Issue
Do 'special circumstances' exist for the application of the Commissioner's discretion under section 140ZB of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No, 'special circumstances' do not exist for the application of the Commissioner's discretion.
Facts
The recipient was medically discharged from employment.
A disability superannuation pension commenced to be paid to the recipient.
The recipient received a reasonable benefit limits (RBL) determination for the disability superannuation pension. The determination was amended and the new final determination also showed an excessive amount.
The disability superannuation pension was assessed against the discounted flat dollar lump sum RBL.
The disability pension was reported as not meeting the pension and annuity standards.
Reasons for Decision
The RBL amount of a disability pension is determined by reference to the pension's capital value. This RBL amount is calculated so as to exclude the 'future service' component. The 'future service' component represents that part of the capital value that is attributed to the period which starts on the commencement day of the pension and ends on the date of the recipient's 65th birthday.
Section 140ZB of the ITAA 1936 allows the Commissioner to treat an excess benefit as being within a recipient's RBL because of special circumstances.
The term 'special circumstances' is not defined in legislation. However, it has been considered in several cases dealing with the exercise of a variety of discretions.
In Tefonu Pty Ltd v ISC 93 ATC 4727, the Administrative Appeals Tribunal (AAT) found that the term meant circumstances that are unusual, uncommon, exceptional and abnormal.
A medical discharge is not considered to be grounds for special circumstance. The excessive amount determined for this disability pension is a direct result of the recipient's age and the fact that the pension did not meet the pension and annuity standards.
For this reason, the Commissioner cannot be satisfied that special circumstances exist to warrant discretion under section 140ZB of the ITAA 1936.