found that the taxpayer was not aware of the irregularity of payments until some ten months after the end of the relevant financial year when informed of the excess contributions by the ATO in a letter. Consequently, the Tribunal concluded that it was not reasonably foreseeable that the taxpayer would exceed his concessional contributions cap in the 2009-10 financial year. The Tribunal determined that special circumstances existed, there being "particular circumstances which set this case apart from the usual or ordinary". The Tribunal listed six factors which together comprised special circumstances in this case: • the taxpayer had sought to arrange his affairs so that the concessional contribution cap was not exceeded, • the decision to switch his contributions to a new superannuation fund, • the July 2009 payments to AMP were intended for the 2008/2009 financial year, • it was not reasonably forseeable that the contributions tax would be exceeded, • the taxpayer expected contributions to be made in a timely manner, and • the taxpayer was not aware of the irregularity of the contributions. • the taxpayer had sought to arrange his affairs so that the concessional contribution cap was not exceeded, • the decision to switch his contributions to a new superannuation fund, • the July 2009 payments to AMP were intended for the 2008/2009 financial year, • it was not reasonably forseeable that the contributions tax would be exceeded, • the taxpayer expected contributions to be made in a timely manner, and • the taxpayer was not aware of the irregularity of the contributions. The Tribunal stated that "a degree of injustice and unfairness would be caused to the taxpayer" if the objection decision was allowed to stand. The Tribunal stated it "would be appropriate to allocate part of the concessional contributions made in the relevant year (2009-10) to the 2008-09 year, provided such a decision is consistent with the relevant object of the legislation. In the circumstances of this case, the Tribunal found that "reallocation of contributions into the previous financial year is entirely consistent with the essential object of the relevant Division of the Act".

ATO view of decision:
The Commissioner will continue to consider each application for the exercise of the discretion in section 292-465 of the ITAA 1997 on its merits. This will involve an examination of the evidence of the contributions made, the extent of control a taxpayer has over the amount and timing of any particular contribution and the extent to which an excess is foreseeable, as these are matters the Parliament has chosen to prescribe may be taken into account.

Administrative treatment:
Implications for ATO precedential documents | Nil

Legislative references: Income Tax Assessment Act 1997 Section 292-465
Case references: Other AAT decisions that have considered section 292-465 of the ITAA 1997 include: Bornstein v Commissioner of Taxation [2012] AATA 424 2012 ATC 10-257 Kuyper v Commissioner of Taxation [2012] AATA 282 Leckie v Commissioner of Taxation [2012] AATA 129 82 ATR 975 McMennemin v Commissioner of Taxation [2010] AATA 573 2010 ATC 10-145 79 ATR 898 Naude v Commissioner of Taxation [2012] AATA 130 Paget v Commissioner of Taxation [2012] AATA 334 2012 ATC 10-251 Peaker v Commissioner of Taxation [2012] AATA 140 2012 ATC 10-238 Rawson v Commissioner of Taxation [2012] AATA 322 2012 ATC 10-250 Schuuurmans-Stekhoven v Commissioner of Taxation [2012] AATA 62 82 ATR 731 Tran v Commissioner of Taxation [2012] AATA 123 2012 ATC 10-236
Subject references: Excess contributions tax Excess concessional contributions tax