Case R44

Judges:
KP Brady Ch
JE Stewart M
DJ Trowse M

Court:
No. 2 Board of Review

Judgment date: 9 May 1984.

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K.P. Brady (Chairman), J.E. Stewart and D.J. Trowse (Members)

The short question for decision in this case is whether the taxpayer, employed as a crane operator by a State Statutory Authority during the years of income ended 30 June 1981 and 1982, was an ``eligible person'' for the purposes of sec. 82AAS of the Income Tax Assessment Act 1936 so as to qualify for a deduction from assessable income pursuant to sec. 82AAT of the Act in respect of those years. For the purposes of the hearing of the references, it was common ground between the taxpayer and the Commissioner that two payments of $1,900 were made after the commencement date for the operation of sec. 82AAS and that a payment of $1,900 was made during each of the above-mentioned years of income. It was also common ground that there were no material differences in the circumstances that gave rise to the payments which were made by the taxpayer to a non-employer sponsored superannuation fund that was accepted as being a ``qualifying superannuation fund'' for the purposes of sec. 82AAS. The benefits accruing to the taxpayer in respect of that fund were not in issue before us. It was not in dispute that subsec. (2) of sec. 82AAT operated to limit the taxpayer's claim in each year to an amount of $1,200.

2. It is convenient to set out here the provisions of sec. 82AAS and 82AAT, which were inserted in the Assessment Act by sec. 10 of Act No. 124 of 1980 and which provide a deduction of up to $1,200 in an income year for contributions made to a qualifying superannuation fund by a self-employed person or by any other gainfully employed person not being covered by employer-sponsored or other superannuation arrangments. The sections read as follows:

``82AAS(1) In this Subdivision, unless the contrary intention appears -

`dependant', in relation to a taxpayer, includes the spouse and any child of the taxpayer;

`qualifying superannuation fund' means a superannuation fund -

• (a) the income of which of the year of income is exempt from tax by virtue of paragraph 23(ja) or would, but for the provisions of section 121C, be exempt from tax by virtue of that paragraph; or
• (b) which is a fund to which section 79 applies in relation to the year of income.

(2) Subject to sub-section (3), a person (in this sub-section referred to as the `relevant person') is an eligible person in relation to a year of income for the purposes of this Subdivision unless -

• (a) during the whole or a part of the year of income circumstances existed by reason of which it was reasonable to expect that superannuation benefits would be provided for the relevant person upon retirement or for dependants of the relevant person in the event of the death of the relevant person (whether or not any condition other than the retirement or death of the relevant person would be required to be satisfied in order that those benefits be provided); and
• (b) to the extent to which those benefits would be attributable to the year of income -
  • (i) the benefits would be wholly or partly attributable to contributions made to a superannuation fund in relation to the relevant person by a person other than the relevant person; or
  • (ii) the benefits would, in whole or in part, be paid out of moneys that would not represent -
    • (A) contributions made by the relevant person to a superannuation fund;
    • (B) contributions made by the relevant person under a

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      scheme for the payment of benefits upon retirement or death, being a scheme constituted by or under a law of the Commonwealth or of a State or Territory; or
    • (C) income or accretions arising from contributions, referred to in sub-sub-paragraph (A) or (B).

(3) Where, apart from this sub-section, a person would not be an eligible person in relation to a year of income for the purposes of this Subdivision by reason of the operation of sub-section (2) in relation to a part only of a year of income and the Commissioner, having regard to -

• (a) the period or periods during the year of income or during any preceding year of income during which circumstances of the kind specified in that sub-section existed in relation to the person; and
• (b) such other matters as the Commissioner thinks relevant,

is of the opinion that it is reasonable that the person should be treated as an eligible person in relation to the year of income for the purposes of this Subdivision, the person shall be deemed to be an eligible person in relation to the year of income for the purposes of this Subdivision.''

``82AAT(1) Subject to sub-section (2), there shall be allowed as a deduction from the assessable income of an eligible person of a year of income the amount of any contribution, or the sum of the amounts of any contributions, made by the eligible person during the year of income and after 19 August 1980 to a qualifying superannuation fund, being contributions made to obtain superannuation benefits for the eligible person or, in the event of the death of the eligible person, for the dependants of the eligible person.

(2) The deduction allowable to a taxpayer under this section from the assessable income of a year of income shall not exceed $1,200.''

3. It appears that it was the Commissioner's view at the assessing stage (and also before the Board) that the taxpayer was not an ``eligible person'' as defined (and so entitled to a deduction in each year of an amount of $1,200) because, during the relevant part of the 1981 income year and for the whole of the 1982 income year, circumstances existed by reason of which it was reasonable to expect that ``superannuation benefits'' (as defined in sec. 6 of the Assessment Act) would be provided for the relevant person (i.e. the taxpayer) upon retirement (or, in the event of his death, for his dependants), and to the extent to which those benefits would be attributable to the years of income in issue, they would be paid out of moneys that would not represent contributions by the taxpayer to a superannuation fund or public sector superannuations scheme (or income or accretions arising from these latter contributions).

4. It is convenient to set out here the definition of ``superannuation benefits'', which reads:

``6(1) In this Act, unless the contrary intention appears -

...

`superannuation benefits' means individual personal benefits, pensions or retiring allowances;

...''

5. It appears that, in the Commissioner's opinion, the ``superannuation benefits'' provided for the taxpayer (as an employee of a State Statutory Authority) in the 1981 and 1982 income years arose out of the taxpayer's entitlements under the Public Servants' Retiring and Death Allowances Act 1925, the relevant parts of which for present purposes read:

``2 In this Act -

`public servant' means a person employed in any position or capacity in the Public Service

...

`Public Service means the Public Service of the State, and includes any industry or undertaking carried on by or on behalf of the State.

3(1) There shall be paid by the Treasurer to every public servant who, after having continuously served as such for a period of four years or longer -

• (a) retires from the Public Service on account of sickness;

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• (b) is compulsorily retired therefrom on account of -
  • (i) his age;
  • (ii) his position having been abolished; or
  • (iii) his services having become unnecessary;

  or

• (c) having reached the age of sixty years, if a male, or fifty-five years, if a female, voluntarily retires therefrom,

an allowance upon his retirement.

(2) Such allowance shall be -

• (a) in respect of the first four years of such service, one month's salary; and
• (b) in respect of any further period of such service, one week's salary for every full year of such further period, and a proportionate part of such one week's salary for any additional portion, less than a year, of such further period.

Provided, however, that the amount of the allowance to be paid to a public servant under this section shall not in any case exceed one year's salary.

...

4(1) There shall be paid by the Treasurer in respect of every public servant who, after having continuously served as such for a period of two years or longer, dies while in the Public Service, an allowance upon his death as follows:

• (a) In respect of the first two years of such service, one month's salary; and
• (b) In respect of any further period of such service, one week's salary for any additional portion, less than a year, of such further period.

(2) The allowance payable under this section in respect of any public servant shall be paid by the Treasurer to the personal representative of such public servant, and the moneys constituting such allowance shall, except for the purposes of the Deceased Persons' Estates Duties Act 1931, be deemed to form part of the personal estate of such public servant.

...

8 All moneys payable by the Treasurer under this Act shall be paid by him out of moneys to be provided by Parliament for that purpose out of the Consolidated Revenue.''

6. The taxpayer, presently aged 42 years with what would seem to be a statutory retiring age of 60 years, did not appear to contest the Commissioner's conclusions (with which we would concur having regard to the evidence) that the above definition of ``Public Service'' included the Statutory Authority (with which the taxpayer had been employed continuously for some 12 years), in that it was an ``industry or undertaking carried on by or on behalf of the State'' and that, as an employee of that Authority for the period indicated, he was entitled therefore as a ``public servant'', as defined, to be paid ``an allowance upon his retirement'' to be calculated in accordance with the criteria provided in sec. 3 of the Public Servants' Retiring and Death Allowances Act 1925. There appeared to be no dispute that payment of allowance moneys so calculated would be made ``out of moneys provided by [State] Parliament for that purpose out of Consolidated Revenue'' and not out of a superannuation fund or scheme to which the taxpayer had made contributions. In the circumstances, there could not be, in our opinion, any doubt that the taxpayer would be entitled to ``personal benefits'' or a ``retiring allowance(s)'' within the meaning of the term ``superannuation benefits'' as defined in the Assessment Act. As a consequence, he could not, in our opinion, be regarded as an ``eligible person'' for the purposes of sec. 82AAS of that Act and entitled to a deduction under sec. 82AAT of the amounts of $1,200 in issue.

7. However, the main thrust of the taxpayer's submissions in support of the allowance of his claims appeared to be based upon the proposition that the general history of employment with the Authority of which he was an employee indicated that long-term future employment by it was, and is, highly improbable and, in his own case, it was, and is, unlikely to continue beyond the completion in or about 1985 of a particular project with which he was presently engaged. Therefore, it seemed to be submitted, first, that the tenure of his service was so uncertain at the time of making the assessments that it could not (reasonably) have been said that he would reach the voluntary retirement age at which an allowance would be paid (said in evidence to be 65 years and not 60

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years as indicated in sec. 3(1) cited above) and, secondly, that, as a consequence, any amount paid before that time could only be regarded as ``retrenchment pay'' and not as ``superannuation'' (p. 34 of transcript), which would lead to the disqualification of the amounts in issue as deductions.

8. The evidence does not enable us to determine whether the taxpayer might be retired before reaching the age of 60 years (or 65 years) for any reason, including those contained in sec. 3(1) of the Public Servants' Retiring and Death Allowances Act 1925. However, having regard to those provisions and the fact that at the time of making the assessments for the 1981 and 1982 income years the taxpayer, in his capacity as a public servant (as defined), had served for the qualifying period of four years or longer, we consider that it was reasonable for the Commissioner to expect at the time of making each assessment that the taxpayer would be entitled to be paid ``an allowance upon his retirement''. The evidence does not enable us to arrive at any other conclusion. We consider that any allowance so paid would fall clearly within the meaning of the words ``individual personal benefits... or retiring allowance(s)'' used in the definition of ``superannuation benefits'' and that, as a consequence, his claims for deductions were properly disallowed on the basis that they were not made by an ``eligible person''. We do not think that the taxpayer's use of the term ``retrenchment pay'' could affect that position or that public statements said to be concerned with the general question of whether retrenchment payments should be regarded as superannuation payments could affect the interpretation that should, in our opinion, be given in the particular circumstances of this case to the various statutory provisions to which reference has been made.

9. Finally, by way of summary we would add that, in our opinion, during the years in issue circumstances existed in respect of which it was reasonable to expect for assessment purposes that the taxpayer would be entitled to receive ``superannuation benefits'' (other than those from funds to which he had made personal contributions), that those benefits would in the relevant sense be attributable to the years of income in issue, that the benefits would be wholly paid out of moneys that would not represent his own contributions to a superannuation fund or a scheme or accretions thereof, and that the benefits which would be payable would fall within the definition of ``superannuation benefits'' in subsec. 6(1) of the Income Tax Assessment Act. Accordingly, in our opinion, the taxpayer has failed the ``eligible person'' test prescribed in sec. 82AAS.

10. For the above reasons, we would uphold the Commissioner's decisions on the objections and confirm the assessments in issue.

Claims disallowed