JARRA HILLS PTY LTD v FC of T

Members:
BH Pascoe SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 19 September 1997

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BH Pascoe (Senior Member)

This is an application to review a decision of the respondent to disallow an objection against a Superannuation Guarantee Charge assessment in respect of the year ended 30 June 1994. The assessment which issued on 16 April 1996 showed an amount payable of $4,325.10 calculated as follows:

Number of employees with a shortfall            12
Total Superannuation Guarantee shortfall     $3063.46
Nominal interest component                     344.11
Administration component                       410.00
                                             --------
Total Superannuation Guarantee Charge         3817.57
Late payment penalty                           507.53
                                             --------
Amount payable                               $4325.10
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2. The assessment issued following an audit of the applicant's records and enquiries from the insurance company with whom the applicant had established an employer superannuation fund. These enquiries showed that, in respect of 12 employees, the applicant had failed to make sufficient superannuation contributions by 28 July 1994 in respect of remuneration paid during the year ended 30 June 1994.

3. At the hearing the applicant was represented by Mr D Kou, a director of the applicant company and the respondent by an officer of the respondent. Mr Kou did not dispute the calculations made by the respondent but argued that the assessment was unfair and inequitable, in that it has penalised the applicant by requiring payment twice for the same employees plus penalties added to the Superannuation Guarantee Charge. It was said that the required contributions were made to the applicant's superannuation fund on 28 September 1994. It was argued that the relevant legislation is new to the applicant, is complex and the applicant has relied on advice from the insurance company and its agent. Mr Kou said that the applicant had always paid superannuation contributions on receipt of statements from the insurance company. He said that most of the employees concerned were new employees and there had been a delay in completing their enrolment in the superannuation fund as a result of the insurance company agent wishing to interview all new employees prior to completing the paperwork. Mr Kou said that it was not possible to offset the Superannuation Guarantee Charge against future contributions as most of the relevant employees had left the applicant's employ prior to the receipt of the assessment.

4. For the respondent it was submitted that the requirements of the Superannuation Guarantee (Administration) Act 1992 (``the Act'') had been followed and the respondent has no discretion to extend the time in which contributions can be made to a superannuation fund or to remit any component of the charge or late payment penalty. While accepting that the

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ATC 2134

applicant may have been penalised and had been required to pay contributions in respect of certain employees twice, the respondent contended that the requirements of the Act were specific and clear.

5. The assessment in question was issued by the respondent pursuant to section 36 of the Act. This section applies where an employer has not lodged a Superannuation Guarantee statement for a year and the Commissioner is of the opinion that the employer is liable to pay Superannuation Guarantee Charge for the year. The Commissioner is empowered to make an assessment of the Superannuation Guarantee shortfall for the year and the Superannuation Guarantee Charge payable. Under subsection 36(3) the Charge is taken to have become payable on 14 August in the following financial year. Section 19 of the Act sets out the calculation of a shortfall and, in simple terms, requires a calculation of a specific percentage of the actual salary and wages or the maximum contribution base, whichever is the lower, for each employee. From that calculation is deducted amounts contributed to a superannuation fund for the benefit of each employee in the period commencing from the first day of the year and ending on the twenty- eighth day after the end of the year. Where a shortfall is assessed a nominal interest component pursuant to section 31 and an administration component pursuant to section 32 are added. As section 36 deems the charge to have become payable on 14 August, section 49 provides for a penalty for late payment calculated from that date. The legislation is quite clear in providing a deadline for contributions to superannuation of 28 July of the following financial year. There is no provision in the legislation which allows for any extension of time beyond that date nor any discretion given to the respondent or this Tribunal to overlook a failure to make required levels of superannuation contributions by that date.

6. It is accepted that the likely result of the applicant's failure to avoid the shortfall by 28 July 1994 is that the total cost of superannuation to the applicant and the benefits derived in respect of certain employees have been higher than that intended by both the applicant and the legislation. Nevertheless, there is nothing that either the respondent or this Tribunal can do to ameliorate that position. The respondent concedes this, although argues that any contribution subsequent to 28 July in respect of a prior year, can be utilised as a contribution to be taken into account in that subsequent year. In a case such as this it is likely to be of little benefit where the employer becomes aware of the shortfall for the 1993-1994 year only in April 1996, well after that subsequent year had closed. It may be said that the delay would not have occurred if the applicant had complied with section 33 of the Act which requires an employer with a Superannuation Guarantee shortfall to lodge a statement by 14 August in the following year or any later day allowed by the Commissioner.

7. For the respondent, it was submitted that the absence of discretion in the legislation had led the respondent to undertake in 1992 what was said to have been ``the largest information campaign in Tax Office history'' including a direct mail out of an explanatory booklet to all employers. Whilst accepting that the legislation may penalise employers such as the applicant, it was said that the purpose of the legislation was to ensure that all employees receive a minimum level of superannuation support and that this support is required to be provided either by way of employer contributions on or before 28 July following the year of income or by way of a Superannuation Guarantee Charge payable by 14 August.

8. The Tribunal must affirm the decision under review as the legislation under which the assessment was issued is clear and unambiguous. The applicant accepts that required superannuation contributions were not made by 28 July 1994 and the liability under the assessment for Superannuation Guarantee Charge has been correctly imposed under the Act.