The Federal Court has affirmed an excess superannuation contributions tax assessment issued to an individual after finding there were no "special circumstances" to warrant reallocating excess concessional contributions that had been received late via BPAY.
 
The Court heard that the bookkeeper of the individual's employer had made two payments on 30 June 2009 via BPAY to the individual's superannuation fund, and that those payment were received by the fund on 1 July 2009. The Court also heard that the bookkeeper had mistakenly made an early payment to the individual's superannuation fund on 27 May 2010, which was meant for the following financial year.
 
As a result of these payments, the total amount of funds received by the superannuation fund in the 2009-2010 financial year exceeded the individual's $50,000 concessional contributions cap for the year.
 
The individual argued that there were "special circumstances" and that the Commissioner should reallocate the two late payments to the 2008-2009 financial year, and the 27 May 2010 payment to the 2010-2011 financial year.
 
However, the Court said late BPAY payments did not amount to "special circumstances". Further, simple errors such as making a contribution too early also did not amount to "special circumstances". The Court was also of the view that the individual had been in a position to ensure that the contributions were made in the correct year. 

A taxpayer who has contributed above his or her concessional or non-concessional contributions caps can apply to the Commissioner to exercise his discretion to disregard or reallocate excess contributions for a financial year. However, it should be noted that the discretion is not easy to obtain.

Individuals should consider keeping track of contributions and avoid making last-minute contributions that could be allocated to the next financial year. Individuals with salary-sacrifice arrangements should carefully identify the timing of superannuation payments relating to wages accrued for the June quarter (or June month). Please contact us for further information
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The Federal Court has upheld an excess superannuation contributions tax assessment and affirmed the Commissioner's decision that there were no "special circumstances" under s 292-465 of the Income Tax Assessment Act 1997 (ITAA 1997) to warrant reallocating excess concessional contributions received late via BPAY.

Background

The taxpayer was the managing director of a fluid technology company (and a related foreign company registered in Australia). On 30 June 2009, the bookkeeper for the companies made electronic payments via BPAY to the taxpayer's AMP superannuation account. One of the payments was a salary-sacrifice payment of $30,000 and the other was an employer contribution of $8,499. The two payments were received by AMP on 1 July 2009 and applied to the taxpayer's account. The bookkeeper also mistakenly made another salary-sacrifice payment of $13,970.66 to the taxpayer's AMP account on 27 May 2010, which was actually intended for the 2010-2011 year.
 
In 2011, the Commissioner issued an assessment for excess concessional contributions tax of $16,905.20 in respect of excess concessional contributions of $53,667.42 (above the taxpayer's $50,000 cap) for the year ended 30 June 2010. The taxpayer applied for the Commissioner to exercise his discretion under s 292-465 of the ITAA 1997 to reallocate the two payments received on 1 July 2009 to the 2008-2009 financial year (ie the year for which they were intended to be made). He also requested that the $13,970.66 paid on 27 May 2010 be allocated to the 2010-2011 year (as it had been mistakenly paid too early by the bookkeeper). The Commissioner refused the taxpayer's application on the grounds that his case did not demonstrate "special circumstances" as required by s 292-465.
 
The taxpayer, who was self-represented before the Court, argued that the late payment by his employer, and the mistake by the bookkeeper, constituted "special circumstances".

Decision
 
The Court upheld the Commissioner's decision that there were no "special circumstances" under s 292-465 to exercise the Commissioner's discretion to reallocate the excess concessional contributions to another financial year. The Court ruled that the BPAY transfers initiated on 30 June but not received until 1 July did not amount to a "special circumstance" as they were not "unusual or different [and] outside the ordinary course of events". Likewise, the Court said the error made by the bookkeeper in making the contribution early on 27 May 2010 was not a special circumstance. In this respect, the Court noted the Commissioner's submission that "simple errors" or an "innocent mistake" of this nature do not in themselves constitute special circumstances: Re Tran and FCT [2012] AATA 123. Equally, the Court said the taxpayer was in a position to ensure that contributions were made by the bookkeeper in the correct financial year but he "did not take steps sufficient to ensure that the payments she made were the right amounts at the right times".

While it may seem to be a rather "rigid position to adopt", the Court said there is a limit to any discretionary power that the Commissioner is able to exercise to treat a payment as being made on the date it was "sent" rather than "received".
 
Timing of contributions
 
The Court also held that the concessional contributions transferred by BPAY on 30 June 2009 were not "made" in the 2008-2009 year pursuant to s 292-25(2)(a) of the ITAA 1997 as the amounts were not "received" by the superannuation fund until 1 July 2009 (ie in the 2009-2010 year). Although the term "made" in s 292-25(2)(a) is not defined, the Court considered that the "better argument" is that the contribution was "made" on the date the funds were actually "received". The Court further observed that nothing in the ITAA 1997 permits a taxpayer or a superannuation provider to deem a contribution to have been made on a date other than the date on which it was in fact made. Stipulating by some covering email or communication that a payment is intended for some other date (in this case, the date on which the BPAY entries were made) does not change the reality of the actual date of receipt, the Court said.
 
Nevertheless, the Court said that if the issue was the proper meaning of "contribute" (the verb), it considered that it would be open to argue (and it would probably be the preferable construction of the object and purpose of the statutory provisions) "that one contributes at the point of time when funds are irreversibly dispatched to the correct destination". However, the Court said it is the word "contribution" that repeatedly appears in the statute, and taken in the statutory context, a contribution does not become a contribution at all until the point of time at which it is actually "received".

The taxpayer had also argued that a contribution made by electronic funds transfer (eg BPAY) occurs as soon as the contributor has done everything necessary to effect a payment. However, the Court noted the Commissioner's view in Taxation Ruling TR 2010/1 that BPAY operates through contractual arrangements between the payer's financial institution and the payee's financial institution, and between the payee's financial institution and the payee. Accordingly, the Court upheld the Commissioner's decision not to exercise his discretion to reallocate the excess concessional contributions to another financial year.

Liwszyc v FCT [2014] FCA 112, Federal Court, www.austlii.edu.au/au/cases/cth/FCA/2014/112.html.