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ADMINISTRATIVE APPEALS TRIBUNAL - SMALL TAXATION CLAIMS TRIBUNAL

Case [2000] AATA 496

Re Sukumaran and Federal Commissioner of Taxation

A F Cunningham, Part-time Member

25 February 2000 - Sydney

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A F Cunningham, Part-time Member.    This is a statement of reasons pursuant to s 43(2A) of the Administrative Appeals Tribunal Act 1975 (Cth) in respect of a decision made on 25 February 2000.

  2  The applicant has sought the review of a decision which disallowed an objection dated 13 September 1999 against a notice of assessment that was issued on 29 August 1995 in respect of the year ended 30 June 1995 and against a notice of assessment issued on 22 July 1996 in respect of the year ended 30 June 1996.

  3  The income received during those years from the applicant's employment was received as part of a termination payment. The applicant has alleged that the payments received should be treated as received under a voluntary redundancy program or an early retirement scheme and therefore eligible for tax concessions pursuant to s 27CB of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936).

  4  The applicant represented himself and appeared in person. The respondent Commissioner was represented by Ms Gatland.

  5  The applicant gave evidence in person and was cross-examined by Ms Gatland. The applicant asked the tribunal to receive into evidence various letters that he had written to the tribunal including his letter of appeal and there was no objection to this. The T Documents were tendered and admitted into evidence pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (Cth). The respondent called Ditmar Holman to give evidence and his statement of evidence was admitted into evidence without objection. Mr Holman had occupied a managerial role in relation to the applicant during the years 1994 and 1995 when the applicant retired from the Australian Taxation Office (ATO).

  6  Evidence was given as to the history of the applicant's employment with the ATO. This history does not appear to be in dispute and the tribunal finds that the applicant was an employee of the ATO between 15 January 1987 to 10 April 1995 when he accepted his retirement offer. The date of his election was made on 14 March 1995 and that document is contained at T3 in the T Documents.

  7  The applicant had occupied position number 41061. His duties consisted of examining less complex income tax cases and taking action to recover outstanding amounts of tax. In particular the drafting and issuing of replies to correspondence, requesting extensions of time to pay and account inquiries, answering telephone inquiries relating to requests for extensions of time to pay and general debt management inquiries. He was to initiate contact with taxpayers and/or their representatives in relation to recently generated cases, and making appropriate recommendations and submissions. He drafted, issued and/or served legal documents and calculated and imposed additional taxes in accordance with guidelines. Within authorised delegations he granted extensions of time for payment of outstanding taxes. He remitted additional tax for late payment and action, relieve and write off applications. He actioned interest on overpayment cases and attended to general clerical tasks including the preparation of transactions for input and error correction and data entry and retrieval. He liaised with other sections and outside agencies.

  8  The applicant gave evidence that around this time, which is the time when he finally accepted his retirement offer, but earlier than March 1995, he was subject to harassment which he said was because of his accent. He was, in his words "being pushed around in his office". He informed the Tribunal, that on one occasion he had however been offered higher duties in an ASO3 role and had received support from other officers in the Department who had commended him on his work. Further, that he had succeeded with an appeal that he had lodged with the Merit Protection Review Tribunal.

  9  Prior to taking up his offer of early retirement, changes were being made in the office to modernise and update the facilities, in particular, in the area of technology. The applicant confirmed that he was offered further training but said that he didn't feel that he needed more training and that he had undergone many training programs in the past.

  10  He did not take up the training offer at the time but went off on sick leave as he said he was suffering from a nervous illness because he was not happy with the situation. He said that he didn't feel the need for training to do the same job. It was around this time that he was informed by Mr Holman that he was not coping with the pace of change. Mr Holman said in evidence that the applicant was counselled after Mr Holman had been informed by a training officer who had worked with the applicant each day for a period of 4 weeks, that the applicant was not managing the new skills required at all well.

  11  The applicant said that he took up the offer for early retirement because had had been told that if he did not, he would be demoted. It appears that he was informed by other co-workers in a general sense that this would be the process, rather than being told specifically by his supervisor that this would occur to him. Section 76W(1) of the Public Service Act 1922 (Cth) and other relevant awards indicates that this could occur following the expiration of a retention period and it was agreed that the applicant was not demoted prior to him accepting his retirement offer.

  12  Admitted into evidence was a letter addressed to the applicant dated 9 November 1999 written by a senior consultant with the human resources services of the ATO which set out the procedure involved in the retirement process. The applicant has not disputed the contents of the letter and annexures. He conceded that he had received the voluntary separation program bulletin prior to retiring and was aware of the relevant quotas.

  13  These quotas indicated that no officers at the applicant's level of ASO2 were to be retired under category 1, but that 150 offers would be made across the country under category 2 which reads as follows :

   

For staff of any classification and in any region who have worked effectively for many years and now through no fault of their own have found themselves in a rapidly changing environment for which they may not possess the relevant skills and knowledge.

  14  In accordance with this office the applicant accepted an offer from his employer to be effective between 10 April and 15 May as he had elected. The offer became effective from 10 April 1995 having been accepted in accordance with the provisions of cl 7 of the Australian Public Service and Redeployment and Retirement Redundancy Award of 1987 and that is contained at T3. Tax exemptions can be granted under the provisions of s 27CB of the ITAA 1936 if the early retirement payment, ETP, is a bona fide redundancy. The provisions of s 27F of the ITAA 1936 provide:

   

Where -

 (a)  an eligible termination payment is made in relation to a taxpayer in consequence of the dismissal of the taxpayer from any employment at any time (in this section referred to as the "termination time") by reason of the bona fide redundancy of the taxpayer.

 

…

 

so much of the eligible termination payment as exceeds the amount (in this section referred to as the "termination amount") of an eligible termination payment that could reasonably be expected to have been made in relation to the taxpayer had he voluntarily retired from that employment at the termination time is a bona fide redundancy payment in relation to the taxpayer.

  15  The tribunal was referred to a ruling of the Commissioner of Taxation, Taxation Ruling 94/12 dated 31 March 1994 which relates to the requirements in order for a payment to qualify as a bona fide redundancy under s 27F of the ITAA 1936. Paragraphs 8-9 read:

   

Payments made under redundancy packages will qualify for concessional payment under section 27F if an employee is dismissed by reason of his or her bona fide redundancy. Dismissal carries with it the concept of involuntary (on the employee's part) termination of employment and will ordinarily be instigated by the employer. The involuntarily nature of dismissal does not prevent the employer, with a view to maintaining industrial harmony and minimising the destruction to employees, from seeking expressions from interest for those employees who would like to accept a redundancy package. It simply means that the employer ultimately decides that the number of staff positions will be reduced and determines which employees will actually be made redundant.

Further, at para 12:

   

Redundancy can be described as a situation where an employer no longer requires employees to carry out work of a particular kind or to carry out work of a particular kind at the same location. Redundancy refers to a job becoming redundant and not to an employee becoming redundant. An employee's job is considered to be redundant if:

 •  an employer has made a definite decision that the employer no longer wishes the job the employee has been doing to be done by any one;

 •  that decision is not due to the ordinary and customary turnover of labour;

 •  that decision led to the termination of the employee's employment; and

 •  that termination of employment is not on account of any personal act or default of the employee.

  16  The 2 most relevant aspects of that ruling are the question of constructive dismissal and whether, the applicant's retirement was part of a voluntary redundancy. On the evidence presented to this hearing, the tribunal does not accept that the applicant was not offered any alternatives. He was in fact offered training and declined that offer. He was invited and counselled regarding the early retirement program. His claim that he would be demoted arises from his understanding and the tribunal accepts that this prospect was never specifically put to him by his manager.

  17  As to whether the applicant's retirement was part of a voluntary redundancy program, this term as been defined by the Supreme Court of South Australia in the R v Industrial Commission of South Australia; Ex parte Adelaide Milk Supplier Cooperative Limited (1977) 16 SASR 6; 44 SAIR 1202 which description was accepted by Deputy President Gerber in the decision of Hallows, which is reported as AAT Case 9398; Re Hallows v FCT (1994) 28 ATR 1033. The term is defined and I quote from Bray CJ's statement at SASR 8; SAIR 1205:

   

I agree with Bright J that the concept of redundancy and the context we are discussing seems to be simply this, that a job becomes redundant when the employer no longer desires to have it performed by anyone. A dismissal for redundancy seems to be a dismissal not on account of any personal act or default of the employee dismissed or any consideration peculiarly to him or her but because the employer no longer wishes the job the employee has been doing to be done by anyone.

  18  Deputy President Gerber in Hallows found that a dismissal for redundancy is one made because the employer no longer wishes the job the employee has been doing to be done by anyone. On the evidence before the tribunal this was not the case in the present situation. In the applicant's own words, he said that he didn't need to do any training to do the same job, from the duty statements referrable to the work the applicant performed at the time of his accepting his retirement offer and subsequently performed by other officers occupying the same position number, it appears to the tribunal that there were no significant changes in the work performed. The work was still principally that of debt collecting. The applicant's evidence in relation to this was that he prepared statements of claim and other legal documents, performed clerical work, answered mail and attended to correspondence. Whilst it is acknowledged that some of the duties in the subsequent job description in relation to the work carried out on the HECS accounts and s 221D applications are different, the tribunal does not accept that they were so difference as to constitute a different job. The duty statement at T20, the evidence that was given by the applicant in relation to the performance of these tasks and the evidence of Mr Holman supports this finding that effectively it was the same work.

  19  The employer was not intent on reducing the number of positions but making sure that those occupying the positions required the necessary skills and ability to carry out the job effectively. In contrast to the facts as found by Senior Member Muller in the case of AAT Case 12,997 (1998) 39 ATR 1067; Case 12/98 98 ATC 183 where he found that on the evidence there was in fact a reduction in the number of positions.

  20  While the applicant maintains as part of his argument that a different job was created, his evidence was that he had done the sort of work envisaged in the duty statement contained at T20 and that is the subsequent duty statement which was effective from 1 December 1997. The tribunal does not accept that the duties without job description were significantly different from those that the applicant was then carrying out.

  21  Whilst it is noted that the duty statement was effective from 1 December 1997 which is a while after the applicant retired, there was no other evidence before the tribunal to suggest that the duty statements for the intervening periods reflected a different type of work.

  22  In relation to the income received for the taxation year ended 30 June 1996, the evidence before the tribunal was clear, that this was received from an eligible superannuation fund. The evidence before the tribunal was that the St George's approved deposit fund had the accepted status as an approved superannuation fund. Under the provisions of s 27F(1) of the ITAA 1936 this income is not eligible for concessional payment.

  23  In the alternative, the applicant contended that the payments received could be eligible for concession under the provisions of s 27E of the ITAA 1936. The tribunal accepts the respondent's contention in this regard. The payments received by the applicant do not meet the requirements of the early retirement scheme which need to be:

   First of all offered to all employees within a class identified by the employer.

   Secondly, entered into with a view to rationalising or re-organising the operations of the employer with an identified purpose in mind; and

   Thirdly, approved by the Commissioner before its implementation.

  24  It was conceded on behalf of the respondent that, whilst it could be argued that the proposal offered to the applicant met one or other of those qualifications, it was not a scheme approved by the Commissioner prior to its implementation. The basic failure of the applicant's case is that in this case his employer, the ATO, had an unlimited right of veto to accept his application for voluntary redundancy in accordance with the ruling that I have previously referred to, Taxation Ruling 94/12 it is stated at para 7:

   

A scheme will fail to satisfy the requirements of section 27E if the employer has an unlimited right to veto on the acceptance of applications under the scheme. If the employer has an unlimited right of veto he or she can effectively choose which employees are to be made redundant.

  25  The employees who are made redundant in those circumstances are usually being retrenched because their jobs have been abolished and the payments they receive may qualify for concessional treatment as bona fide redundancy payments under s 27F. However as already indicated, the tribunal has found that in this case the applicant's job was not being abolished and further that the Commissioner had the right to refuse to accept the applicant's election.

  26  The tribunal having found that the applicant has failed to satisfy the provisions of s 27E in relation to voluntary redundancy and s 27F being the provisions in relation to the early retirement scheme payments, the applicant is therefore not eligible for concessional taxation under the provisions of s 27CB of the ITAA 1936 and so the appeal must fail.