The AAT has upheld the Commissioner’s decision to include a superannuation benefit in a taxpayer’s assessable income for the 2007 income year under s26AFB of the ITAA 1936 after finding that the taxpayer had attempted to evade paying tax on the superannuation money.
In 2007, the taxpayer (age 37) withdrew $53,000 from his public offer superannuation fund by transferring it to the ETK Superannuation Fund which in turn paid $38,370 to the taxpayer. The ETK fund was not a complying superannuation fund. Rather, it appeared to be merely 2 bank accounts established by unnamed person for the illegal early release of superannuation benefits. The Tax Office alleged that the taxpayer had committed fraud (or was involved in tax evasion) via the unnamed operators of the ETK Fund. Accordingly, the Commissioner amended the taxpayer’s income tax return to include the $53,000 as assessable income for the 2007 year.
The AAT held that the superannuation money was an eligible termination payment (ETP) properly included in the taxpayer’s assessable income under former s 26AFB(2) of the ITAA 1936.
The AAT also upheld the Commissioner’s decision not to exercise his discretion under former s 26AFB(4) to exclude the amount from the taxpayer’s assessable income to the extent that it would be “unreasonable”. While the AAT accepted that the taxpayer was in financial difficulties, it was not satisfied that he made appropriate inquiries about withdrawing his superannuation. The AAT also found that there was insufficient substantiation that the funds were used to pay for the medical treatment of his disabled son.
In addition, the AAT found that there was “evasion” for the purposes of s 170(1) of the ITAA 1936 to permit the Commissioner to amend an assessment at any time.
While the AAT agreed that the Commissioner had correctly applied an administrative penalty to the tax shortfall, the AAT held that the penalty should nevertheless be remitted in full.
(AAT Case [2012] AATA 716, Re Yrorita and FCT, AAT, Ref No: 2011/1826, Ettinger SM, 18 October 2012.)
[LTN 203, 19/10]