TRANSITION TO THE ADMINISTRATIVE REVIEW TRIBUNAL[1]

1. On 14 October 2024, the Administrative Appeals Tribunal (AAT) became the Administrative Review Tribunal. Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), proceedings in the AAT that were not finalised before 14 October 2024 are to be continued and finalised by the Tribunal. Anything done in relation to the proceeding before 14 October 2024 is taken to have been done by the Tribunal.

1. On 18 June 2023, the Applicant opened a new accumulation superannuation account with Australian Super and commenced making personal contributions totalling $329,500.00 by 22 June 2023.
2. On 19 November 2023, the Commissioner issued the Applicant an ENCC Determination upon becoming aware that the Applicant had exceeded his non-concessional contribution cap (cap) for the income year ending 30 June 2023. The cap is the maximum amount of after-tax contributions a person can make to their super each year without contributions being subject to extra tax. The Applicant's cap was zero because his superannuation balance was $2,632,780.05, which was greater than the general transfer balance cap ($1.7 million for 2021-2022) on 30 June 2022.
3. The ENCC Determination provided the Applicant with the option to:

(a) release the excess from his superannuation fund with the associated earnings amount of $46,264.00 being included in his assessable income for the year ending 30 June 2023 and then be liable to pay $11,374.24 tax on that amount; or > > (b) release no amount in relation to the excess and be assessed for ENCC tax at a tax rate of 47% ($154,865.00) which his superannuation fund would be required to pay.

4. In December 2023, after being advised that he had exceeded his cap, the Applicant closed his account, and on 11 December 2023 Australian Super returned $336,125.80 to him, which was made up of the $329,500.00 in contributions and $6,625.80 in earnings.
5. On 28 November 2023, the Applicant lodged his first objection to the ENCC Determination and the associated earnings calculation. In that objection he expressed the hope that the action of closing the account would be acceptable to the Australian Taxation Office (ATO).[2]
6. On 8 April 2024, the Respondent contacted the Applicant to ask him to clarify his contentions in the first objection.[3] The Applicant clarified that he was objecting to the associated earnings calculation on the basis that it did not represent his actual earnings.[4] He was told by the ATO that the calculation of associated earnings 'comes from the law' and the Commissioner has no discretion in relation to the calculation method.[5] The Applicant later withdrew his first objection.[6]
7. On 16 April 2024, the Applicant lodged a second objection to the ENCC Determination. In that objection, he stated he objected to the way the associated earnings amount of $46,264.00 was calculated because it was not based on actual earnings which were $6625.80.[7] He stated that the use of the associated earnings calculation is based on expediency and not factual data, and seems like a 'punishment and unconscionable' when actual earnings are available.[8] He further stated that he is willing to pay the tax on actual earnings.[9]
8. On 20 June 2024, the Respondent disallowed the Applicant's objection to the ENCC Determination because the associated earnings amount was correctly calculated under s 97-30 of Sch 1 to the TAA**,** and under that Act there is no discretion to adjust that amount.[10]
9. On 22 August 2024, the Applicant was advised by the Respondent that due to his failure to make an election, a request had been made to release $368.824.40 from his superannuation fund and, further, that an amount was being withheld to pay outstanding tax.[11]

THE MAKING OF ENCC DETERMINATIONS AND CALCULATION OF ASSOCIATED EARNINGS

1. Section 97-25 of Sch 1 to the TAA relevantly provides that if non-concessional contributions for a financial year exceed an individual's cap for the contribution year, the Commissioner must make a written determination stating:

(c) the amount of the excess contribution; > > (d) the amount of associated earnings for those contributions worked out under s 97-30; and > > (e) the amount to be released from the superannuation fund. The total release amount being the amount of excess contribution plus 85 per cent of an associated earnings amount.

2. Associated earnings is the approximated amount earned from excess contributions while held in the superannuation fund, calculated using the formula under s 97-30 of Sch 1 of the TAA:

Proxy rate x (excess + sum of earlier daily proxy amounts)

3. Section 97-30 of Sch 1 to the TAA provides that the period for which the associated earnings are calculated commences on 1 July of the financial year the contribution was made and ends on the day the Commissioner makes the first determination of excess contribution.
4. The associated earnings amount is calculated using an average of the general interest charge (GIC), which is calculated under s 8AAD(1) of the TAA, for each of the quarters of the financial year in which the excess contributions were made and compounds on a daily basis.[12]
5. The Explanatory Memorandum to the Tax and Superannuation Laws Amendment Bill (2014 Measures No. 7) 2014 (Cth) (Explanatory Memorandum) to the TAA explains the reasons for the associated earnings calculation. It states that individuals will have benefited from accruing earnings while the excess contributions were invested in their superannuation fund. It further explains that an approximation is used for the calculation of associated earnings to avoid the burden and complexity that would arise for both individuals and superannuation providers if calculations of the actual earnings amount on excess contributions for the actual period were required to be calculated.[13] It further explains that calculations may be lower or higher than the actual earnings. However, as the GIC is on average higher than average superannuation fund returns, there is 'a small but appropriate disincentive for individuals to exceed their non-concessional contributions cap'.[14]
6. Advice produced by the ATO explains in relatively simple terms how this formula is applied.[15]

We calculate associated earnings using 3 elements:

• your excess non-concessional contributions (ENCC)
• the associated earnings rate - the average of the general interest charge rates for the 4 quarters of the financial year in which you made ENCC. This proxy rate may be more or less than the earnings rate applied by your super fund
• the associated earnings period - from 1 July of the financial year in which you made the ENCCs through to the date of the original ENCC determination letter.

We apply the associated earnings rate to the ENCC amount on a daily compounding basis for the length of the associated earnings period.

1. A previous Tribunal decision has found that the Commissioner is obliged to make an ENCC Determination when an individual has exceeded their cap and there is no ability to remit an amount that is calculated as associated earnings using the formula in the TAA.[16]
2. Under s 14ZZK of the TAA, the Applicant bears the burden of proving that a Determination should not have been made or should have been made differently.

1. Section 101 of the Administrative Review Tribunal Act 2024 (Cth) (ART Act) provides that the Tribunal may, at any time, dismiss an application if satisfied in s 101(1)(b) that the application has no reasonable prospects of success. The Revised Explanatory Memorandum to the Administrative Review Tribunal Bill 2024 states that s 101 is equivalent to s 42B of the Administrative Appeals Tribunal Act 1975 (AAT Act) although it extends the provision to allow the Tribunal to make an order of its own initiative.[17]
2. Previous Court and Tribunal decisions that have considered section 42B of the AAT Act have emphasised that the dismissal power should be exercised cautiously and carefully.[18] Other principles which can be gleaned from those decisions relevant to this case include:

(a) Whether it is an appropriate case to review: proceedings with no reasonable prospects of success should be dismissed as it is inappropriate to use the time and resources of the Tribunal, conversely requests to dismiss should only be made in an appropriate case because considering a request made in inappropriate circumstances interferes with the Tribunal's performance of its powers.[19] > > (b) Whether there is a real issue of fact or law: is the Applicant's evidence of sufficient quality and weight to succeed in their application such that a real issue of fact or law is capable of being determined in their favour?[20] However, if there are no disputes as to the facts, it is open to the Tribunal to dismiss an application which only concerns a question of law. In such a case, if the success of an application depends upon propositions of law which are not open to statutory interpretation from the relevant provisions, then it is 'open to the Tribunal to be satisfied that the application has no reasonable prospects of success'.[21] > > (c) Will it serve a useful purpose: if proceeding with the application can achieve a useful purpose for the Applicant it should proceed. Conversely, if it can't achieve a useful purpose, the Tribunal's time and resources should not be expended.[22] > > (d) The genuineness of the Applicant's belief: the genuineness of the Applicant's belief might be a relevant factor - and possibly a decisive one - if the subject of the mistake is factual rather than of law.[23] > > (e) An assessment of the Applicant's case: a full-scale consideration of the merits is not required in order to be satisfied that the application has 'no reasonable prospects of success'. However, an assessment of the merits of the Applicant's case is necessary in order to ascertain if there are valid contentions or lines of argument.[24] The threshold of satisfaction is not reached if the Tribunal apprehends that it is unlikely that an applicant will succeed on a question of law or fact (or both).[25] For the Tribunal to be satisfied of 'no reasonable prospects of success' of a given application, there must exist 'a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to [hearing] in the ordinary way'.[26]

3. In addition to the principles above, the power in s 101(1)(b) of the ART Act is a discretionary power which supports the Tribunal's procedural processes, including the right of each party to present their case under s 55 by making submissions and adducing evidence. In exercising the discretion it is also necessary to consider the Tribunal's objectives in s 9 of the ART Act.[27]

1. At the hearing, the Respondent submitted that in relation to the Applicant's Application there is no real issue of fact or law capable of being determined in the Applicant's favour. The Respondent submitted that upon the Commissioner becoming aware that the Applicant had exceeded his cap for the income year ending 30 June 2023, consistent with s 97-25 of Sch 1 to the TAA, they were obliged to issue an ENCC Determination to the taxpayer under s 97-30 of Sch 1 to the TAA with no discretion to make any other decision. Further, the Respondent submitted that review of the decision by the Tribunal would not serve any utility or useful outcome because no error has been identified in the making of the ENCC Determination by the Commissioner.
2. The Respondent submitted that as the Explanatory Memorandum explains the associated earnings amount is not the same as the actual earnings amount because the provisions also operate as a deterrent to taxpayers exceeding their cap.[28]
3. The Respondent also submitted that it is not the Applicant's contention that the Commissioner has acted not according to the law. The Applicant's contention is that the law is unfair rather than the law has been incorrectly applied in the circumstances. Further, the Respondent submitted that the TAA does not allow for considerations of fairness to be considered when issuing ENCC Determinations.
4. The Respondent relied on Purcell and Commissioner of Taxation [2020] AATA 4235 (Purcell) to argue that the issuing of an ENCC Determination is not a matter of fairness nor is it a penalty.
5. The Respondent directed the Tribunal to the legal principles expressed in Ford Pty Ltd v Ford Motor Co of Australia Ltd[29] and Dandaven v Harbeth Holdings Pty Ltd[30] to support their position that the Applicant is required to establish that there is a real issue of law capable of being decided in his favour for the Tribunal to conclude that there are reasonable prospects of success.

1. The Applicant's oral submissions did not identify any questions of law. The crux of the Applicant's oral submissions was that there is no 'truth' or 'justice' in the calculation of associated earnings. In relation to 'truth' the Applicant argued at the hearing that his super fund told him that his actual earnings were $6,625.80 and it is this 'truth' which should be contained in his tax return and not the 'fiction' of $46,264.00 that has been calculated under the TAA.
2. He further argued at the hearing that the associated earnings calculation is a punishment or a penalty for depositing into his super fund an amount that is over his cap. That being the case, he considered there was nothing he could do to change the way the law operates.

1. Previous Tribunal decisions have observed that it can be difficult in an interlocutory hearing for dismissal for the Tribunal to assess on the available material the strength or otherwise of the application for review.[31] In this case, the Respondent had provided a statement of facts, issues and contentions. However, the Applicant failed to comply with Directions dated 24 October 2024 regarding providing his statement to the Tribunal. Despite this, I am satisfied that I have the necessary material before me to decide the application according to the principles identified above as explained below.

1. This appears to be an appropriate case. At the hearing, the Respondent acknowledged that applications for dismissal are not taken lightly by the Tribunal or Courts and therefore the decision to make the request to the Tribunal to dismiss the Applicant's Application was likewise not taken lightly. Before making the request for dismissal, the Respondent wrote to the Applicant outlining the lack of reasonable prospects of his application and inviting him to withdraw his application before the Tribunal by a particular date. The Respondent also advised of their intention to make the dismissal request to the Tribunal if it was not withdrawn by that date. The Respondent did not receive a response to their request. At the hearing the Applicant said the request was very unclear to him which is why he did not respond.

1. There is no dispute between the parties as to the facts in this case. As to the law, the issue considered in Purcell by Member Reitano is very similar to the issue in this matter. That is, whether the Respondent was required to make an associated earnings calculation under

s 97-25 of Sch 1 to the TAA and whether that calculation was correctly calculated. The Applicant's contention is that the associated earnings calculation was unfair and constituted a penalty. At the hearing, he acknowledged he was expressing this in layman's terms as he was not a lawyer. 2. In Purcell the Applicant also contended that the associated earnings calculation was unfair and constituted a penalty. In response, Member Reitano found at [18] and [19] that neither section 97-25 or 97-30 of Sch 1 to the TAA are penalties and that the sections require the Commissioner to make an ENCC Determination in accordance with the statutory formula contained in s 97-30 of Sch 1 of the TAA after becoming aware that the cap has been exceeded. Further the Member found at [20] that the Commissioner does not have power under the TAA to remit an amount that is calculated as associated earnings. 3. I agree this is the correct interpretation of ss 97-25 and 97-30 of Sch 1 to the TAA. There are no civil or administrative penalties in the TAA for exceeding the cap in the Applicant's circumstances. This does not mean there are no financial consequences for him. Sections 97-25 and 97-30 of Sch 1 to the TAA were introduced into the TAA as part of a suite of amendments aimed at making the taxation treatment of individuals with excess non-concessional contributions fairer by providing the option to withdraw superannuation contributions that exceed the cap and any associated earnings which are then taxed at the individual's marginal tax rate.[32] Prior to the changes tax was applied to the excess contribution at the top marginal tax rate regardless of the individual's marginal tax rate.[33] As acknowledged in the Explanatory Memorandum, this treatment was regarded as 'punitive' as it could be seen as 'double-taxation' which was why it was changed.[34] The policy rationale for the change was to ensure that inadvertent breaches of the cap did not incur a 'disproportionate penalty'.[35] It is also acknowledged in the Explanatory Memorandum that because the GIC is on average higher than average superannuation fund returns, the associated earnings calculation can be higher than average earnings. For this reason, the Minister has the ability under s 97-30(2) of Sch 1 to the TAA to specify an alternative proxy rate that is lower than the default rate where superannuation funds on average have made significant losses such as occurred during the global financial crisis.[36]

1. Consistent with finding that there is no real issue of fact or law it is difficult to see how proceeding with the Applicant's Application could achieve a useful purpose for the Applicant. At the hearing, the Applicant expressed his frustrations with the law's 'fancy' calculations and how this had not been explained to him in clear terms from the outset or in the objection decision.
2. I have said above that the ATO's advice explains in relatively simple terms how the associated earnings calculation is made. It also explains the lack of discretion to change the associated earnings rate or period. However, it does not explain why the GIC is used as a proxy rate of associated earnings instead of the superannuation fund's actual investment earnings in relation to the excess contribution amount. As outlined above, the two main reasons for this are to reduce complexity and incentives for deliberate breaching of the cap to obtain a tax benefit. The guidance could benefit from the inclusion of the policy rationale.
3. It follows, because proceeding to a hearing cannot achieve a useful purpose for the Applicant the Tribunal's time and resources should not be expended.

Is the genuineness of the applicant's belief relevant?

1. It has been found in Court and Tribunal decisions that an Applicant who genuinely holds a belief as to a state of fact is entitled to 'a day in court' to test that belief.[37] It has also been found that where significant factual matters are agreed between the parties, and the only issues in dispute relate to the legal consequences which follow, the genuineness of the Applicant's belief as to the legitimacy of their claim must 'bow before a finding that, as a matter of law, no legitimate purpose can be achieved by continuing with the proceedings'.[38]
2. The Applicant's genuine belief is that the associated earnings calculation is unfair and is in effect a penalty. His objection is to the policy behind the law itself and the financial consequences that flow from the application of the law to his situation.

1. The assessment of 'no reasonable prospects of success' as expressed in Re Kristoffersen and Secretary, Department of Social Services[39] (Kristoffersen) does not require a determination that the matter is hopeless or bound to fail.[40]
2. The threshold set in Kristoffersen for the Tribunal to be satisfied of 'no real prospect' in this matter has been achieved if not exceeded. There exists a high degree of certainty about the ultimate outcome of the proceeding if it did go to hearing.[41] By the end of the hearing, the Applicant himself conceded the legal consequences of breaching the cap although he maintained his view that those consequences were not fair or just. In his circumstances, the Commissioner was required to issue him with a written determination which contained the associated earnings calculation under s 97-25 of Sch 1 to the TAA as part of the Determination. It is a case where the law is clear and the facts are not in dispute. There is no 'room for doubt' based on the facts as asserted by the Applicant on the law that the Applicant would be successful in varying or setting aside the decision if the matter proceeded to hearing.[42]

As already stated, the power to dismiss an application under s 101 of the ART Act is discretionary and the threshold is one of satisfaction. I am satisfied that after assessing the merits of the Applicant's case that it has 'no reasonable prospects of success' for the purposes of s 101 of the ART Act.

The power in s 101 of the ART Act supports the Tribunal's procedural processes including the right of each party to present their case in s 55 of the ART Act which includes making submissions and adducing evidence. There was a risk at the hearing that the Respondent's submissions had the potential to overwhelm the Applicant. However, the Applicant was able to equip himself well and clearly articulated his view that the law operated in a way to 'penalise' him and he did not consider this to be fair or just. He conceded however that it was the way the law worked.

The Applicant was provided with the opportunity to make a written submission on the issue of dismissal following the interlocutory hearing. The Applicant declined the offer stating that he had said all he needed to, and he didn't feel the need to provide anything further. He also said that if he did, he would just be repeating what he has already said.

Therefore, I do not consider that dismissing the Applicant's Application would be unfair. I am satisfied that the Applicant has had the opportunity to put his case forward and has made it clear he has no further evidence or submission to put before the Tribunal. In such circumstances, I am satisfied it would be a waste of time and resources for all parties including the Tribunal if the matter was to proceed any further. It would serve no useful purpose and would not advance the Tribunal's statutory objectives.

[1] This paragraph has been approved for use in all Tribunal decisions.

[3] Statement of facts issues and contentions (SFIC) at [10].

[12] Explanatory Memorandum, Tax and Superannuation Laws Amendment Bill 2014 (Cth).

[15] ATO, Non-concessional contributions cap, Non-concessional contributions cap |, accessed 25 February 2025.

[16] Purcell and Commissioner of Taxation [2020] AATA 4235.

[17] Revised Explanatory Memorandum, Administrative Review Tribunal Bill 2004 (Cth).

[18] Re Marnotta Pty Ltd and Secretary, Department of Health and Ageing [2004] AATA 326. See also Filsell and Comcare [2009] AATA 90.

[19] Re Oliver and Comcare [2018] AATA 1964.

[20] Ibid. See also Ford Pty Ltd v Ford Motor Co of Australia Ltd [2008] FCAFC 60.

[21] Re Paraponiaris and Secretary, Department of Employment [2015] AATA 985.

[22] Re Williams and Australian Electoral Commission [1995] AATA 160; (1995) 38 ALD 366.

[24] Re Kristoffersen and Secretary, Department of Social Services [2018] AATA 524.

[26] Paraponiaris and Secretary, Department of Employment [2015] AATA 895 citing Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552.

[27] Adams and Comcare (Practice and procedure) [2025] ARTA 51.

[29] [2008] FCAFC 60.

[30] [2008] FCA 955.

[31] Allied BioServices and Minister for Health and Aged Care (Practice and Procedure) [2024] ARTA 50 at [53].

[32] Parliament of Australia, Explanatory Memorandum, Tax and Superannuation Laws Amendment Bill 2014, p 12.

[33] Parliament of Australia, Explanatory Memorandum, Tax and Superannuation Laws Amendment Bill 2014, p 19.

[35]Australian Government, Treasury, Superannuation Excess Non Concessional Contributions Tax Summary of Consultation Process, Consultation Summary - Superannuation Excess Non-Concessional Contributions Tax, accessed 10 March 2025.

[37] Re Hatchett and Bowater Tutt Industries Pty Ltd (No 3) [1991] FCA 188; 28 FCR 324; (1991) 39 IR 31.

[38] Re Williams v Australian Electoral Commission and the Greens [1995] AATA 160; (1995) 21 AAR 467.

[39] [2018] AATA 524.

[42] Merante and Secretary, Department of Employment [2017] AATA 1178.