Decision impact statement
Sills and Commissioner of Taxation
Court Citation(s):
[2010] AATA 843
2010 ATC 10-164
(2010) 80 ATR 908
Venue: Administrative Appeals Tribunal
Venue Reference No: 2009/2940-2941
Judge Name: Senior Member Ettinger
Judgment date: 29 October 2010
Appeals on foot:
Impacted Advice
Relevant Rulings/Determinations:- N/a
Subject References:
Income tax
Eligible Termination Payment
Employment Termination Payment
Invalidity payment
Invalidity segment
Medical certificate
Précis
Whether certificates provided by medical practitioners satisfy the legislative requirements for determining whether any part of an eligible termination payment or an employment termination payment contains an invalidity component which is exempt from income tax.
Brief summary of facts
1. The Applicant joined the NSW Police Force in 1996 where he progressed to become a Senior Constable. As a result of an injury suffered in 2005, the Applicant undertook restricted duties in the role of Assistant Station Manager and was medically discharged from the NSW Police Force on 23 February 2007. On 16 July 2007, the Applicant commenced employment as a Development Compliance Officer - Building with Lake Macquarie Council.
2. Upon discharge from the NSW Police Force, the Applicant received lump sum payments of $136,632 on 23 February 2007, and $336,116 on 16 January 2008, as he had stopped being gainfully employed because of ill health and was below retirement age at the time. He contended that the payments contained, respectively, an invalidity payment for the purposes of s27G of the Income Tax Assessment Act 1936, and an invalidity segment for the purposes of s82-150 of the Income Tax Assessment Act 1997.
3. The Commissioner disallowed the Applicant's objection on the basis that the medical certificates provided by the Applicant did not satisfy the requirements of s27G(b)(i)(B) of the Income Tax Assessment Act 1936 for the 2007 payment, and s82-150(1)(d) of the Income Tax Assessment Act 1997 for the 2008 payment, as the certificates did not properly address the capacity of the taxpayer to be employed, his qualifications, training and other relevant factors which were mandatory considerations.
4. The Tribunal had before it new material which was not previously before the Commissioner, being a medical certificate of Professor Ghabrial, dated 8 September 2010, and an updated medical certificate of Dr Matalani, dated 23 February 2010.
Issues decided by the tribunal
1. Whether the medical certificates of Dr Ghabrial dated 8 September 2009 and of Dr Matalani dated 23 February 2010 satisfied the respective requirements of s27G(b)(i)(B) of the Income Tax Assessment Act 1936 and s82-150(1)(d) of the Income Tax Assessment Act 1997 to gain concessional tax treatment.
The legislation requires, in summary, that two legally qualified medical practitioners have certified that, because of the ill-health of the person, it is unlikely he or she can ever be gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience of training.
The Tribunal confirmed that the power to certify reposes in the medical practitioners and not the Commissioner or the Tribunal. Although there was no oral evidence called at the hearing, the Applicant's education, experience and training as a labourer, shop fitter and police officer were in written documents before the doctors and the Tribunal. It is for the Tribunal to rely on the doctors' opinions, not to go behind them. The subsections do not impose additional requirements that each medical certificate set out the evidence on which the doctor's opinion is based. The medical certificates properly answered the questions posed by the two subsections, and, therefore, the payments received in 2007 and 2008 respectively contained an invalidity payment and an invalidity segment.
The Tribunal considered the Applicant's subsequent training undertaken for his employment with Lake Macquarie Council, in the context that the possibility can exist that a taxpayer by training or education undertaken after the former employment terminated, has become qualified for employment in a capacity not available when the earlier termination occurred.
Although statements contained in the relevant Explanatory Memorandum are that a person able to undertake other appropriate employment does not have access to the concession, the Tribunal held that it is bound by the legislation and not by extraneous material.
2. Whether the Tribunal can take into account new material not before the decision maker
As the Tribunal hearing is de novo, the Tribunal can take into account medical certificates that are not before the Commissioner at the time of his decision.
Tax Office view of Decision
The decision was open to the Tribunal on the particular facts of the case.
The decision confirms that the Tribunal will not look behind the conclusion expressed in a medical certificate where the medical practitioner has properly answered the questions raised by the relevant legislation.
Administrative Treatment
List of Rulings and Determinations Affected
None
Implications on current Public Rulings & Determinations and Law Administration Practice Statements
None
Legislative References:
Income Tax Assessment Act 1936
27CB
27G
Income Tax Assessment Act 1997
82-140
82-150
Case References:
Drake v Minister for Immigration and Ethnic Affairs
(1979) 2 ALD 60
46 FLR 409
Shi v Migration Agents Registration Authority
[2008] HCA 31
235 CLR 286
248 ALR 390
235 CLR 286
Commissioner of Taxation v Pitcher
[2005] FCA 1154
146 FCR 344
2005 ATC 4813
60 ATR 424
Manokian v Minister for Immigration and Multicultural Affairs
(1997) 48 ALD 632
Minister for Immigration and Multicultural Affairs v Seligman
[1999] FCA 117
85 FCR 115
Meroka v Minister for Immigration and Multicultural Affairs
[2002] FCA 482
117 FCR 251
Saeed v Minister for Immigration and Citizenship
[2010] HCA 23
241 CLR 252
115 ALD 493