Issue
Whether '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 a member of two superannuation funds.
Fund A commenced to pay a pension (the Fund A pension) and reported the benefit to the Australian Taxation Office (ATO) for reasonable benefit limits (RBL) purposes.
The recipient completed a payment request and sent it to Fund B. Fund B did not receive the payment request until a week later and payment of the eligible termination payment (ETP) was made two weeks after the pension's commencement day.
Fund B then reported the benefit to the ATO for RBL purposes.
When the Commissioner made a RBL determination for the ETP, the Fund A pension was taken to be a previously received benefit. The determination showed that the ETP had an excessive component.
The recipient has received written confirmation from Fund A and Fund B that the action taken by them in processing the payment request was not in accordance with their ordinary practice.
The recipient requested that the ETP from Fund B be reported to have been paid for RBL purposes prior to the commencement date of the Fund A pension.
The recipient sought the exercise of the Commissioner's discretion under section 140ZB of the ITAA 1936 to deem the ETP from Fund B to be within the recipient's RBL in view of the special circumstances of the case. The recipient also requests that the RBL treatment of the Fund A pension be reviewed, with the result that this pension will not be fully rebatable.
Reasons for Decision
Benefits are determined against the recipient's RBL in the order in which they are received. As the commencement day of the Fund A pension occurred prior to the date the ETP from Fund B was paid, the Fund A pension was determined before the ETP.
Fund B reported the ETP benefit to the ATO a month after Fund A reported the pension. This is in itself not an unusual, uncommon, exceptional or abnormal circumstance.
The fact that Fund B reported the benefit to the ATO a month after the ETP was paid to the recipient, is also in itself not an unusual, uncommon, exceptional or abnormal circumstance.
The Administrative Appeals Tribunal (AAT) in Ivovic v Director-General of Social Services said that the decision maker must "be prepared to respond to the circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate." The decision maker must consider whether, by exercising the discretion in a particular case, the purpose of the legislation will be achieved.
The discretion under 140ZB of the ITAA 1936 cannot be used to substitute the benefit dates for either the Fund A pension or the ETP paid by Fund B for different dates (for example, to achieve a reversal in the order of those benefits so that the pension rather than the ETP would be determined to be in excess of the RBLs as had originally been planned). Rather the decision maker must consider whether, because of special circumstances, it is unjust or unreasonable that the ETP from Fund B is determined to be in excess of the applicable RBL.
The discretion under section 140ZB of the ITAA 1936 cannot be used to alter the facts (benefit dates) to achieve the originally planned result. Given this, it is not unjust or unreasonable in the circumstances that the ETP from Fund B should be determined to be in excess of the recipient's RBLs.
Accordingly section 140ZB of the ITAA 1936 does not apply to these circumstances.