3. Section 5 of the Superannuation (Sustaining the Superannuation Contributions Concession) Imposition Act 2013 (Cth) prescribes the amount of Division 293 tax is 15% of a taxpayer's taxable contribution.
4. Taxable contributions are defined in s 293-20 ITAA 97 as:

Your taxable contributions > > (1) If the sum of: > > (a) your * income for surcharge purposes for an income year (disregarding your * reportable superannuation contributions); and > > (b) your * low tax contributions for the corresponding * financial year; > > exceeds $250,000, you have taxable contributions for the income year equal to the lesser of the low tax contributions and the amount of the excess. > > (2) However, you do not have taxable contributions for an income year if the amount of your * low tax contributions is nil.

5. Section 995-1 of the ITAA 97 provides that income for surcharge purposes means the sum of the following:

(a) the person's taxable income for the income year (disregarding the person's * assessable FHSS released amount for the income year and subsection 271 - 105(1) in Schedule 2F to the Income Tax Assessment Act 1936 ); > > (b) the person's * reportable fringe benefits total (if any) for the income year; > > (c) the person's * reportable superannuation contributions for the income year; > > (d) the person's * total net investment loss for the income year; > > less the amount mentioned in subsection 301 - 20(3) for the person for the income year if the person is entitled to a tax offset under subsection 301 - 20(2) for the income year.

6. The term taxable income is also defined in s 995-1 of the ITAA 97 to have the meaning given by s 4-15 of the ITAA 97. Section 4-15 explains that taxable income equals assessable income minus deductions.
7. Section 6-5 of the ITAA 97states that assessable income includes 'income according to ordinary concepts, which is called ordinary income_.'[1]_ For Australian residents this includes ordinary income derived directly or indirectly from all sources whether in or out of Australia during the income year.[2] Section 6-5 (4) provides:

In working out whether you have derived an amount of * ordinary income, and (if so) when you derived it, you are taken to have received the amount as soon as it is applied or dealt with in any way on your behalf or as you direct.

1. The Tribunal had the benefit of the following material:[3]
   • The Tribunal documents;
   • The Supplementary Tribunal documents;
   • The Applicants Statement of Facts, Issues and Contentions;
   • The Respondent's Statement of Facts, Issues and Contentions; and
   • The Respondent's written submissions.
2. Mr Uddin also gave evidence as to the following facts:
   • he has been employed as a full time academic with the University since 2011. His role includes a teaching, research and general administration work load. Between 2015 and 2022, he had additional teaching duties;
   • the University initially refused to acknowledge the extra work he was undertaking during this period. After a number of complaints and a case before the Fair Work Commission, the University agreed to compensate him for the actual hours worked;
   • he entered into a deed of settlement with the University. In accordance with the deed, he was paid the Lump Sum.
3. Mr Uddin submitted to the Tribunal:
   • by assessing the Lump Sum in the Income Year, he is being financially disadvantaged and punished by the Commissioner for conduct outside his control. Had he been properly remunerated by the University in the Earlier Income Years, he would never have been liable for the additional tax. His circumstances do not fall within the intention of the Division;
   • even though he was paid for his personal services by the Lump Sum which was received in the Income Year, the income should be treated as having been derived in the Earlier Income Years. Treating the income in this way would result in no taxable contributions in the Income Year;
   • his position is unique and distinguishable from the cases relied upon by the Commissioner. In his case, he was not paid at all for services rendered in the Earlier Income Years. The cases relied upon by the Commissioner involved the underpayment of wages or payouts as part of a termination.

1. The ultimate issue in this case is whether Mr Uddin can establish the Assessment is excessive or otherwise incorrect and what the Assessment should be. This, in turn, requires consideration of whether the Mr Uddin had taxable contributions for the Income year.
2. Mr Uddin will have taxable contributions for the Income Year if the sum of his income for surcharge purposes and low tax contributions for the Income Year exceed $250,000. In the circumstances of this review, that depends on whether the Lump Sum Payment is assessed in the Income Year or the Earlier Financial years.

1. It is not in dispute the Applicant received the Lump Sum from his employer in the Income Year or that it related to work performed by him in the Earlier Financial Years. Unfortunately for Mr Uddin, the Lump Sum as assessed by the Commissioner, increased his income and superannuation contributions for the Financial Year to $250,473 which exceeded the Division 293 earnings threshold.
2. Mr Uddin says the Lump Sum Payment should be assessed using the earnings method whereby income is taken to have been derived when it is earned. The Lump Sum would be assessed as income derived in the Earlier Financial Years and there would be no liability under Division 293 for the Income Year.
3. Taxation Ruling 98/1 Income Tax: determination of income; receipts versus earnings provides guidance in respect of the timing of income. Under the receipts method, income is derived when it is received either actually or constructively by the taxpayer. Under the earnings method, income is derived when earned. The accounting method adopted in the circumstances of a particular case is a question of fact and must reasonably reflect the taxpayer's income.[4]
4. Although whether an entitlement to receive has arisen, or whether an amount has been received may be relevant to determining in which income year the earnings have been derived, the most important consideration is whether an item of ordinary income can be said to have 'come home to a taxpayer in a realised or immediately realisable form.'[5] For employment income, receipt is reflective of when the income has come home in the relevant sense, even if the income relates to services provided in another income year. This position has been consistently applied by the Tribunal in comparable situations.[6]
5. The Tribunal sympathises with Mr Uddin. The Division 293 implications were an unintended consequence of his legitimate activity to recover income owed to him by the University. The Tribunal acknowledges the liability arose through no wrong doing or inappropriate action on his part and understands why he considers the outcome to be unfair in the circumstances of his case.
6. Unfortunately, the law on the derivation of employment income is clear and has been applied consistently. Taxpayers are assessed on amounts received in a particular year of income regardless of whether some part could relate to another income year. Even though the Lump Sum related to services provided in the Earlier Income Years, it constitutes income for the Income Year, being the period within which it was received.
7. The Commissioner has disregarded an amount of superannuation guarantee contributions made by the Applicant's employer. However, that decision was made under a different Division of the ITAA 1997, specifically s 291-465 in Division 291. Unfortunately, there is no equivalent provision in Division 293 that would permit the Tribunal consider special circumstances.[7]

1. For the reasons outlined above, the Tribunal finds the entire Lump Sum is part of Mr Uddin's income for the Income Year. The Tribunal does not have any discretion under Division 293 to alter, reduce, remove, disregard, or allocate to another financial year, any amount of the Lump Sum from the amount of the Applicant's income. There is no discretion to apply special circumstances.
2. Mr Uddin has been unable to meet the burden of proving that the Reviewable Decision is excessive or otherwise incorrect and therefore the Commissioner's decision is affirmed.

Ms A Luong, Litigation and Legal Services, Australian Taxation Office

[1] s 6-5(1)

[2] s 6-5(2)

[4] Taxation Ruling 98/1, paragraph 27 citing Commissioner of Taxes (SA) v Executor Trustee & Agency Co of South Australia Ltd [1938] HCA 69; (1938) 63 CLR 108.

[5] News Australia Holdings Pty Ltd v Commissioner of Taxation [2017] FCA 645 citing Commissioner of Taxes (SA) v Executor Trustee & Agency Co of South Australia Ltd [1938] HCA 69; (1938) 63 CLR 108 at [155]

[6] See by way of an example DHDF and Commissioner of Taxation [2016] AATA 778; Edwards and Commissioner of Taxation [2016] AATA 781; KXCS and Commissioner of Taxation [2021] AATA 4498; Re Hannavy v Commissioner of Taxation [2001] AATA 370,;Roszkiewicz v Federal Commissioner of Taxation [2019] AATA 931

[7] KXCS and Commissioner of Taxation [2021] AATA 4498