Two recent cases alert us to what the Administrative Appeals Tribunal (AAT) considers to be 'special circumstances' under section 292-465 of the Income Tax Assessment Act 1997 (ITAA97):
Lisa Lynch, Thomson Reuters
The AAT has found that special circumstances existed in a taxpayer's situation to allow for the Commissioner's discretion in section 292-465(1) of the ITAA97 to reallocate monies paid into a super fund on 28 and 29 July 2009 to be attributed to the 2008-09 financial year.
The taxpayer exceeded the concessional contributions cap for the 2009-10 financial year, which was $50,000, by $10,068. The Commissioner issued an excess contributions tax assessment of $3,171. The taxpayer made salary sacrifice payments each month with the intention to stay below the relevant cap. The taxpayer made salary sacrifice payments of $5,000 per month, but when the concessional cap was reduced to $50,000, he reduced his payments to $4,000 per month initially, then to $3,000 per month.
The Tribunal heard the disputed amounts were salary sacrifice amounts for the April, May and June 2009 months not being transferred by the taxpayer's employer to the super fund until July 2009. The taxpayer said he was unaware of the delay and that he, operating from monthly payslips, was of the belief that the sums had been transferred to the fund. There was no agreement between the taxpayer and his employer as to when salary sacrifice amounts would be transferred by the employer to the super fund.
The AAT found special circumstances existed to warrant the disputed amounts to be attributed to the 2008-09 financial year. The Tribunal was also of the view the taxpayer's behaviour, in making regular contributions, demonstrated that he was building his super by making gradual contributions over the course of his life (per the objective of Division 292 of the ITAA97). The Tribunal noted that if the July 2009 payments had been credited to the 2008-09 financial year, then the taxpayer's concessional super contributions would amount to $48,000, that is, under the relevant cap.
In finding that there were "special circumstances", the Tribunal member said recent AAT decisions "seem to have adopted an unduly narrow interpretation" of what may constitute "special circumstances". In particular, the Tribunal member suggested the decision in AAT Case  AATA 123, Re Tran and FCT, which took the view that circumstances will not be special unless they are out of the ordinary, was "misconceived". The Tribunal member, in this case, was of the view that "something unfair, unintended or unjust" could be a ground for finding special circumstances.
The Commissioner had argued that overpayment was reasonably foreseeable as the taxpayer had received notices from the super fund for periods ended 30 June 2009 and 31 December 2009, which showed that continued payments would result in excess payments for the 2009-10 year. Although the AAT agreed, it said "it was perfectly reasonable for the [taxpayer] to envisage that his employer would make the payments when they were shown in the payment advises issued to him each month".
Accordingly, the excess contributions tax assessment was set aside.
Jane Tu, Thomson Reuters
The AAT has agreed with the Commissioner that the circumstances surrounding a taxpayer's excess super contributions did not constitute "special circumstances" under section 292-465 of the ITAA97. Accordingly, it held the Commissioner's discretion should not be exercised to reallocate the excess contributions to another year.
The taxpayer made excess contributions into a super fund in the relevant year. She argued that "there was a widespread misunderstanding at the relevant time as to the operation of the law and it was not until the Commissioner's position became clear sometime later that everyone knew where they stood". As evidence, the taxpayer presented statements from certain parties in the financial industry and passages from a National Tax Liaison Group meeting. Therefore, the taxpayer argued that the Commissioner's discretion should be exercised to reallocate the excess contributions to another year as the widespread misunderstanding constituted "special circumstances".
The AAT said that if the taxpayer's evidence were to be accepted then "everyone was in the same boat. If that is so, there is nothing really special about the taxpayer's case". Hence, it held there were no "special circumstances" within the meaning of section 292-465 to justify treating the taxpayer differently.
The AAT said the law about contribution limits "was there to be read and understood". It said the fact a mistake was made in this particular case was regrettable, "but it is not such as to mark it out as being a special case that is different to the others". In those circumstances, the AAT concluded that, "whatever the good intentions of the taxpayer that may have been consistent with the objects of the division, we are not in a position to do anything about it because there are no special circumstances in this particular case".
In addition, the AAT held that even if the taxpayer was given the wrong advice, it would not be considered to be "special circumstances" as "[i]t is not unusual for advisers to give the wrong advice". In conclusion, the AAT affirmed the Commissioner's decision and held there were no "special circumstances" for the exercise of the Commissioner's discretion to reallocate the taxpayer's excess contributions to another year.
Source: These articles were first published in Thomson Reuters' Weekly Tax Bulletin. To subscribe to Weekly Tax Bulletin, or for more information, please:
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