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The AAT has dismissed the taxpayer's arguments that special circumstances existed sufficient to justify the exercise by the Commissioner of the discretion conferred upon him by s 292-465(1) of ITAA 1997 to treat a concessional superannuation contribution as having been made in the income year prior to the year in which it was actually made.

On 27 June 2008, the taxpayer's employer paid an amount of $182,302.36 in respect of the taxpayer and another employee to a clearing account opened in the name of the employer by a third party superannuation provider. However, no funds were allocated to the taxpayer's account in the superannuation fund until 23 July 2008, when an employee of the employer uploaded a "contribution file" with the superannuation provider. The failure to upload the contribution file earlier was explained as being due to personal circumstances of the employee concerned.

Thus, it was only on 23 July 2008 that $91,141.65 was identified as a contribution made by the employer to the superannuation fund on behalf of the taxpayer. The AAT held that it had therefore been made in the year ended 30 June 2009 and not the year ended 30 June 2008.

In the year ended 30 June 2009, the taxpayer made a concessional contribution of $90,000 to another superannuation fund and a non-concessional contribution of $450,000 to the same fund. In the same year, the taxpayer's employer also made further concessional contributions of $8,172.56.

For the year ended 30 June 2009, the taxpayer's concessional contributions cap was $100,000, with the result that the taxpayer exceeded her concessional contributions cap by $89,314.21. She also exceeded her non-concessional contributions cap by the same amount, as the contribution of $450,000 equalled her non-concessional contributions cap, and any excess concessional contributions were added to the non-concessional contributions to determine whether the non-concessional contributions cap had been exceeded.

The failure to exercise the discretion resulted in the taxpayer being liable for excess contributions tax of $69,665.07 or 78% of the excess contribution of $89,314.21. In addition, tax of 15% was paid by the respective superannuation funds on the two concessional contributions of $91,141.65 and $90,000.

The taxpayer argued that special circumstances existed such that the employer's contribution of $91,141.65 should be treated as having been made in the income year ended 30 June 2008. The taxpayer based this argument on three bases, namely, the employee's personal circumstances which resulted in the delay in uploading the contribution file, the penal rate of tax of 78%, and the fact that the employer was not aware that the contribution had been paid, in the first instance, to a clearing account and not to the superannuation fund. However, the AAT held that none of these three bases constituted special circumstances.

In relation to the penal rate of 78%, the AAT said at para 61:

"The very essence of the legislation is that if there is such a coincidence of events the intention is to tax at 78%. Whilst this is clearly a rate of tax that is itself unacceptably high by almost every standard (with the possible exception of recently announced French taxes), it is the prescribed outcome declared in unambiguous terms by the Federal Parliament. It is not, in my view, correct to suggest that special circumstances exist either because those three conditions have all been found to arise in the one year or because the tax rate is unacceptably high. Special circumstances need to be found beyond the actual rate imposed and beyond the specific conditions which give rise to that rate being imposed."

Vershuer and FCT [2013] AATA 12 (AAT, Professor Deutsch DP, 14 January 2013)


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