PURDON v FC of T
Members:MD Allen SM
Tribunal:
Administrative Appeals Tribunal
MEDIA NEUTRAL CITATION:
[2001] AATA 188
MD Allen (Senior Member)
On 22 February 1995 the Applicant was retired from the Commonwealth Public Service on the bases of his medical unfitness to perform his duties.
2. Upon his retirement the Applicant received a pension from the New South Wales State Superannuation Investment and Management Corporation.
3. On 11 November 1997 the Administrative Appeals Tribunal determined that the Applicant suffered a permanent impairment as a result of work-caused injury and that Comcare was to pay to the Applicant compensation for medical expenses, incapacity for work, permanent impairment and non-economic loss as assessed pursuant to the Safety, Rehabilitation and Compensation Act 1988.
4. Although the Tribunal's decision was made on 11 November 1997, Comcare was particular tardy in complying with the Tribunal's decision. At document T11 p 31 is a copy of a Direction by the Tribunal made 14 August 1998 noting that at that date the amount of compensation for incapacity for work had not yet been determined by Comcare. On 7 October 1998 Comcare wrote to the Applicant stating inter alia (T11 p 32):
``For the purposes of assessing your entitlement to compensation for incapacity under the SRC Act, I have determined that you have not had an ability to earn since the date of retirement, and therefore are entitled to weekly payments in accordance with sections 19 and 20 of the Act.
You can expect the first payment, which includes arrears dating back to 23 February 1995, to be in your credit union account on Thursday 15 October 1998. Payments thereafter will be made fortnightly.''
5. Document T14 is a letter to the Respondent from Comcare dated 22 November 2000 which reads inter alia:
``I note your letter dated 16th November 2000 regarding payments made to Mr Purdon in the 1998/99 financial year as well as lump sum payments by way of Sections 24 and 27 of the SRC Act 1988.
Please be advised that Mr Purdon received $11,262.53 under section 24 and $8,165.34 under section 27 of the SRC Act 1988. Both amounts were paid on the 27th May 1998. I have attached screen printouts of the details for your information.
Mr Purdon is in receipt of fortnightly compensation payments and these are continuing. I have attached screen printouts of payments of fortnightly compensation made in the financial year 1998/1999. These amounts include payments from previous financial years. Mr Purdon was, and continues to be, paid under Section 20 of the SRC Act 1998. Section 20 payments relate to a person receiving compensation payments who is also in receipt of a superannuation pension.''
6. Previously Comcare had written to the Respondent on 22 June 2000 (T12 p 36) stating:
- ``The following amount has been paid to Mr William Purdon in the 1998/99, financial
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year and relates to previous financial year(s). As advised by your office this amount has been taxed at 21.5%.FINANCIAL YEAR 1994/95 $15,914.07 1995/96 $ 8,646.94 1996/97 $ 9,626.09 1997/98 $10,733.64 ---------- TOTAL $44,920.74" ==========
7. On 27 November 2000 (T15) Comcare confirmed to the Respondent the nature of the said payments:
``I note our recent telephone conversation regarding a payment of $48,349.86 paid in pay 8 1999 (sic). I can confirm that this money was back payment of fortnightly compensation payments relating to earlier financial years. This money was paid under Section 20 of the SRC Act 1988.''
8. Section 20 of the Safety, Rehabilitation and Compensation Act 1988 (as amended) (SRC Act) applied to the Applicant after his retirement on 22 February 1995. Prior to that date compensation had been paid to the Applicant for loss of earnings under section 19 of the SRC Act but these payments are not relevant here.
9. Section 20 of the SRC Act states:
``(1) This section applies to an employee who, being incapacitated for work as a result of an injury, retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a pension under a superannuation scheme.
(2) Comcare is liable to pay compensation to the employee, in respect of the injury, in accordance with this section for each week after the date of the retirement during which the employee is incapacitated.
(3) The amount of compensation is an amount calculated under the formula:
AC - (SA + SC)where:
AC is the amount of compensation that would have been payable to the employee for a week if:
- (a) section 19, other than subsection 19(6), had applied to the employee; and
- (b) in the case of an employee who was not a member of the Defence Force immediately before retirement - the week were a week referred to in subsection 19(3);
SA is the superannuation amount; and
SC is the amount of superannuation contributions that would have been required to be paid by the employee in that week if he or she were still contributing to the superannuation scheme.''
10. The Applicant was assessed for tax in respect of the lump sum payment of $44,920.74. On 13 March 2000 he objected against a Notice of Assessment that had been issued on 8 March 2000 in respect of the tax year ended 30 June 1999 and, on 19 September 2000, made application to this Tribunal for review of a decision rejecting his objection.
11. The Applicant's submission was that any payments made to him under section 20 of the SRC Act could not be characterised as a substitution for income in that as a retired person in receipt of superannuation, there was no loss of income. The matter was set out in the Applicant's submissions as follows:
``5. The main question to be answered in this application is whether the lump sum payment was a payment for loss of earning capacity as distinct from loss of earnings thus constituting an affair of capital not subject to tax.
6. The case upon which the Applicant principally relies is that of
FC of T v Inkster 89 ATC 5142....''
12. In the course of his written submissions the Applicant referred to various passages in Inkster supra.
13. For its part the Respondent also referred to Inkster supra as authority for the undeniable proposition that compensation paid in substitution for earnings, and which is paid for loss of earnings, is assessable to taxation.
14. In
FC of T v Inkster 89 ATC 5142 at 5147 Pincus J said:
``... The proper reading of the High Court's reasons is that, for this purpose, one looks at
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the essential character and purpose of the compensation provisions rather than whether or not, in particular situations, those provisions necessarily do no more than restore lost earnings....''
See also Lee J at p 5156:
``... As the Full Court said in
FC of T v Slaven 84 ATC 4077 at p 4085; (1984) 52 ALR 81 at p 93;`the purpose of a statutory payment, as disclosed by the terms of the statute itself, must be a powerful, though not conclusive, aid to the determination of the character of the payment and in particular as to whether its receipt constitutes income in the hands of a taxpayer.'''
And continued at p 5157:
``The fact that the amount of a compensation payment is a notional calculation will not prevent the payment being of a revenue nature if it is designed as a contribution to diminish the adverse economic consequences of a disability, that is to say the income loss caused by it.''
Previously at p 5156, Lee J had said:
``The amount paid to the respondent by way of weekly payments of compensation was a notional calculation. There was no assessment of the respondent's actual capacity to obtain earnings in some suitable employment or business after his retirement to determine how the weekly payment of compensation for the partial incapacity was to be calculated...''
And then added:
``... However, although the terms of the Compensation Act may have indicated a purpose for the payments, those provisions will not determine the character of the payments without regard to the circumstances in which the respondent received the payments.''
15. To my mind the passages quoted above direct attention back to the precise wording of section 20 of the SRC Act and that particular Act, by its reference to section 19 and normal weekly earnings, makes it clear that the character of the payments are income based.
16. Although, to my mind, that is the effect of Inkster's case supra in this particular matter, a previous matter, namely Case X21,
90 ATC 239 decided by Deputy President Gerber, is directly on point. After a review of the judgments in Inkster's case supra, the learned Deputy President said at p 242:
``I am therefore satisfied that the mechanics provided by the Act [the Compensation (Commonwealth Government Employees) Act 1971] for calculating compensation indicate that the compensation payable is directly related to the amount of earnings which the employee would have been entitled to receive if he had been earning it in the form of wages. Compensation is thus in substitution for earnings and is paid for loss of earnings and assessable under sec. 25(1)(a) of the Tax Act.''
17. I am therefore satisfied that on the authority of both Inkster's case and Case X21, the decision under review, rejecting the Applicant's objection to his Notice of Assessment, should be affirmed.
18. Two other matters must be dealt with. The first is regarding an income arrears rebate. Section 159ZRB of the Income Tax Assessment Act 1936 provides a statutory formula for calculation of the rebate which is applicable in circumstances such as the Applicant's where a lump sum has been received and the Respondent concedes that the Applicant is entitled to a rebate of $212.00.
19. The Applicant also submitted that a general interest charge should be remitted, however, pursuant to subsection 170AA(13) of the Income Tax Assessment Act 1936 the ascertainment of interest is deemed not to be an assessment, consequently the general interest charge component is not a decision which can be reviewed by the Administrative Appeals Tribunal, see sections 14ZQ and 14ZS of the Taxation Administration Act 1953.
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