KANCROFT PTY LTD (ACTING AS TRUSTEE FOR ROBERTSON FAMILY TRUST) v FC of T

Members:
BJ McCabe SM

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [2004] AATA 591

Decision date: 11 June 2004

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BJ McCabe (Senior Member)

This is an application for review of a decision of the Commissioner of Taxation. The Commissioner decided to disallow the applicant's objection to the imposition of several amounts of Superannuation Guarantee Charge (SGC) and related penalties.

2. The matter was heard on 1 June 2004. The applicant was represented by Mr Robertson, a director of Kancroft Pty Ltd. The respondent was represented by Ms Hopton. In evidence were documents submitted pursuant to s 37 Administrative Appeals Tribunal Act 1975. Mr Robertson also gave oral evidence at the hearing.

3. The matter is a relatively straightforward one. Unfortunately for the applicant the legislation in the area is clear. The decision under review must be affirmed.

The facts

4. The applicant is a company. It operated in the camera/photography business. The company hit hard times and ceased trading because of changing technology.

5. The company had three employees. For the sake of convenience I will call them Hancox, Ritosa and Grigg. On 19 August 2002 an employee notified the respondent that the company had made insufficient superannuation contributions. The Australian Taxation Office (ATO) issued the company a superannuation guarantee audit questionnaire on 24 September 2002. The questionnaires requested details of superannuation contributions made in the financial years ending 30 June 1999 and 30 June 2000. The questionnaires were soon returned to the ATO.

6. On 5 February 2003 default SGC assessments were issued for those financial years. A penalty assessment was also imposed as well as a general interest charge.

7. The company lodged a notice of objection to the assessments on 26 February 2003. The respondent disallowed the objection on 7 November 2003. On 24 December 2003 the company applied to this Tribunal for review.

The law

8. This area of law is governed by the Superannuation Guarantee (Administration) Act 1992 (the Act). It exists to ensure all eligible employees receive superannuation support from their employers. Where an employer has not lodged a superannuation guarantee statement for a quarter and the Commissioner is of the opinion that the employer is liable to pay a superannuation guarantee charge for the quarter, the Commissioner may make an assessment of the employer's superannuation guarantee shortfall and of the superannuation guarantee charge (SGC) payable on the shortfall: s 36. The legislation provides employers who have not made the minimum superannuation contributions must lodge superannuation guarantee (SG) statements by 14 August following the end of the financial year.

9. The SGC comprises three elements:

• (a) The total of the employer's individual superannuation guarantee shortfalls for the relevant year (the formula set out in s 19);
• (b) A nominal interest component for the year (s 31 of the Act);
• (c) An administration component (s 32 of the Act sets out the formula for calculating this component).

10. A penalty under Part 7 of the Act may apply for non-lodgement of superannuation guarantee statements. Section 59(1) imposes the penalty at a rate of 200%. Section 62(3) gives the Commissioner discretion to remit all or part of the penalty. The respondent's policy is to impose a flat 10% penalty on employers who fail to lodge a SG statement by 14 August of the following financial year if that failure is discovered by ATO action: Superannuation Guarantee Ruling 94/3.

11. A GIC also applies which is levied on amounts of SGC which remain unpaid after the due date for payment. That is levied under s 49(1) of the Act. The amount of GIC is worked out under Division 1 of Part IIA of the Taxation Administration Act 1953.

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ATC 2128

Consideration and findings

12. The respondent says the applicant failed to make superannuation payments on behalf of the employees Hancox, Ritosa and Grigg. The applicant concedes it has not made superannuation contributions on behalf of Hancox and Ritosa. It objects only to the assessments raised in relation to Grigg.

13. Mr Robertson says the company paid Grigg's superannuation entitlements in full in early 2001. He says the company should not have to pay the amounts again.

14. The Tribunal must ask: was the respondent's decision to disallow the applicant's objection to the assessment the correct and preferable decision? That question will require analysis of the various components of the assessment.

Tribunal jurisdiction

15. It is important to be clear about the Tribunal's jurisdiction. It is limited. Here the applicant objected to the Commissioner's assessments pursuant to s 42 of the Act. That section allows employers to object against assessments in the manner set out in Part IVC Taxation Administration Act 1953. Section 6 of the Act defines ``assessment'' as:

``(a) the ascertainment of an employer's superannuation guarantee shortfall in a year and of the superannuation guarantee charge payable on the shortfall; or

(b) the ascertainment of additional superannuation guarantee charge payable under Part 7.''

16. The Tribunal can review the decision in as far as it relates to the ascertainment of the SGC, and the Part 7 penalty. There is no provision in the Act which provides discretion to remit or waive payment of the SGC. Only its ascertainment can be reviewed. More specifically there is no discretion in the Act to allow the remittal or waiver of the nominal interest or administration component of the SGC:
Pye v FC of T 2004 ATC 2029.

17. Nor does the Tribunal have jurisdiction to review the amount of GIC levied. The GIC cannot be the subject of an objection under s 42 as it is not an ``assessment'' (I note the employer may request a remission of the GIC. However the request is not made pursuant to s 42 of the Act, so it is not part of the decision under review here).

The superannuation guarantee charge

18. Section 16 of the Act says the superannuation guarantee charge imposed on an employer's superannuation guarantee shortfall is payable by the employer. Under s 17 of the Act the superannuation guarantee shortfall is worked out by adding the following amounts:

``(a) the total of the employer's individual superannuation guarantee shortfalls for the quarter; and

(b) the employer's nominal interest component for the quarter; and

(c) the employer's administration component for the quarter.''

19. Section 19 of the Act defines the method for calculating an individual superannuation guarantee shortfall. That amount is the sum of the employer's shortfalls in respect of that employee for that financial year. I have examined the respondent's calculations in respect of the individual shortfall amounts for the years ending 30 June 1999 and 2000 (at ff27-28 T6 of the T-documents). I am satisfied they are correct.

20. The nominal interest component is calculated on the individual SG shortfalls at a rate of 10% per annum. I have no reason to believe the respondent erred in its calculations here.

21. The calculation of the administration component is also correct. Section 32 of the Act states the administration component is $30 per employee, as well as $50 per year for financial years up to and including 30 June 2003. The company's superannuation guarantee audits reveal in the 1999 financial year the company employed three people (Hancox, Ritosa, Grigg), and in 2000 it employed two people (Hancox and Grigg): T3-T4. By my calculation the administration component owed is $140 for the 1999 financial year and $110 for 2000. The respondent arrived at this same figure.

The Part 7 penalty

22. The Part 7 penalty was imposed at a rate of 10% for both years. Section 59(1) of the Act gives the Commissioner power to levy a penalty of 200% in situations where a non- governmental employer fails to provide a superannuation guarantee statement. Section 62(3) gives the Commissioner discretion to remit the penalty. The Superannuation Guarantee Ruling 94/3 provides a flat 10%

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ATC 2129

penalty should apply where an employer has failed to lodge a SG statement and that failure is discovered by ATO actions. This happened here. Considering the maximum penalty is 200%, this is a lenient position. I cannot justify waiving the penalty in its entirety.

Previous contribution to Grigg's superannuation

23. The applicant says he has already paid Grigg's superannuation for the years ending 30 June 1999 and 2000. He concedes it was paid late. But he objects to the idea that he must now make a further payment when he has already paid.

24. The legislation gives a deadline for contributions to superannuation of 28 July of the following financial year: s 23(6A). The Act does not allow an extension of time beyond that date: see
Jarra Hills Pty Ltd v FC of T 97 ATC 2132 at 2134.

25. Under the Act contributions to Grigg's superannuation fund for the year ending 30 June 1999 had to be made by 28 July 1999. Contributions for the year ending 30 June 2000 had to be made by 28 July 2000. The company made these contributions to Grigg's superannuation in early 2001. Unfortunately this was out of time. The respondent could not take them into account when determining the company's SGC in relation to Grigg.

26. The respondent's calculation the superannuation guarantee shortfall in relation to Grigg was correct.

Conclusion

27. By my own calculations, the respondent correctly ascertained the SGC payable. The Part 7 penalty was also correctly applied. It follows that the decision under review must be affirmed.