THOMMENY v FC of T

Members:
I Way M

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [2006] AATA 840

Decision date: 3 October 2006

I Way (Member)

1. This is an application by John Thommeny (the Applicant) for review of an objection decision of the Commissioner of Taxation (the Respondent), dated 17 March 2006, that disallowed the Applicant's objection in respect of the Respondent's assessment of the lump sums he received from the SAS Trustee Corporation (State Super) and from his employer during the 2003/2004 financial year.

2. The tribunal had before it the documents lodged pursuant to section 37 of the

ATC 2441

Administrative Appeals Tribunal Act (1975) and further documents from the Applicant marked as Exhibit A1. The Applicant was self-represented and gave oral evidence. Mr P Kaszyckyj represented the Respondent.

Background

3. The background facts in this matter are not in dispute and in view of this and on the material before it the Tribunal finds:

(a) The Applicant retired from the NSW Police Service on 27 November 2003 and applied for a lump sum benefit in lieu of the pension from the Police Superannuation Scheme.
(b) The benefits the Applicant received are as follows:
- (i) Gross amount of $715,552 paid on 4 December 2003 by State Super (salary multiple).
- (ii) Gross amount of $36,912 paid by State Super on 4 December 2003 (Basic Benefit Payment).
- (iii) Gross amount of $83,878 paid by the Applicant's employer on 27 November 2003.
(c) The Applicant's lump sum flat dollar Reasonable Benefit Limit (RBL) for the year ending 30 June 2004 is $588,056.
(d) On 22 December 2003, NSW Police reported to the Respondent payment of an Eligible Termination Payment (ETP) of $83,878 to the applicant.
(e) On 14 January 2004, State Super notified the Respondent about the payment of an ETP of $715,552 to the applicant.
(f) On 24 February 2005 (Tribunal emphasis) State Super notified the Respondent of the payment of an ETP of $36,912 to the applicant.
(g) Based on the above notifications, the Respondent issued RBL determinations as follows:
- (i) On 26 January 2004 an RBL final determination based on the ETP of $715,552 paid by State Super, and the ETP of $83,788 paid by the Applicant's employer.
- (ii) On 14 March 2005, a revised RBL final determination, based on the ETP of $36,912 showing that the entire amount of $36,912 was excessive of the applicant's RBL.
(h) The RBL determination of 26 January 2004 determined the two ETPs of $715,552 and $83,788 were in excess of the applicant's RBL by $100,532 and the applicant in his tax return for 2003/04 showed this excessive component. As a result of the revised RBL of 14 March 2005, the Applicant's excessive component was increased by the Respondent from $100,532 to $137,444.

Applicant's contentions

4. In his application for review, the Applicant stated, inter alia, that the decision to include his Preserved Benefit ($36,912), as part of his excessive component is wrong and furthermore that the issuing of a second final RBL determination some 13 months after the first determination is invalid and outside of a reasonable period of issue of such a notification.

5. In his request to the Respondent for review in August 2005, the applicant also raised a number of issues in respect of his dealings with the Respondent, including having to deal with many different people and sections, not receiving responses to correspondence, errors in calculation of tax, queries about the payment of general interest charges and surcharge tax.

6. In his final submissions to the Tribunal, the Applicant contended:

(a) "My preserved benefit was paid as a separate payment, in relation to this I declared it in my Tax Return of 2003/2004 and included the form provided by State Super.

(b) It is clear that the error in notifying the Commissioner of Taxation was on the part of State Super, however by issuing another Final Determination the commissioner was unreasonable in that my Taxation return had already been submitted and assessed.

(c) No one from the Office of the Taxation Commissioner saw that this was unreasonable to expect someone to include something in a Taxation return already submitted and no action was taken until I requested a review of my taxation matters.

(d) During the course of obtaining information, speaking personally with and general dealings with the Australian Taxation Office the applicant has followed both the Taxpayers' Charter of Rights (July 1997 and November 203 Editions) and has

ATC 2442
always complied with information received and instructions given.

(e) However on occasions these have been severe and frustrating in the extreme.

(f) I requested a Review on 22 August 2005 and even though I knew that the lodgement of any objections would be considered outside the time frames laid down I was instructed to submit the Letter of Objection on 22 September 2005.

(g) I submit that my preserved benefit under the meanings of the words should have been something that was protected and saved and kept safe from harm so as to be advantageous and secure.

(h) I submit that the issuing of another Final Determination was unreasonable as it followed no sound logic or judgment especially when conceded that if there was an error it was not mine. The Webster's New World Dictionary Third College Edition describes Final as meaning: of or coming at the end, last, concluding, leaving no further hance for action, discussion or change, conclusive.

(i) I received my Final Determination from the commissioner of Taxation on 26 January 2004, I submitted my Taxation return on 20 October 2004, including the Commissioners' final Determination together with my declaring my Preserved Benefit received and submitting the form of notification at the same time.

(j) The amended Assessment received of 30 March 2006 for the amount of $10,410.81 is unreasonable.

(k) As can be seen from the Assessments I have received on 7 January 2005, 22 April 2005, 1 June 2005 and 30 June 2006 there has never been any reasonable explanation for the vast changes in the categories marked A.O.G.L.M.N. the only category that has never changed has been E, which is PAYG withholding credits."

Issues and legislative framework

7. The Applicant accepts that the matters raised by him, as briefly set out in paragraph 5 above are not issues before the Tribunal in its hearing of this matter.

8. The questions before the Tribunal are:

(a) What ETPs must be taken into account in respect of the applicant for the 2003/4 tax year;
(b) Are the two final RBL determinations, one on 26 January 2004 and one on 14 March 2005, correct and valid; and if so
(c) Are there special circumstances that would warrant the Tribunal exercising a discretion under the provisions of the Income Tax Assessment Act 1936 (ITAA).

9. The ITAA relevantly provides as follows:

140ZC Benefits which are counted towards a person's RBLs

Benefits which are to be counted

(1) Except as provided by subsection (2), each of the following benefits are to be counted towards a person's RBLs:

(a) an ETP made in relation to the person on or after 16 February 1990;

(b) a superannuation pension where the commencement day was on or after 16 February 1990;

(c) an annuity where the commencement day was on or after 16 February 1990.

Benefits which are not to be counted

(2) None of the following benefits are to be counted towards a person's RBLs:

(a) an ETP made before 1 July 1990 by the person's employer, where the person was not an associate of the employer when the ETP was made;

(b) an ETP made in relation to the person as a result of the commutation of, or the residual capital value of, a superannuation pension or annuity where the commencement day for the pension or annuity is before 1 July 1990;

(c) a residual pension or residual annuity payable on partial commutation of another superannuation pension or annuity where the commencement day for the other pension or annuity is before 1 July 1990;

(d) a superannuation pension or annuity that:

ATC 2443
(i) is payable to the person as the result of the death of another person; and

(ii) is a reversion of another pension or annuity that was already payable to the other person;

(g) an ETP paid to a charitable or religious body;

(h) a superannuation pension or an annuity paid to a person under 18 years of age because of:

(i) the death of another person; or

(ii) a disability of another person that 2 legally qualified medical practitioners have certified is likely to result in that other person being unable ever to be employed in a capacity for which the other person is reasonably qualified because of education, experience or training

…

27A Interpretation

(1) In this Subdivision, unless the contrary intention appears:

…

eligible termination payment , in relation to a taxpayer, means any of the following:

…

(b) any payment made from a superannuation fund in respect of the taxpayer by reason that the taxpayer is or was a member of the fund, not being a payment:

(i) that is income of the taxpayer; or

(ii) to which paragraph (d), (da), (e) or (ga) applies; or

(iii) that is a benefit to which subsection 26AF(1), 26AFA(1) or 26AFB(2) or (3) applies; or

(iv) that is a contributions-splitting ETP;

reduced by any amount that has been or will be included in the assessable income of the taxpayer under subsection 26AF(2), 26AFA(3) or 26AFB(5) in respect of the transfer by the taxpayer of a right to receive the payment or any part of the payment;

…

(d) any payment made in respect of the taxpayer in relation to the commutation, in whole or in part, of a superannuation pension that was payable to the taxpayer;

…

(da) a payment (in this paragraph called the "capital payment" ) made after the death of the taxpayer to the trustee of the estate of the taxpayer where:

(i) the capital payment is made by reason that the taxpayer was a member of a superannuation fund (whether or not the capital payment is made from the fund); and

(ii) at some time after the death of the taxpayer, a person had a right to elect to receive a superannuation pension (whether or not from the person making the capital payment) in lieu of the capital payment being made to the trustee;

…

(e) any payment made in respect of the taxpayer of the residual capital value of a superannuation pension that was payable to the taxpayer;

…

(ga) a payment (in this paragraph called the "capital payment" ) made after the death of the taxpayer to the trustee of the estate of the taxpayer where:

(i) the capital payment is made by reason that the taxpayer was a member of a superannuation fund (whether or not the capital payment is made from the fund); and

ATC 2444

(ii) at some time after the death of the taxpayer a person had a right to elect to receive an annuity (whether or not from the person making the capital payment) in lieu of the capital payment being made to the trustee;

…

…

…

26AF Assessable income to include value of benefits received from or in connection with former paragraph 23(ja) funds or former section 23FB funds

(1) Where:

(a) in a year of income and after 19 August 1980, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, a paragraph 23(ja) fund or a section 23FB fund;

(aa) if the fund is an exempt fund within the meaning of section 26AFB - the benefit was received or obtained by the taxpayer before the proclaimed superannuation standards day;

(b) the benefit is received or obtained otherwise than in accordance with approved terms and conditions applicable to the fund at the time when the benefit is received or obtained; and

(c) the Commissioner is satisfied that the taxpayer received or obtained the benefit:

(i) by reason that the taxpayer was, or had been, a member of the fund;

(ii) by reason that the taxpayer was, or had been, a dependant of a person who was, or had been, a member of the fund; or

(iii) by reason that the taxpayer was, or had been, associated with a person who was, or had been, a member of the fund;

the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

(2) Where, in a year of income and after 19 August 1980, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from a fund, being a paragraph 23(ja) fund or a section 23FB fund and not being an exempt fund within the meaning of section 26AFB, the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.

…

26AFA Assessable income to include value of certain benefits received from or in connection with former section 23F funds

(1) Benefits not in accordance with terms and conditions of fund

Where:

(a) in a year of income and on or after 7 December 1983, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, a section 23F fund;

(aa) if the fund is an exempt fund within the meaning of section 26AFB-the benefit was received or obtained by the taxpayer before the proclaimed superannuation standards day;

(b) the benefit:

(i) is not a benefit that the taxpayer has a right to receive from the fund; or

(ii) is an excessive benefit; and

(c) the Commissioner is satisfied that the taxpayer received or obtained the benefit:

(i) by reason that the taxpayer was, or had been, a member of the fund;

(ii) by reason that the taxpayer was, or had been, a dependant of a

ATC 2445
person who was, or had been, a member of the fund;

(iii) by reason that the taxpayer was, or had been, associated with a person who was, or had been, a member of the fund; or

(iv) by reason that the taxpayer was, or had been, associated with a person who had made contributions to the fund, being contributions to which Subdivision AA of Division 3 applied;

the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

…

(3) Where, in a year of income and on or after 7 December 1983, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from a fund, being a section 23F fund and not being an exempt fund within the meaning of section 26AFB, the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.

…

26AFB Assessable income to include certain benefits

…

(2) Where:

(a) in a year of income and on or after the proclaimed superannuation standards day, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, an exempt fund;

(b) at the time when the benefit was provided, there were in force regulations for the purposes of subsection 31(1) of the Superannuation Industry (Supervision) Act 1993 prescribing standards applicable to the fund; and

(c) the provision of the benefit resulted in a failure of the fund to comply with such of those standards as are prescribed for the purposes of this section by regulations made under this Act;

the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

(3) Where:

(a) in a year of income and on or after the proclaimed superannuation standards day, a taxpayer receives or obtains a benefit of any kind out of, or attributable to assets of, an exempt fund; and

(b) at the time when the benefit was provided:

(i) the fund was not a regulated superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993; or

(ii) both:

(A) the fund was a regulated superannuation fund within the meaning of that Act; and

(B) the fund was not maintained as required by section 62 of that Act;

the assessable income of the taxpayer of the year of income shall include the amount or value of that benefit.

…

(5) Where, in a year of income, a taxpayer receives valuable consideration in respect of the transfer by the taxpayer to another person (whether by assignment, by declaration of trust or by any other means) of a right (whether vested or contingent) to receive a benefit from an exempt fund, the assessable income of the taxpayer of the year of income shall include the amount or value of that consideration.

…

"140ZH RBL amount-ETP paid by superannuation funds or ADFs

ATC 2446

The RBL amount of an ETP made in relation to a person by the trustees of a superannuation fund or an ADF is the sum of:

(a) 100% of the retained amount of the pre-July 83 component of the ETP; and

(b) 100% of the taxed element of the retained amount of the post-June 83 component of the ETP; and

(c) 85% of the untaxed element of the retained amount of the post-June 83 component of the ETP; and

(d) 100% of the retained amount of the CGT exempt component of the ETP.

…

"140R Determination of whether a benefit is in excess of recipient's RBLs

Commissioner to make final determination

(1) Subject to this section, if the Commissioner receives a notice under subsection 140M(1) in relation to:

(a) an ETP made in relation to a person; or

(b) the commencement of payment to a person of a superannuation pension or an annuity;

the Commissioner must determine:

(c) whether the ETP, pension or annuity is in excess of the person's RBLs; and

(d) if the ETP, pension or annuity is in excess of the person's RBLs:

(i) the extent to which it is in excess of the person's RBLs; and

(ii) in the case of a rebatable superannuation pension or a rebatable ETP annuity - the rebatable proportion of the pension or annuity.

…

(2) The Commissioner must make a final determination within 60 days after receiving the notice.

140S Revision of final determinations

…

Correction of errors etc.

(3) The Commissioner may, at any time, revise a final determination by making any alteration that the Commissioner thinks necessary in order to:

(a) correct any error made by the Commissioner in making the determination; or

(b) take into account any further material or information that has become available since the determination was made.

Revised determination taken to be a final determination

(4) For the purposes of this Division, if a final determination is revised under this section, it is taken, as so revised, to be a final determination.

Limitation on revised determination

(5) A final determination as revised under this section must not be a determination that the Commissioner is not empowered to make under subsection 140R(1).

…

"140M Payers of benefits to give certain information to Commissioner

Notice to be given

(1) If:

(a) any of the following applies:

(i) both:

(A) a payer makes an ETP in relation to a person on or after 1 July 1994; and

(B) if the payer is the person's employer, the Commissioner or a State or Territory authority referred to in subsection 18(2) of the Superannuation (Unclaimed Money and Lost Members) Act 1999-the amount of the ETP exceeds $5,000;

…

…

the payer must give to the Commissioner a notice containing

ATC 2447
such information as is specified in the regulations.

…

Form and lodgement of notice

(3) A notice under this section must:

(a) be in the form approved in writing by the Commissioner; and

(b) be given to the Commissioner before:

(i) if the payer is informed by the recipient, on or before the 10th day of the month after the month ( payment month ) in which the benefit was paid or commenced to be paid, that:

(A) the recipient had applied to the Commissioner for the issue of a tax file number; and

(B) the Commissioner had neither granted nor refused that application;

the end of the 14th day of the second month after the payment month; or

(ii) in any other case-the end of the 14th day of the month after the payment month;

or before the end of such further period as the Commissioner allows.

…

…

"140ZB Discretion to treat benefits as within recipient's RBLs

If:

(a) the whole or a part of an ETP, a superannuation pension or an annuity would, apart from this section, exceed the recipient's RBLs; and

(b) the Commissioner is satisfied that, because of the special circumstances of the case, the whole or a part of the ETP, pension or annuity should be treated as if it were not in excess of the recipient's RBLs;

the Commissioner may make a final determination or an interim determination accordingly.

Consideration

10. There is no dispute between the parties that the ETPs of $715,552 and $83,878 were paid to the applicant during the financial year 2003/2004 and they are to be counted towards the applicant's RBL and the Tribunal so finds.

11. The Applicant submits that the remaining payment of $36,912 should not be included in considering his reasonable benefit limits. The Respondent contends that the payment is an ETP required to be counted towards the applicant's RBL and has submitted:

"Section 140ZC of the ITAA specifies which amounts are counted towards a person's RBL. Pursuant to subjection 140ZC(1), an ETP made in relation to a person on or after 16 February 1990 is counted towards a person's RBL unless it is excluded by subsection 140ZC(2).

An ETP is defined in subsection 27A(1) of ITAA to include payments made from a superannuation fund in respect of the taxpayer by reason that the taxpayer is or was a member of the fund unless it is excluded by paragraphs 27A(1)(b)(i) to(iii),(ba)(iv) or (ma).

The payment in question is a payment made from a superannuation fund in respect of the applicant by reason that the applicant was a member of the fund. The payment does not come within the provisions of paragraphs 27A(1)(b)(i) to(iii),(ba)(iv) or (ma). The payment is therefore an ETP.

The ETP does not come within the provisions of subsection 140ZC(2). The payment is therefore excluded from being counted towards the applicant's RBL.

The ETP was made to the applicant after 16 January 1990.

The ETP is therefore of the kind required to be counted towards the applicant's RBL pursuant to subsection 140ZC(1) and is not excluded from being taken into account under subsection 140ZC(2)."

12. The legislation in respect of this payment is quite clear and the Tribunal accepts the Respondent's submission and finds that the

ATC 2448

Commissioner is correct in counting this payment towards the applicant's RBL.

13. The Tribunal is also satisfied that the applicant received this payment in the 2003/2004 financial year.

14. There is no dispute between the parties and the Tribunal accepts the calculation of an excessive component of $100,532 in the applicant's RBL final determination issued by the Respondent on 26 January 2004.

15. The question then is whether the revised final RBL determination issued on the 14 of March 2005 is correct and valid. The Applicant is of the view it is not. However, the Respondent submits:

"…

The Commissioner was notified of the ETP in question after the RBl dated 26 January 2004 was made. Because the Commissioner was notified of the ETP in question after the date of the determination the Commissioner may revise the determination at any time.

Accordingly, there is no basis for contending that the revised RBl is invalid by reason that the determination was made outside a reasonable time for making of the determination."

16. In considering this issue, the Tribunal is mindful that State Super have accepted that they were in error in delaying reporting the applicant's benefit to the Respondent (Exhibit A1). However, the Respondent can not be held responsible for this delay and the Tribunal accepts the Respondent's submissions that the Commissioner correctly issued a revised final RBL determination within 18 days of being informed of the payment, and the Tribunal so finds.

17. The payment in question comprised $15,955 pre July 1983 component and $20,957 post June 1983 taxed element and therefore the total amount of $36,912 must be counted towards the applicant's RBL. Given that the applicant prior to this has an excessive component of $100,532, the Tribunal is satisfied that the sum of $36,912 has been correctly added to the applicant's excessive component and so finds.

18. Turning then to the exercise of discretion under S.140ZB of ITAA, the Respondent has submitted:

"Section 140ZB of the ITAA allows the Commissioner to treat an excess benefit as being within a recipient's RBL because of special circumstances.

The term 'special circumstances' is not defined in legislation. However, it has been considered in several cases dealing with the exercise of a variety of discretions.

In the case of
Tefonu Pty Ltd v Insurance & Superannuation Commissioner
93 ATC 4727; (1993) 44 FCR 361, the Tribunal found that the term meant circumstances that are unusual, uncommon, exceptional and abnormal.

In Tribunal
Case 64/96, 96 ATC 583, the Tribunal considered that special circumstances recognised that a strict application of legislation may "result in an unjust, unreasonable or inappropriate result".

The applicant's decision to take his superannuation benefits in the form of lump sum payments and therefore be subject to the lump sum RBL was not affected by the delay [of] SAS Trustee Corporation advising the Commissioner of the ETP in question [and] did not cause any financial prejudice to the applicant because, under the revised RBL and amended assessment giving effect to the revised RBL, the applicant is required to pay the amount he would have been required to pay if the original RBL determination had been correct. If anything, the applicant has had the benefit having part of his tax liability deferred.

Therefore, no special circumstances exist to warrant an exercise of the Commissioner's discretion under section 140ZB to treat the ETP of $36,912 as being within the applicant's RBL."

19. The term "special circumstances", while not defined in the Act, has been considered in numerous cases and the Tribunal accepts that for special circumstances to exist they must be such that they are unusual, uncommon or exceptional; or where the strict application of the law gives rise to an unjust, unreasonable or inappropriate result.

20. The Tribunal has looked carefully at all of the material before it and the submissions of both parties in respect of this issue. The

ATC 2449

Tribunal is mindful that the delay in reporting by State Super is the principal reason for a very late revised final RBL determination and the applicant can not be held at fault for this delay. However, in the Tribunal's view such a delay is not exceptional nor can the end result be seen to be unjust, unreasonable or inappropriate. The Tribunal accepts the Respondent's submission as set out in paragraph 18 above.

21. The Tribunal is satisfied that no special circumstances exist to warrant an exercise of the discretion under S.140ZD of ITAA, to treat the applicant's ETP of $36,912 as being within his RBL.

22. In making this finding the Tribunal has noted the Applicant's submission about the frustrations and difficulties he has experienced in dealings with the Tax Office and is mindful that the issues he has raised, as set out briefly in paragraph 5 above are not issues before the Tribunal and appear to have been resolved or are in the process of being resolved. It is to be hoped that with the determination of this matter by this Tribunal, the Applicant will be able to turn his attention to enjoying a well earned retirement.

23. The Tribunal affirms the decision under review.

This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.

Individuals online services

Business online services

Agents online services

Non-residents online services

Foreign Investor

THOMMENY v FC of T

Tools

Tax information for

Help and support