A taxpayer has been unsuccessful before the AAT in seeking the Commissioner’s discretion under s 292-465 of the ITAA 1997 to disregard or re-allocate to another financial year all or part of her excess non-concessional contributions to super in the 2010-11 financial year.
- The case involved a husband and wife who had re-organised their superannuation accounts prior to retirement.
- Following advice from Centrelink, the husband withdrew $293,858 from his superannuation account and deposited it into his wife’s account in the 2008-09 year in anticipation of reaching Age Pension age.
- Subsequently, the wife triggered an excess non-concessional contributions tax liability when she withdrew and re-contributed $200,000 for estate planning purposes.
- Transaction 1 in the 2008-09 year had triggered the 3-year $450,000 bring-forward rule so that Transaction 2 generated $43,858 in excess non-concessional contributions.
The AAT noted the matter was a rehearing following an appeal to the Federal Court (see FCT v Dowling [2014] FCA 252, a test case funded by the ATO). In that case, the Federal Court allowed the Commissioner’s appeal against an earlier AAT decision (see AAT Case [2013] AATA 49, Re Dowling and FCT). At first instance, the AAT was satisfied that “special circumstances” existed in relation to Transaction 1, but not Transaction 2. As such, it reasoned that the notional excess non-concessional contributions in 2008-09 should be disregarded and it followed for the AAT that no excess non-concessional contributions arose in the 2010-11 year. In allowing the Commissioner’s appeal, the Federal Court set aside the AAT decision after finding that it “fell into error” in the way it constructed and applied s 292-465 (and remitted the matter to the AAT). In doing so, the Court provided some detailed guidance on the statutory construction and application of s 292-465 of the ITAA 1997.
The AAT said it appreciated all the taxpayer had said – that is, she was not aware of the contributions cap, and she would not have acted as she did, if she had known that she would be assessed for taxation as had occurred. However, the AAT said, having regard to all the circumstances, it could not say that the case displayed “special circumstances” per s 292-465(3)(a). In relation to the object of Div 292, the AAT referred to the taxpayer’s withdrawal and re-contribution of a lump sum and its estate planning purpose (ie to essentially gain a tax advantage for her children when she dies). In this regard, the AAT said it could not say that disregarding or re-allocating the lump sum contribution in whole or in part would be consistent with the object of Div 292. Accordingly, the Commissioner’s decision was affirmed.
(AAT Case [2014] AATA 474, Re Dowling and FCT, AAT, Ref Nos: 2012/2727, 2012/2728, Molloy DP, 14 July 2014.)
[LTN 135, 16/7/14]