Commissioner of Taxation v Dowling

The statutory scheme 7 Before examining the elements of the Tribunal's decision and the Commissioner's grounds of appeal, I will identify the elements of the statutory scheme. 8 Part 3-30 of the 97 Act addresses the topic of superannuation. 9 Part 3-30 contains a number of provisions that give rise to "tax concessions" which are "intended to encourage Australians to save in order to make provision for their retirement, recognising that superannuation investments, and the income from them, are quarantined for retirement" (s 280-1(2)). Division 280 of Pt 3-30 sets out a "Guide" to Part 3-30 which seeks to explain, in a contextual and introductory way, the operation of the various Divisions within that Part. Although it will be necessary to turn to the precise language of Div 292 dealing with "excess contributions tax", including s 292-465 within that Division which addresses the topic of the Commissioner's discretion to disregard contributions to a complying superannuation plan (or scheme) by or on behalf of a person in relation to a relevant financial year, it is not necessary to examine the detail of all the particular provisions establishing the central elements of the scheme. Nevertheless, contextually, the essential elements of the scheme need to be broadly identified before examining Div 292. 10 There are three phases in the "tax treatment" of superannuation: a contributions phase; an investment phase; and a benefits phase (s 280-5(1)). 11 As to the contributions phase, employers and individuals can deduct from their assessable income contributions they make (for employees in the first case or personally in the second) to a "complying superannuation plan" (or scheme) up to a certain threshold amount (s 280-10). However, there is a limit to, or cap upon, contributions that can be made for or on behalf of an individual in a financial year to a complying superannuation plan that "receive favourable tax treatment". This limit upon contributions takes the form of a tax on "excessive contributions" and "neutralises the favourable tax treatment" otherwise arising under Part 3-30 from the excessive (ie amounts beyond the statutory cap) contributions (s 280-15(1)). 12 Subject to exceptions not presently relevant, contributions to a complying superannuation plan are either "concessional contributions" or "non-concessional contributions". 13 I will return to those two terms shortly. 14 As to the benefits phase, the taxation of superannuation benefits depends primarily on the age of the (plan or scheme) member (s 280-30(1)) such that if the member is aged 60 or over, superannuation benefits he or she derives (whether lump sums or income streams or elements of both) are "tax free" if the benefits have already been subject to tax in the fund (that is, a taxed element): s 280-30(2). Where the benefit contains an amount that has not been subject to tax in the fund (an untaxed element), that element is subject to tax for those aged 60 or over, although taxed at "concessional rates" (s 280-30(3)). Additional tax concessions may apply when superannuation benefits are paid to a member's beneficiaries after a member's death (s 280-30(6)). 15 A "superannuation benefit" is a payment falling within one of the categories described in the schedule at s 307-5 of the 97 Act. 16 Personal contributions to a complying superannuation plan which are deductible from the individual's assessable income are "concessional contributions". So too are deductible contributions by employers. Non-deductible contributions are "non-concessional contributions". Concessional contributions received by a complying superannuation fund, benefit from "concessional tax treatment" when paid to the fund. Those contributions are taxed at 15% in the fund. However, as already mentioned, the amount of concessional contributions that can benefit from concessional tax treatment is subject to a cap or limit, and a person who makes concessional contributions in excess of the amount of the annual cap is liable to pay contributions tax on the footing that the amount in excess of the cap so contributed is subject to tax at the rate of 31.5% which has the effect that the amount in excess of the cap is subject to a total tax of 46.5% (ie 15% in the fund and 31.5% excess contributions tax: see s 292-15 and Subdivision 292-E). 17 Non-concessional contributions to a complying superannuation plan are generally contributions made by or on behalf of an individual in a financial year that are not included in the assessable income of a complying superannuation fund, subject to certain qualifications. An individual's non-concessional contributions for a financial year will include, for example, personal contributions for which an income tax deduction is not claimed and contributions made for the person by the person's spouse. 18 Like concessional contributions, there is a cap or limit on the amount of non-concessional contributions that can be made for or on behalf of an individual in each financial year, and an individual taxpayer is liable to pay excess contributions tax of 46.5% (the applicable rate at the relevant time) on non-concessional contributions which exceed the non-concessional contributions cap for the relevant financial year (see s 292-80; ss 4 and 5 of the SENCCT Act; and Subdivision 292-E).

Division 292 19 Division 292 of the 97 Act addresses the features of the scheme dealing with excess contributions tax. 20 Division 292 limits the "superannuation contributions" that receive "concessionally taxed treatment", made for a person in a financial year (s 292-1). The object of Div 292 is "to ensure that the amount of concessionally taxed superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of the person's life" [emphasis added] (s 292-5). 21 The concessional contributions cap for the 2008/2009 financial year was $50,000.00. For the 2010/2011 financial year the cap was $25,000.00 (s 292-20(2)). Those caps are relevant because the non-concessional contributions cap in each financial year is a multiple of the concessional contributions cap. For the 2008/2009 financial year the non-concessional contributions cap was three times the concessional cap of $50,000.00, that is, $150,000.00. For the 2010/2011 financial year, the non-concessional contributions cap was six times the concessional cap for that financial year of $25,000.00, that is, $150,000.00. 22 These non-concessional contributions caps are determined by s 292-85(2) of the 97 Act. However, s 292-85(3) displaces the application of s 292-85(2) in favour of s 292-85(4) if the individual's non-concessional contribution for the first year exceeded the amount set out at s 292-85(2) for that year; and the individual is under 65 at any time in the first year; and a previous operation of s 292-85(4) did not determine the individual's non-concessional contributions cap for the first year. 23 Each of those elements are satisfied in respect of Mrs Dowling's contributions and thus s 292-85(4) applies to determine the non-concessional contributions cap that applied to her in the relevant years rather than s 292-85(2). In its application, s 292-85(4) requires Mrs Dowling to "work out" her non-concessional contributions cap for the first year and for the following two years according to these steps. 24 First, the cap for the first financial year is three times the amount mentioned in s 292-85(2) for the first year. Since the first year is the 2008/2009 financial year and the amount for that year calculated using s 292-85(2) is $150,000.00, the first year cap under s 292-85(4)(a) is $450,000.00. 25 Second, Mrs Dowling's cap for the second year is determined by asking whether her non-concessional contributions for the first year fell short of the $450,000.00 first year cap, and if so, the second year cap is the shortfall amount. In Mrs Dowling's case, a non-concessional contribution of $293,858.00 was made on 10 February 2009 (in the 2008/2009 financial year - the first year). The second year cap by operation of s 292-85(4)(b) became $156,142.00 (ie $450,000 - $293,858.00). 26 Third, Mrs Dowling's cap for the third year is determined by asking whether her non-concessional contributions for the second year fell short of the second year cap of $156,142.00 and, if so, the third year cap is the shortfall amount. In the second year (ie the 2009/2010 financial year), Mrs Dowling made no non-concessional contributions and thus the third year cap was also $156,142.00. 27 On 30 August 2010, in the 2010/2011 financial year (ie the third year), Mrs Dowling made a non-concessional contribution of $200,000.00 which exceeded the third year cap for non-concessional contributions of $156,142.00 (calculated by applying s 292-85(4)(c)) by an amount of $43,858.00. 28 Section 292-85(1) provides that an individual has excess non-concessional contributions for a financial year if "the amount of your non-concessional contributions for the year exceeds your non-concessional contributions cap for the year". Section 292-80 creates a liability to pay excess non-concessional contributions tax imposed by the SENCCT Act. Section 4 of that Act imposes the tax in respect of that liability, and s 5 of that Act provides for the amount of the tax at a rate of 46.5% (at the relevant date) of the excess for a financial year. At the rate of 46.5% of the excess of $43,858.00, the excess contributions tax is $20,393.95. 29 Subdivision 292-E requires the Commissioner to make an assessment called an "excess contributions tax assessment" of the amount (if any) of the excess non-concessional contributions tax which a person is liable to pay in relation to the relevant financial year (s 292-230(2)). Objections to the assessment are provided for by s 292-245 in the manner set out in Part IVC of the Taxation Administration Act 1953 (Cth). Sections 292-385 and 292-390 provide for the date for payment of the assessed tax and the application of the general interest charge. 30 However, s 292-465(1) provides that if the taxpayer makes an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of Div 292, all or part of the taxpayer's non-concessional contributions "for a financial year" [bold emphasis added] is to be "disregarded, or allocated instead for the purposes of another financial year" specified in the Commissioner's determination (s 292-465(1)(b)). 31 Subsection (2) provides for the manner and form of making the application. Subsection (2) also provides that the application can only be made after all of the contributions sought to be disregarded or reallocated have been made, and the application is made to the Commissioner within particular time periods of the taxpayer receiving "an excess contributions tax assessment for the financial year" [bold emphasis added]. 32 Section 292-465(3), however, constrains the exercise of the discretion conferred upon the Commissioner under s 292-465(1) in this way: The Commissioner may make the determination only if he or she considers that: (a) there are special circumstances; and (b) making the determination is consistent with the object of this Division. [bold emphasis added] 33 Once the Commissioner so considers, but only once he or she so considers, the discretion conferred under s 292-465(1) is enlivened. 34 In then electing to exercise the discretion to make a written declaration under subsection (1), the Commissioner "may have regard to the matters in subsections (5) and (6) and any other relevant matters" [emphasis added] (s 292-465(4)). 35 Subsections (5) and (6) are in these terms: (5) The Commissioner may have regard to whether a contribution made in the relevant financial year would more appropriately be allocated towards another financial year instead. (6) The Commissioner may have regard to whether it was reasonably foreseeable, when a relevant contribution was made, that you would have excess concessional contributions or excess non-concessional contributions for the relevant financial year, and in particular: (a) if the relevant contribution is made in respect of you by another person - the terms of any agreement or arrangement between you and that person as to the amount and timing of the contribution; and (b) the extent to which you had control over the making of the contribution. [emphasis added] 36 It is important to remember (by reason of the conjunction of subsection (1)(b) and subsection (2)) that the application to the Commissioner contemplated by s 292-465(1)(b) is an application for a determination that all or part of the individual's non-concessional contributions for a financial year the subject of the excess contributions tax assessment for that year be disregarded or allocated to (or, to use the language of subsection 1(b) "for the purposes of") another financial year specified in the Commissioner's written determination should the discretion be exercised in favour of the applicant. Section 292-465(1)(b) does not contemplate an application by an individual for a written determination that non-concessional contributions made in a financial year other than the financial year in which excess contributions have given rise to an excess contributions assessment (for example, an earlier year where contributions did not exceed the applicable cap for that year), be disregarded or allocated for the purposes of another financial year. 37 That is not to say that circumstances relating to non-concessional contributions made by the individual in the first and second years (years other than the financial year giving rise to the assessment) are not to be taken into account in considering the circumstances relevant to the making of contributions in the financial year the subject of the excess contributions assessment. However, the circumstances relating to the contributions made in the first and second years must have some relevant relationship with the circumstances considered by the Commissioner in relation to the contributions made in the financial year giving rise to the assessment, about which the individual seeks to secure a determination that all or part of the contributions in that year be disregarded or reallocated to another financial year. 38 The statutory question, so far as it relates to s 292-465(3), is whether the Commissioner considers that there are special circumstances in relation to the application to disregard or reallocate all or part of the individual's non-concessional contributions for the financial year giving rise to the excess contributions tax assessment. As to the exercise of the discretion on review, s 43(1) of the AAT Act provides that the Tribunal may exercise all the powers and discretions that are conferred by any relevant enactment on the person who made the decision. 39 It is now necessary to consider the Tribunal's findings of fact. 40 The Tribunal reached these findings. 41 On 27 November 2008, Mr and Mrs Dowling spoke with a Centrelink Finance Officer to obtain financial advice about their assets and income. Prior to February 2009, Mrs Dowling maintained a "Unisuper" superannuation account and Mr Dowling maintained a "Sunsuper" superannuation account. On 3 February 2009, Mr and Mrs Dowling met with a Sunsuper representative, Mr Hamilton, of DGZ Financial Planning, to consider whether Mr Dowling could obtain an age pension upon turning 65 years of age. Mr and Mrs Dowling were advised that they could legitimately deploy a strategy of causing Mr Dowling to withdraw all of his superannuation from the Sunsuper account and then re-contribute an amount into a new superannuation account to be established in the name of Mrs Pamela Dowling (para 6). 42 On 6 February 2009, Mr Dowling gave effect to the strategy by withdrawing $293,895.75 from his Sunsuper account, tax free, as he was then over 60 years of age (para 6). 43 On 10 February 2009, an amount of $293,858.00 was paid as a contribution into a Sunsuper superannuation account in the name of Mrs Dowling (para 6). 44 In the 2010/2011 financial year, Mrs Dowling read reports in the media that superannuation benefits either would not be taxed at all, or would be minimally taxed (concessionally taxed), when paid to the beneficiaries of Mrs Dowling's estate upon her death. In order to secure this favourable tax treatment in relation to a superannuation benefit paid to the beneficiaries of her estate, Mrs Dowling formed the view that she was required to withdraw an amount from her superannuation account and re-contribute it as a personal non-concessional contribution. On 30 August 2010, Mrs Dowling implemented her strategy by withdrawing $240,933.39 from her superannuation account (fund) and made a $200,000.00 contribution to her Unisuper account. She retained the balance monies of $40,933.39. The contribution of $200,000.00 was a non-concessional contribution for the 2010/2011 financial year. In conceiving and implementing this strategy, Mrs Dowling did not seek professional advice from a tax lawyer or an accountant (para 6). 45 At para 4, the Tribunal describes the question for determination before it as whether "a discretion [should] be exercised to disregard the excess contribution or to allocate the excess to another financial year". At para 36, the Tribunal observes that in answering this question, Mrs Dowling had made "two distinct transactions" where "special circumstances" must be considered in relation to the "excess contribution tax assessed" [emphasis added]. 46 Transaction 1 is the transfer of Mr Dowling's superannuation to Mrs Dowling by the 10 February 2009 contribution of $293,858.00 and Transaction 2 is Mrs Dowling's personal contribution on 30 August 2010 of $200,000.00. 47 At para 37, the Tribunal finds that Mr and Mrs Dowling are witnesses of truth. 48 Also at para 37, the Tribunal finds that there are "special circumstances" in relation to Transaction 1. 49 In construing the meaning of "special circumstances" the Tribunal recognised, consistent with Groth v Department of Social Security (1995) 40 ALD 541 at 545, per Kiefel J that there is no requirement for any "judicial gloss" on the term and that having regard to Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228 per Bowen CJ, Fisher and Lockhart JJ, special circumstances subsist "if the circumstances are such that it is unreasonable, unjust or inappropriate" by which the Tribunal seems to mean that special circumstances subsist, in part at least, if it is unreasonable, unjust or inappropriate not to disregard or reallocate to another financial year some or all of the 2008/2009 financial year contribution. The Tribunal also accepts at para 26 that special circumstances suggest something which distinguishes events from the "usual or ordinary case". The Tribunal also observes at para 37 that the assessment of special circumstances must be made against the background of the purpose of the legislation, and the circumstances of a particular case will give rise to an unjust or unreasonable result only if the provisions of the legislation produce that result. 50 At para 38, the Tribunal finds that there were special circumstances concerning the 2008/2009 financial year contribution by Mr Dowling to Mrs Dowling's superannuation account, for the following "amalgam" of reasons. 51 First, Mr and Mrs Dowling had chosen to maintain separate superannuation accounts because they wanted to benefit their respective children from former marriages. However, Mr Dowling, with Mrs Dowling's concurrence, made a gift of his superannuation to Mrs Dowling by making a gifted contribution to her superannuation account. This step was taken on advice from Centrelink and Sunsuper. The Tribunal finds that the "ultimate purpose" of making the contribution was to preserve Mr Dowling's entitlement to an age pension which would fall in when he turned 65, about a year after seeking Centrelink's advice (para 38(1)). 52 Second, if Mr Dowling's "practical issue" of seeking to preserve an entitlement to the age pension had not arisen, then the 2008/2009 financial year contribution would not have been made and, in effect (although it is not put this way by the Tribunal), the 2010/2011 financial year contribution of $200,000.00 would have been the "first year" for the purposes of s 292-85(4) with a cap in that year of $450,000.00 (para 38(1)). 53 Third, Mrs Dowling, "therefore", according to the Tribunal, had been "affected consequentially by the re-arrangement of her husband's affairs, rather than to advance her own position primarily" (para 38(1)). 54 The Tribunal accepted that Mrs Dowling had sought and obtained financial advice from two independent financial advisers about the 2008/2009 contribution. The Tribunal finds at para 38(2) that neither Mrs Dowling nor Mr Dowling was "negligent" in relation to the transaction. The Tribunal finds that they endeavoured to obtain advice to ensure that the step they took was "legally permissible". The Tribunal finds that Mr and Mrs Dowling sought advice from a financial adviser employed by Centrelink and a private sector financial adviser who was acting as the agent of Sunsuper during the period 27 November 2008 to 3 February 2009 leading up to Mr Dowling making the deposit of $293,858.00 on 10 February 2009. The Tribunal makes further particular findings about this matter at para 38(2)(a) to (e). These particular matters also represent findings of fact. 55 At para 38(2)(a), the Tribunal finds that Mrs Dowling sought advice "in good faith". Centrelink provided oral advice. The independent advice from Sunsuper confirmed the Centrelink advice as correct. Mrs Dowling was "diligent" in seeking to verify the accuracy of the initial Centrelink advice. The Tribunal observes that the letter from DGZ Financial Planning shows that the paperwork concerning the withdrawal of Mr Dowling's superannuation is a transactional record only and does not rest upon any "professional knowledge based advice". 56 At para 38(2)(b), the Tribunal finds that Mr and Mrs Dowling sought advice from Centrelink which was "free of charge". The advice from Sunsuper's agent also did not attract a fee. The Tribunal observes that nevertheless, professional advisers giving advice (whether free or otherwise) assume a duty, the measure of which, will vary depending upon the sophistication of the client. The client may not appreciate the scope of the questions that need to be asked in obtaining particular advice with the result that the notion of "a mere ignorance of the law" might bear an important relativity to the circumstances of the client; his or her sophistication; the circumstances in which the advice was given; and, the amount involved. At para 38(2)(b), the Tribunal makes a finding of fact that: Mr and Mrs Dowling did not have any knowledge of excess contributions (or the corresponding tax) and no advice on this issue was offered by the financial adviser from Centrelink (whose role probably did not encompass financial advice of this nature). It is clear that the Sunsuper representative did not give the relevant advice either. 57 At para 38(2)(c), the Tribunal finds that Mr and Mrs Dowling were undertaking a "complex transaction" involving two superannuation funds "neither of which [funds] involved any knowledge of the other" and the Tribunal notes that "there is no suggestion of anything deceitful in this regard". 58 At para 38(2)(d), the Tribunal observes that the Commissioner's original objection decision relied, in part, on the reasoning that Mrs Dowling could, or should, have obtained information from financial advisers about excess contributions to her fund or a liability that might arise as to excess contributions tax. The Tribunal finds at para 38(2)(d) that neither Mrs Dowling nor Mr Dowling had any real concept of excess contributions before or after consulting either Centrelink or the Sunsuper agent and therefore they "would not have been in a position to ask appropriate questions". The Tribunal observes, at this paragraph, that "special circumstances" is a notion concerned "predominantly with the special nature of the circumstances and not with the financial amount of the excess". 59 At para 38(2)(d), the Tribunal also observes that it is of no advantage to the taxpayer in seeking the exercise of the discretion to show that there has been an "innocent mistake", "ignorance of the law" or a failure of a financial planner to "properly inform" the taxpayer. The Tribunal then observes this: However, although ignorance of the law is no defence of itself, I am satisfied that Mrs Dowling and her husband exercised due diligence of reasonable persons in their position and attempted to get advice, but inadvertently, did not receive advice in a professional manner. They did not have a concept of the excess non-concessional contributions tax before or after consulting either of the financial advisers. [emphasis added] 60 At para 38(2)(e), the Tribunal says that the reasons set out in para 38(2)(d) are "strengthened" when considering the applicant's letter of 10 September 2012 to the Commissioner. The Tribunal finds that that letter provides corroboration that Mrs Dowling only received oral advice. The Tribunal says this: [Mrs Dowling's] evidence is supported by Mr Peter Hamilton's letter of 3 September 2012, who confirmed advice he gave on 3 February 2009 in relation to the transfer of Mr Dowling's superannuation which Mr and Mrs Dowling had initially received from Centrelink. 61 Fourth, the transaction on 10 February 2009 is "different from" the "usual case" as there were no actual "new contributions" made and only a re-arrangement of Mr and Mrs Dowling's "existing funds". The Tribunal qualifies that observation by adding: "(although that, of itself, is not sufficient to amount to 'special circumstances')". 62 Fifth, the Tribunal observes that most of the decisions concerning superannuation contributions involve contributions on behalf of employed individuals. The Tribunal observes that "it might be expected employed persons and employees have the opportunity to develop at least some day to day insight from their organisation about the law surrounding Division 292, its purpose and the extent to which it will apply to them". In this context, the Tribunal observes that Mr and Mrs Dowling are retired people who took advice but steps taken in reliance upon that advice led them into "technical error" under the law. The Tribunal then makes this observation: They are not particularly wealthy in terms of Superannuation, the purpose of the law of Superannuation being to encourage individuals to be financially self-sufficient in retirement rather than dependent on social security payments. 63 At para 39, the Tribunal accepts that the important issue in considering special circumstances is not the "misfortunate of the taxpayer" but the "uniqueness of the circumstances". The Tribunal observes, however, that the circumstances need to be taken into account "in their entirety". The Tribunal then finds: I am satisfied that "special circumstances" exist in relation to Transaction 1. In addition, that conclusion is reinforced as the circumstances "give rise relevantly to an unreasonable or unjust result only if the operation of [the statutory provisions here], apart from the ameliorating provisions … produces that result". [italics in original; citation omitted] 64 At para 40, the Tribunal observes that the "penalty" of $20,393.95 would be particularly harsh for Mrs Dowling considering that her own superannuation is an amount of approximately $200,000.00. In concluding its observations on Transaction 1, the Tribunal said this: The intention of the superannuation legislation more broadly is to make individuals more self-reliant and not be reliant on public revenue. The applicant and her husband are retired and while the breach has been a result of insufficient competent advice, the culpability of the applicant is minimised and that was done to comply with the law as it presently exists. This is also relevant to consideration of the exercise of the discretion. 65 The Tribunal then considers whether there were special circumstances in relation to Transaction 2. The Tribunal notes that in Mrs Dowling's review application, it was said that Mrs Dowling and her husband in August 2009 and August 2010 were advised to undertake a withdrawal and re-contribution strategy. The Tribunal finds that there is "no evidence of any weight" to support Mrs Dowling's position in relation to Transaction 2, and that there are no special circumstances subsisting in relation to Transaction 2. 66 Mrs Dowling's re-contribution of $200,000.00 on 30 August 2010 occurred about 18 months after the February 2009 transaction. The Tribunal finds at para 42 that advice was available to Mrs Dowling over some of that period (perhaps more than eight to nine months) but advice was not sought. The Tribunal also observes that the "context" of Transaction 2 may be "very different" to Transaction 1 and, in any event, "there is no evidence to support the contention that the applicant was advised to carry out a "'withdrawal' and 're-contribution' strategy". 67 At para 43, the Tribunal finds that by the time Transaction 2 occurred, Mrs Dowling had the experience of Transaction 1 and "could have obviously spoken to financial advisers over a much lengthier period, which she concedes did not occur". 68 At para 44, the Tribunal concludes that special circumstances are "properly established" for Transaction 1 and that no special circumstances "arise in Transaction 2". I will return to the Tribunal's treatment of these two transactions shortly. 69 The Tribunal's reasoning then proceeds on this basis. 70 Since the Tribunal considered, for the purposes of s 292-465(3)(a), that there were special circumstances concerning the 2008/2009 financial year contribution, it then considered whether making a determination to disregard that contribution was consistent with the object of Div 292. That second consideration, required by s 292-465(3)(b), is a matter the Tribunal was required to be affirmatively satisfied about ("considers") before the discretion under s 292-465(1)(b) is enlivened. Once enlivened, subsection (4) provides that in "making the determination", that is, in exercising the discretion under subsection (1)(b), the Tribunal is entitled to (may) have regard to the matters in subsections (5) and (6). 71 Methodologically however, the Tribunal at para 45 begins the process of infusing the threshold subsection (3)(b) matter of whether disregarding the 2008/2009 contribution is consistent with the object of Div 292, with a consideration of the subsections (5) and (6) matters rather than recognising that those matters go to the entirely separate question of the exercise of the discretion, once enlivened as a result of the Tribunal reaching a considered view about the subsection (3)(a) and (b) factors. 72 At para 45, the Tribunal also made this observation: "As there are no 'special circumstances' in relation to Transaction 2, there will be no consideration of the discretion for Transaction 2". 73 At para 46, the Tribunal quotes the s 292-5 object of the Division of ensuring that the amount of concessionally taxed superannuation benefits a person receives, results from superannuation contributions made gradually over the course of a person's life. The Tribunal then observes at para 48 that there is no "real dispute" that Mrs Dowling did not gain any "monetary benefit" from the 10 February 2009 contribution and that she did not "add any additional contribution". The Tribunal observes that, properly characterised, the 2009 contribution did not add any "new money" to the combined superannuation of both Mr and Mrs Dowling. The Tribunal observes that, properly analysed, they "merely withdrew and re-contributed their own money" (para 48). 74 However, rather than being consistent with gradually made superannuation contributions over the course of Mrs Dowling's lifetime, the facts, not in real dispute, recited at para 48, seem to be consistent with a large single contribution on 10 February 2009 by Mr Dowling so as to preserve his own entitlement to an age pension at 65. 75 At para 49, the Tribunal then took up the Commissioner's contention that an apparent absence of any direct financial benefit in Mrs Dowling, by reason of the 2009 contribution, is an "irrelevant consideration" to the "consistency with the object" consideration under subsection (3)(b). In taking up that contention, the Tribunal immediately returned, however, to the "special circumstances" question and accepted that an absence of direct financial benefit in Mrs Dowling did not assist her in "establishing special circumstances". The Tribunal at para 49 went on to regard the absence of any direct financial benefit in Mrs Dowling as establishing that the 10 February 2009 contribution was "not inconsistent with Division 292, and therefore, it does assist in this issue to establish whether the exercise of the discretion would be consistent with the objects of Division 292" [emphasis added]. 76 This, with respect, is a very confusing approach to the Tribunal's task at hand. 77 At para 50, the Tribunal recites the text of subsections (5) and (6) (set out at [35] of these reasons). Both of these subsections are taken into account by the Tribunal in reaching its considered view on the "consistency with the object" consideration. The Tribunal also takes into account on the "consistency with the object" consideration whether there were "special circumstances" in the making of the 2009 contribution. Having quoted subsections (5) and (6), the Tribunal says this at para 51: The object of Division 292 may be considered satisfied where the "special circumstances" justify a determination being made to disregard the excess contributions or allocate them to a different financial year. Specifically, if the "special circumstances" relate more directly to the amount of the contribution, then the Tribunal may be more at liberty to determine that an excess contribution might be disregarded. Alternatively, where the "special circumstances" show that a contribution might be more appropriately applicable to a different financial year, then such allocation may be appropriate. [emphasis added] 78 At para 52, the Tribunal reaches this conclusion: In this case, there are no factual circumstances about whether the chronology of events would present a compelling case for allocating an excess non-concessional contribution to another financial year. Therefore, I find that any action under s 292-465(5) would be an inappropriate option in this case. I therefore agree with the respondent's submission in this regard. [emphasis added] 79 At para 53, the Tribunal observes that the question for it, with respect to s 292-465(6) is whether it was "reasonably foreseeable" in August 2010 that the non-concessional contribution made by Mrs Dowling "might result in an excess contribution". 80 Paragraph 53 might be unfortunately expressed as the Tribunal is addressing the 2009 contribution in this part of its reasons and seems to be asking itself, at this point of its enquiry (whether a well-placed question or not), whether on 10 February 2009, when Mr Dowling made the contribution to Mrs Dowling's superannuation account with Mrs Dowling's concurrence, it was "reasonably foreseeable" that in August 2010 (18 months later) a non-concessional contribution made by or on behalf of Mrs Dowling might result in an excess non-concessional superannuation contribution. 81 In answering that question, the Tribunal had regard to these matters. 82 First, Mrs Dowling and her husband were not engaged in the conduct of a business undertaking when Mr Dowling was "trying" to deposit money into his wife's superannuation account (that is, the 2009 transaction) (para 54). Presumably, the Tribunal is drawing an inference that this non-business context suggests that Mr and Mrs Dowling would not have been forward-looking to likely future events which might otherwise have been reasonably apparent had future contributions been an orthodox element of their future activities. 83 Rather, Mrs Dowling had a domestic arrangement with her husband to accept into her superannuation account his contribution. The arrangement to make the contribution was "under the control of Mr Dowling" and the arrangement to accept the contribution was "under the control of Mrs Dowling" (para 54). 84 Second, the relevant contribution was made after seeking advice from financial advisers from Centrelink and Sunsuper. The Tribunal observes that the advice did not put either Mr Dowling or Mrs Dowling, subjectively or objectively, in a position where they might be able to "foresee any other problems which could arise" (para 54). 85 Third, neither superannuation fund (Sunsuper and Unisuper) knew of the "relevant activities" of Mr and Mrs Dowling in the other fund and there was nothing "dishonest" about Mr and Mrs Dowling's conduct (para 54). 86 Fourth, had the evidence established that Mr and Mrs Dowling knew of the concept of excess contributions and the tax consequences of making contributions in excess of the cap in the relevant year, "then the weight of evidence in the applicant's favour would have been very different" (para 54). 87 At para 55, the Tribunal observes that objectively viewed "in the 'special circumstances' of this case", a person could be confused and would not be able to foresee, reasonably, that "an excess contribution would occur then or in a subsequent superannuation transaction" [emphasis added]. At para 55, the Tribunal said this: But looking at a reasonable person in the applicant's position, it would be difficult to foresee the outcome of the transaction, particularly after the applicant and her husband made reasonable attempts to ensure they were in compliance with the law, yet those attempts yielded an incorrect understanding of the law. Indeed, without the subsequent transaction (Transaction 2) by the applicant, the excess contribution would not have occurred at all. 88 At para 56, the Tribunal accepts two propositions. First, that s 292-465 does not contemplate circumstances that are of "special significance" to the taxpayer but only those circumstances that are "not unique to the individual in the taxpayer's position" and, second, it is irrelevant whether a person "marginally falls foul" of a provision of Div 292 or their default is "truly egregious". 89 In this discussion, the Tribunal has returned to a discussion, in the context of subsection (6) and reasonable foreseeability, of "special circumstances" and goes on to observe at para 57 that if these two para 56 propositions are applied in a strict and inflexible way "there would never be any circumstance which would be 'special' and therefore, the ameliorating provision would never be applied in any case at all", and: If that was the case, the section dealing with "special circumstances" passed by Parliament would have been intended to be devoid of meaning, which, of course, would be absurd. 90 At para 58, the Tribunal returns to the "object of the legislation" consideration and says that the exercise of a discretion in favour of Mrs Dowling would be consistent with the object of the legislation of limiting the level of concessional and non-concessional money put into superannuation funds "over a lifetime". 91 At para 59, the Tribunal finds that the exercise of the discretion under s 292-465(3)(b) (although the discretion is conferred and exercised under subsection (1)(b)), "is consistent with the objects of the legislation as the funds concerned in Transaction 1 are all those of her husband, and are those which Mr Dowling made gradually over the course of his life (s 292-5)" [emphasis added]. 92 At para 60, the Tribunal reaches its ultimate conclusion in these terms: The circumstances of Transaction 1 also reveal that if the level of penalty in the applicant's circumstances were applied (being $20,393.95 on the applicant's $200,000 superannuation), the applicant would be penalised 10% of her superannuation when no ordinary deposit or deduction from salary was made. Where there would be an excessively punitive outcome in a special case which falls within what is referred to in the Explanatory Memorandum to the 2007 Amendment Act, this could be regarded as being "unjust, unreasonable or inappropriate". In the circumstances therefore, I find in respect of Transaction 1, that the discretion should be exercised in Mrs Dowling's favour. The appropriate resolution is that the notional excess contribution (and the related penalty assessed) should be disregarded under s 292-465(1)(b) and not be taken into account in consideration of the liability for excess non-concessional contributions tax for the 2010 transaction (Transaction 2). [emphasis added] 93 It is important to remember that s 292-465(1)(b) confers a discretion on the Commissioner to disregard all or part of a person's non-concessional contributions for a financial year (or allocate some or all of the contributions in that year to another financial year) in circumstances where a taxpayer has received an excess contributions tax assessment for a particular financial year. The statutory purpose of s 292-465 is to confer a discretion on the Commissioner to, in effect, constructively adjust or alter the actual factual foundation upon which the assessment rests thus relieving the taxpayer of some or all of the burden of the liability to the assessed amount of excess contributions tax in the financial year of the assessment. The Commissioner's power to exercise the discretion is constrained, at the threshold, by the mandatory requirement that he or she "considers" that there are "special circumstances" warranting a constructive change to the actuality of the contributions either by disregarding or re-allocating some or all of those contributions giving rise to the liability, and that he or she considers that doing so is consistent with the object of Div 292. 94 These s 292-465(3)(a) and (b) considerations are absolute pre-conditions to the exercise of the discretion. 95 The real question then for the Tribunal in this case was whether all or part of the $200,000.00 contribution made on 30 August 2010 by Mrs Dowling that gave rise to a non-concessional contribution in excess of the non-concessional contributions cap thus giving rise to a liability in Mrs Dowling to excess non-concessional contributions tax in the 2010/2011 financial year, ought be disregarded or allocated to another financial year provided, first, that the discretion is enlivened having regard to the two s 292-465(3) considerations and, second, whether the discretion ought be exercised (which will almost certainly involve, notwithstanding the reference to "may", an assessment of the subsections (5) and (6) factors and "any other relevant matters"). 96 Answering that question caused the Tribunal to closely examine the circumstances of the 10 February 2009 contribution. 97 However, no liability to excess contributions tax arose in the 2008/2009 financial year. There was no excess as a matter of law. The circumstances of the 2009 contribution are relevant to the basis upon which the 30 August 2010 contribution gave rise to a non-concessional contribution beyond the 2010/2011 cap and thus an excess contribution of $43,858.00 resulting in a liability to excess contributions tax of $20,393.95 in the 2010/2011 financial year. 98 In an application for a determination under s 292-465(1)(b) to relieve Mrs Dowling of all or some part of a liability to the assessed amount of excess contributions tax for the 2010/2011 financial year, the Commissioner (Tribunal) might properly have regard to the circumstances of the 2009 contribution in determining whether "special circumstances" subsist concerning the making of a determination to disregard or re-allocate contributions made in the financial year giving rise to the assessment. Properly construed however, the discretionary power in subsection (1)(b) to make a determination does not extend to disregarding or re-allocating all or a part of the 2009 contribution itself. That contribution is an anterior matter made relevant to the subject application for the exercise of the discretionary power under subsection (1)(b) concerning contributions made in the financial year the subject of the assessment. 99 The enquiry about the circumstances of the 2009 contribution informs the enquiry concerning the circumstances of the 30 August 2010 contribution and whether the discretion is enlivened in respect of the contributions in the financial year the subject of the excess contributions tax assessment (and the consequential application made by Mrs Dowling under s 292-465(1) and (2)). 100 Let it be assumed however, that the discretionary power under s 292-465(1)(b) extends to disregarding some or all of the 2008/2009 financial year contribution. The question that would then arise is whether there were "special circumstances" in relation to that contribution. The question of whether there were special circumstances in relation to that contribution would also be at least a relevant consideration to take into account in examining whether there were, in context, special circumstances in which the 30 August 2010 contribution was made. 101 The respondent contends that the enquiry into the factual findings of the Tribunal concerning the circumstances of the 2009 contribution is an attempt to examine and re-agitate the merits of the Tribunal's factual findings with the result that the applicant has failed to agitate "a question of law". However, each of the matters agitated by the applicant is directed to the question of whether the factual findings fall within the characterisation of "special circumstances", as a matter of law. Moreover, the applicant agitates a question of whether inferences properly arise that "special circumstances" exist having regard to the primary findings of fact. Each of these questions is properly regarded as a question of law: Minister for Immigration & Multicultural Affairs v Al-Mihi (2001) 65 ALD 141; [2001] FCA 744 per Sundberg, Emmett and Finkelstein JJ at [34]. 102 None of the matters relied upon by the Tribunal in relation to the 2009 contribution satisfy, as a matter of law, the description "special circumstances". 103 They are all considerations specific to the circumstances of Mr and Mrs Dowling and the arrangement they chose to put in place to accommodate their particular domestic set of circumstances. Fundamentally, Mr and Mrs Dowling decided to implement an arrangement for Mr Dowling to withdraw his superannuation (balance or amount) from his Sunsuper account and deposit it in one lump sum into a new Sunsuper superannuation account in Mrs Dowling's name and on her behalf, so as to preserve Mr Dowling's entitlement to an age pension when turning 65, not very long after the arrangement was implemented. There is nothing which "distinguishes" or "differentiates" Mrs Dowling's case from other individual cases to take it out of "the usual or ordinary case". 104 Looking at the Tribunal's findings of fact in an aggregated way, the Tribunal finds that after Mr and Mrs Dowling consulted Centrelink and Sunsuper, Mr Dowling made a lump sum gift of his superannuation to his wife, with her concurrence, to accommodate a practical problem confronting Mr Dowling of preserving his entitlement to an age pension, and in engaging in the arrangement they were undertaking a complex transaction in good faith in a diligent and non-negligent way, without any real understanding of the concept of excess contributions. None of these circumstances take the transaction in February 2009 out of the ordinary case. Each of these matters are considerations specific to the circumstances of Mr and Mrs Dowling that make the transaction either prudential or sensible from the perspective of their own circumstances. None of these facts, as found, fall within the description of "special circumstances" as a matter of law. Nor does any inference arise from the facts as found that there were "special circumstances" concerning the 10 February 2009 contribution. 105 There were, however, other considerations. 106 One of them was this. The Tribunal regarded the fact that there were no "new" contributions and that Mr and Mrs Dowling were simply "re-arranging" existing funds, as relevant and material to the question of "special circumstances". The Tribunal's assessment of the materiality of this matter is difficult to understand as the Tribunal expressly recognised that, by itself, this consideration was insufficient to amount to special circumstances. The Tribunal, however, seems to have regarded this consideration as contextually material to the amalgam of considerations earlier mentioned which the Tribunal did regard as special circumstances. 107 The Tribunal also regarded the circumstance that Mr and Mrs Dowling are retirees who took advice from Centrelink and Sunsuper that "led" them into "technical error" as another circumstance in the amalgam of circumstances that constitute special circumstances. 108 Again, the particular circumstances Mr and Mrs Dowling found themselves in as retirees seeking advice from Centrelink and Sunsuper about what to do with Mr Dowling's superannuation or how he might dis-engage from his superannuation entitlement in a way which would preserve Mr Dowling's entitlement to an age pension, no doubt, explains, in part at least, what they did in February 2009 and why they did it, but these considerations do not render the contribution as one made in "special circumstances". It is one made, conditioned and informed by their own particular domestic circumstances. 109 It follows that the Tribunal fell into error in characterising the circumstances, as found on the facts, in which Mr and Mrs Dowling made the 10 February 2009 contribution, as "special circumstances". 110 To the extent that the Tribunal considered that the discretion to disregard the 10 February 2009 contribution was enlivened, it fell into error. 111 If a further assumption is made, in addition to the assumption described at [100], that the circumstances described by the Tribunal, reflected in its findings of fact, are properly characterised as "special circumstances", the second threshold question arises of whether the Tribunal considers that making the determination to disregard the 2009 contribution is "consistent with the object of [Division 292]". 112 As to this question, the Tribunal considered that since Mrs Dowling received no "monetary benefit" from the contribution; no new money was involved; and Mr and Mrs Dowling simply re-arranged and re-contributed their own money, the Tribunal making a determination to disregard the 2009 contribution would "not be inconsistent with" the object of Div 292. Although the Tribunal's reasoning on this issue of consistency with the object of Div 292 is, with respect to the Tribunal member, confused (due to the repeated references to "special circumstances" and subsections (5) and (6)), the Tribunal seems to be saying that if the facts (and circumstances) demonstrate that the real issue is "directly" related to the amount of the contribution (perhaps a single lump sum re-contribution of existing funds) the Tribunal may be "more at liberty" to disregard the (relevant) excess. 113 The Tribunal's observations about factors that suggest the 2009 contribution is "not inconsistent" with the object of Div 292 mis-states the important language of the section. The Tribunal must consider that making a determination to disregard the 2009 contribution is consistent with the object of Div 292. 114 The question then is whether a lump sum contribution by Mr Dowling on 10 February 2009, with the concurrence of Mrs Dowling, as part of an arrangement as found, is consistent with ensuring that the amount of concessionally taxed superannuation benefits that a person receives results from superannuation contributions that have been made gradually over the course of the person's life (s 292-5). 115 Mrs Dowling received a single lump sum contribution to her superannuation of $293,858.00 on 10 February 2009 made by her husband, with her concurrence, so that Mr Dowling might deal with his "practical problem" of preserving an entitlement to an age pension at 65. It might be that (although there was no evidence of the matter before the Tribunal) the withdrawal by Mr Dowling of the amount in his superannuation Sunsuper account in early February 2009 represented an amount of concessionally taxed superannuation benefits in his hands resulting from contributions made by him gradually over the course of his own lifetime. The Tribunal seems to have simply assumed this to be so. Whilst Mr Dowling was entitled to make a contribution of his superannuation amount to his wife's new superannuation account with Sunsuper, the object of the Division was not served because it cannot be said that the lump sum contribution represents contributions made gradually over the course of Mrs Dowling's lifetime. The 2009 contribution, in truth, is a lump sum transfer of an amount standing to the credit of Mr Dowling in his Sunsuper superannuation account, and is nothing more than an element in an arrangement to preserve Mr Dowling's entitlement to an age pension in the immediately foreseeable future as he turned 65. 116 Moreover, there is no evidence to support the finding that Mrs Dowling received no monetary benefit from Mr Dowling's contribution. Mrs Dowling received an increment by way of contribution of $293,858.00. 117 The Tribunal fell into error by reaching a state of satisfaction that making a determination under s 292-465(1)(b) is consistent with the object of Div 292. 118 The findings of fact by the Tribunal did not enable it to be satisfied that either of the s 292-465(3)(a) or (b) factors existed concerning the 2009 contribution. 119 Thus, the discretion under s 292-465(1)(b) was not enlivened. 120 Therefore, the questions addressed by the Tribunal concerning s 292-465(5) and (6) did not properly arise. 121 However, as to subsection (6), the Tribunal focuses upon the factors informing the minds of Mr and Mrs Dowling at the time of the 2009 contribution. The Tribunal finds that because Mr and Mrs Dowling were not engaged in a business undertaking; had sought advice from Centrelink and Sunsuper and had not been put on notice of the possibility of future "problems" that might arise; neither fund knew of the transactions in the other fund; and neither Mr Dowling nor Mrs Dowling had any knowledge of the "concept" of excess contributions, the conclusion arose that it would "therefore" not be possible for a person in the position of Mrs Dowling ("in the special circumstances of the case") to foresee, reasonably, that an excess contribution would occur "then" (by force of the 2009 contribution) or "in a subsequent superannuation transaction" (2010). 122 If the focus of the enquiry by the Tribunal is the 2009 contribution, the position is that once the contribution of $293,858.00 was made to Mrs Dowling's Sunsuper superannuation account, that contribution crystallised, as a matter of law, the non-concessional contributions cap for that year and the following two years. The statutory question asked by s 292-465(6) is whether it was reasonably foreseeable, when a relevant contribution was made (in this case the Tribunal's examination of the 2009 contribution) that Mrs Dowling would have excess non-concessional contributions for the relevant financial year (being the 2008/2009 year). The answer to that question is that there were no excess non-concessional contributions as s 292-85(4) made it plain at that time that the non-concessional contributions cap was $450,000.00. The statute brought about that result and there was nothing unfair or unjust about it and nor was it an unintended outcome. The statute simply worked its orthodox result. 123 Moreover, assuming for the moment that the pre-conditions in s 292-465(3) were satisfied in relation to the $200,000.00 contribution on 30 August 2010, the statutory question asked by s 292-465(6) is whether it was reasonably foreseeable when that contribution was made that Mrs Dowling would have excess non-concessional contributions for the 2010/2011 financial year. The answer to that question is that it was objectively perfectly obvious and predictable that making a contribution of $200,000.00 in 2010/2011 year would give rise to an excess contribution of $43,858.00 and a liability to excess contributions tax of $20,393.95. 124 The question of whether there were special circumstances in relation to the contribution of 30 August 2010 is partly informed by the circumstances of the contribution on 10 February 2009 because that contribution had the effect of determining the non-concessional contributions cap for the 2010/2011 financial year. The Tribunal concluded, correctly, that there were no special circumstances in relation to the contribution on 30 August 2010. Nothing about the circumstances of the contribution on 10 February 2009 has the effect of rendering the circumstances in which the 30 August 2010 contribution was made "special circumstances". Mrs Dowling simply made a $200,000.00 withdrawal from her superannuation account and then made a re-contribution so as to attract concessional treatment in respect of a death benefit her beneficiaries might receive. Mrs Dowling did not consider any aspect of the statutory arrangements in relation to excess non-concessional contributions nor take advice. There was nothing about the 30 August 2010 circumstances which rendered them special circumstances. Nor was the contribution consistent with the object of Div 292. 125 The Tribunal fell into error by bifurcating the questions to be determined into two separate transactions. The real question was whether the Tribunal could be satisfied that there were special circumstances in relation to the contribution made in the 2010/2011 financial year, having regard to the contextual circumstances of that contribution and the contribution made in the 2008/2009 financial year. The Tribunal had to consider whether it was satisfied that making the determination to disregard or re-allocate any part of the 2010/2011 contribution was consistent with the object of Div 292. Once the Tribunal was satisfied of the pre-conditions under s 292-465(3)(a) and (b), the question arose of whether the Tribunal ought to exercise the discretion and that matter gave rise to a consideration of the s 292-465(5) and (6) factors and any other factor the Tribunal regarded as a relevant matter. For the reasons indicated earlier, the Tribunal fell into error in the way it approached the construction and application of s 292-465. 126 The Tribunal fell into error by disregarding the 2009 contribution so as to bring about the result that there was no excess contribution in the 2010/2011 financial year. 127 It follows that the appeal must be allowed. The decision of the Tribunal made on 1 February 2013 in matters numbered 2012/2727 and 2012/2728 must be set aside. Each matter will be remitted to the Tribunal to be heard and determined according to law. Since the appeal to this Court is test case funded, the Commissioner will be ordered to pay the respondent's costs of the appeal on a party and party basis. I certify that the preceding one hundred and twenty-seven (127) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.