Liwszyc v Commissioner of Taxation

• Payments under consideration in this appeal. 7 The concessional contributions caps applicable to Mr Liwszyc under Div 292 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) (to be discussed further below) were as follows: (a) Year ended 30 June 2008: $100,000 (b) Year ended 30 June 2009: $100,000 (c) Year ended 30 June 2010: $50,000 (d) Year ended 30 June 2011: $50,000 8 On 22 September 2011, the Commissioner issued to Mr Liwszyc a notice of assessment for excess contributions tax (ECT) of $16,905.20 in respect of excess concessional contributions of $53,667.42 for the year ended 30 June 2010. 9 On 6 February 2012, Mr Liwszyc wrote to the Commissioner requesting the relevant contributions for the year ended 30 June 2010 be reallocated. 10 He asked that: (a) the first two payments received on 1 July 2009 be allocated to the previous financial year, the 2008/2009 financial year (in effect, they had been paid too late); and (b) the payment on 27 May 2010 of $13,970.66 be allocated to the next financial year, the 2010/2011 financial year (in effect, it had been paid too early). 11 Mr Liwszyc's request was treated as an application for a determination under s 292-465 of the ITAA 1997 (also to be discussed further below). 12 Having considered the question, on 5 March 2012 the Commissioner issued a notice of decision that he would not make a determination to disregard or allocate to another financial year any of the concessional contributions for the year ended 30 June 2010. 13 Mr Liwszyc then objected to the ECT assessment for the year ended 30 June 2010 under s 292-245 ITAA 1997 by a letter dated 21 March 2012 received by the Commissioner on 26 March 2012. 14 By a notice of objection decision dated 10 May 2012 the Commissioner disallowed the objection. 15 There were certain key documents identified in the evidence. The first was on 30 June 2011. 16 On this date, Mr Liwszyc wrote to AMP requesting urgent clarification in relation to the status of the payments. He was informed on 13 October 2011, from AMP, that it was not possible for them to alter the dates of receipt of payments. Following these communications, on 9 November 2011 Mr Liwszyc gave the following account to AMP's Director of Customer Service: … a) AMP has allocated $38,499.00 paid by electronic transfer on the 30/6/2009 as my contribution for the financial year 9/10. The payments were clearly marked that they are for the 4th quarter of 08/09. If for any reason AMP was unable or unwilling to allocate it to the designated year then I should have been informed or the moneys returned. b) On the 5th July 2010 my bookkeeper rang AMP and said that by mistake she has overpaid my supper (sic) by $13,970.66 for the 2009/2010 financial year. Your officer informed her that this is not a problem and that amount will be allocated to the 10/11 year. My bookkeeper confirmed this conversation in her E-mail of the same day. Again, if your employee was wrong then we should have been informed. As a result of AMP wrongly allocating the $38,499.00 and $13,970.6 to the 09/10 financial year, instead to 08/09 and 10/11 respectively I have an additional taxation exposure of over $16,000 and will have a shortfall of $13,970.66 in my allowable super contribution for 10/11. None of this is of my doing and would not have occurred if you (sic) service was up to the required standard. 17 On 6 February 2012 Mr Liwszyc wrote to the Commissioner, noting: … 1. Our accounts person normally pays super contributions for the last quarter of a financial in the first quarter of the following year. Hence the two payments on the 22/07/2008 amounting to $23,084.13 were earned in the year 2007/8 and meant as that year's contribution. 2. At above $38,499.00 was earned in 08/09 and was the year's contribution. 3. Our accounts person has made a mistake and sent the $13,970.66 ahead of time 27/05/2010. On realizing this she contacted AMP who assured her (see-mail of 05/07/2010) this will be allocated as 2010/2011 contribution but did not do so. Financial year Contributions as allocated by AMP Contributions as earned and as intended 2007/2008 $74,366.35 $97,450.58 2008/2009 $84,585.13 $99,999.00 2009/2010 $103,667.42 $51,197.76 2010/2011 $32,654.34 $46,625.00 2011/2012 $4,050.00

From the above it's obvious that if my super contributions were allocated correctly and as intended the only overpayment for which I may be liable to pay additional income tax is the $1,194.76 in 09/10 and not the $53,667.42 as per ATO assessment. I would also like to point out the following:- a. The contributions were earned and clearly intended as per maximum superannuation limits allowable. b. Allocation of the contributions to specific years was by AMP and outside my knowledge and control. c. I was only made aware of the wrong allocation at the end of 2011. d. I'm over 72 years young still working, still paying taxes and employing over 20 people. e. I have no funds in my super or any other account to pay additional $17,305.01 to the ATO. I request you readjust my account to reflect my actual contributions (and entitlements) for the years in which they were actually earned and for which they were intended. 18 Mr Liwszyc made the following submission to the Commissioner on 21 March 2012: … I would like to make the following points:- 1. Each payment to AMT (sic-AMP) states for which period is the contribution. At no time did AMP inform me that they did not or could not allocate these contributions to my designated periods. I had no means of knowing and take corrective actions until I received the ECT in Sept. 2011. 2. Part of the payments on the 22/7/2009 was for company super (not salary sacrifice) therefore since payment on behalf of employees can be made up to 28 of July following end of that financial year, those payments cannot arbitrarily be shifted to the following years. 3. The $21,278.49 paid on 22/07/2008 and $30,000.00 paid 1/7/2009 were paid as salary sacrifice for financial year 07/08 and 08/09 hence if the ATO will not accept them as salary sacrifice for those years then I'm liable to pay additional income tax for those years. 4. The $13,970.66 was clearly a mistake and AMP was informed about it. Another word the company did not pay this as a salary sacrifice and did not claim it as a deduction. If they were not allowed to keep this money until the following financial year they should have returned this and the company would have paid that money the following financial year. I fail to see why my entitlement is being eroded because of AMP's incompetence. I do believe that the payments made to my superannuation account were as stated in my previous letter and hence ECT should be paid on $1,104.76. I request that the ETC (sic-ECT) be adjusted to correctly reflect payments to the designated years and correctly reflect my entitlement. 19 In relation to circumstances surrounding the movement of the BPayments on 30 June, records from Bankwest (relevantly) confirm the following matters as explained by the Bank: … We can confirm that the following payments were made by Mr Liwszyc on the relevant dates and times, and that each payment was batched up in the outgoing 4pm file to BPay. The attached report "A" and associated table "B" [attached to the letter from Bankwest dated 14 May 2013] outline each transaction in detail. We cannot however confirm the transfer times to AMP, due to the following reasons. Bankwest uses a third party, BPay, to securely process payments from customer accounts via electronic means to other organisations, the Billers. The agreement is that funds transferred by customers via BPay are received by BPay, and on-forwarded to the BI, or Biller Institution of the Biller. This is not an instant or real-time transfer however. BPay rules require that the following clause be included in BPay agreements between BI and their Billers: The Participating Biller acknowledges and agrees that: (a) the date of payment by a Payer Customer to that Participating Biller is the Settlement Date for that Payment; and (b) the Participating Biller will treat each Payment made by a Payer Customer as having been received by the Participating Biller on the Settlement Date for that Payment. The Bank is therefore not in a position to further comment on the exact dates and times for which AMP would have received the payments in question, as the funds had left our control by that time, and were held by BPay for on-forwarding to the relevant Biller accounts. … (emphasis added) 20 In an electronic age it may seem surprising that funds are not transmitted/received in 'real time' or near to it. It was common ground that they are often transferred and received on the same day but clearly, on the evidence, this is not always so, nor, on the evidence, does the bank guarantee or assure its customers that BPayments will be received to the payee's account on the same day. Indeed, there are clear indications on the evidence to the contrary. 21 Evidence was given orally by a number of witnesses. Perhaps the most important witness was the bookkeeper who made the entries concerned. It was clear from her evidence that the timing of the entries was her choice and that even though Mr Liwszyc held a superior position to her, he left matters in her hands, having given a general instruction at the commencement of each financial year as to the objective he sought to achieve. This entirely unremarkable set of circumstances might be thought to be commonplace. 22 In short, one of the three payments (that for $13,970.66) was made some weeks earlier than the intended time but with the intention that it be allocated to the following financial year. However the more difficult issue in this appeal is the fact that certain key BPayments were entered by the bookkeeper on the last day of the financial day of the year. While the accounting records from the payer's perspective show the payment having been made as at that date, those payments were not received on that day. The only evidence is that the payments were received and acknowledged electronically on the first day of the next financial year. The question, in each of the three instances, is when the contribution to the superannuation fund was made.

STATUTORY FRAMEWORK 23 Part 3-30 ITAA 1997 deals with superannuation. It was introduced by the Tax Laws Amendment (Simplified Superannuation) Act 2007 (Cth) with effect from the 2007/2008 income year. There are, for taxation purposes, three recognised phases in superannuation (being the contribution, investment and benefit phases as discussed in Div 280 ITAA 1997). Mr Liwszyc's appeal relates to a specific aspect of the contribution phase of superannuation taxation. 24 In the ordinary course, contributions that are made for a superannuation fund are either concessional contributions or non-concessional contributions. The contributions made for Mr Liwszyc to his AMP account during the 2009/2010 financial year were concessional contributions. 25 Under Div 292 ITAA 1997 an ECT is a further tax on an individual's concessional contributions and their non-concessional contributions for a financial year which exceed the nominated levels in the financial year. 26 There will be a concessional contribution for a relevant financial year under s 292-25 ITAA 1997 if the contribution is: (a) made to a superannuation fund in the Relevant Year; (b) included in the superannuation fund's assessable income; and (c) not a transfer from a foreign superannuation fund, a rollover superannuation benefit that includes an untaxed element of an amount below a particular threshold, or a contribution to a constitutionally protected fund.

Discretion 27 Mr Liwszyc does not challenge any aspect of the Commissioner's treatment of the payments other than the Commissioner's failure to exercise his discretion under s 292-465 ITAA 1997. I will examine his arguments on that topic below. 28 In order to consider the arguments, however, it is desirable to set out in full s 292-465 ITAA 1997 as it then stood for the relevant financial years: 292-465 Commissioner's discretion to disregard contributions etc. in relation to a financial year (1) If you make an application in accordance with subsection (2), the Commissioner may make a written determination that, for the purposes of this Division: (a) all or part of your concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination; and (b) all or part of your non concessional contributions for a financial year is to be disregarded, or allocated instead for the purposes of another financial year specified in the determination. (2) You may apply to the Commissioner in the approved form for a determination under subsection (1). The application can only be made: (a) after all of the contributions sought to be disregarded or reallocated have been made; and (b) if you receive an excess contributions tax assessment for the financial year - before the end of: (i) the period of 60 days starting on the day you receive the assessment; or (ii) if the Commissioner allows a longer period - that longer period. (3) 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. (4) In making the determination the Commissioner may have regard to the matters in subsections (5) and (6) and any other relevant matters. (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. (7) The Commissioner must give you a copy of the determination. (8) A determination under this section may be included in a notice of assessment. Review of determinations (9) To avoid doubt: (a) you may object under section 292 245 against an excess contributions tax assessment made in relation to you on the ground that you are dissatisfied with a determination that you applied for under this section; and (b) for the purposes of paragraph (e) of Schedule 1 to the Administrative Decisions (Judicial Review) Act 1977, the making of a determination under this section is a decision forming part of the process of making an assessment of tax under this Act. (emphasis added) 29 It follows and is common ground that the determination may 'only' be made where 'special circumstances' exist in relation to an applicant and the making of a determination would be consistent with the object of the Division. 30 Where an objection is made against the assessment as it was in this instance, the objection is made pursuant to the provisions of Pt IVC TAA. Under s 14ZZO(a) an appellant is, unless the Court orders otherwise, limited to the grounds stated in the original taxation objection to which the decision relates and under subs (b) an appellant has the burden of proving that the assessment is excessive or otherwise incorrect and what the assessment should have been. 31 It is to be noted that in relation to the 2008/2009 financial year there was no assessment for ECT and, accordingly, no objection decision and no appeal. It is therefore beyond power to make any order under s 14ZZ TAA in relation to any concessional contributions made in the year other than the 2009/2010 financial year.

THE APPEAL STATEMENT 32 Mr Liwszyc argues that a late payment to a superannuation fund by an employer on behalf of an employee for a prescribed employer contribution or salary sacrifice constitutes 'special circumstances' and satisfies the preconditions in s 292-465(3) ITAA 1977. He also contends that a mistake in payment into a superannuation fund by an employer constitutes 'special circumstances' and satisfies the conditions in s 292-465(3) and that on a proper reading of s 292-465(5) the Commissioner erred by not exercising his discretion in reallocating the five contributions to the years requested by Mr Liwszyc. The relief sought is a direction that the Commissioner reallocate the $23,084.13 contribution from 2008/2009 to the 2007/2008 financial year and, secondly, to instruct the Commissioner to reallocate the $38,499 contribution from the 2009/2010 to the 2008/2009 financial year and the $13,970.66 contribution from the 2009/2010 to the 2010/2011 financial year. 33 Mr Liwszyc contends that an issue arising in relation to those basic elements of the appeal and the relief sought is whether the Commissioner is entitled to compel the superannuation fund to allocate a contribution contrary to the wishes and instructions of the contributor. 34 Other issues said to arise are whether the Commissioner's discretion under Div 292 allows him to make a ruling is unfair, unreasonable or inappropriate, goes against the spirit of legislation and/or contravenes the ITAA 1997. 35 Mr Liwszyc emphasises that on realising her error by making the employee payment of $13,970.66 to the AMP account from Abrasive Cutting on 27 May 2010, the bookkeeper contacted AMP on 5 July 2010 requesting that that sum be allocated for the 2010/2011 financial year and received oral confirmation from an AMP employee that the allocation would be made.

ARGUMENTS on the APPEAL 36 Mr Liwszyc stresses that concessional contribution is a taxation benefit legislated by Parliament for a specific year and a specific amount. Thus on a proper construction, if late payment deprives the taxpayer of that benefit, it 'must' be considered 'special circumstances' for the purposes of s 292-465(5) ITAA 1997. As the relevant concessional contributions were made on behalf of Mr Liwszyc by a company employee responsible for such payments he should not be deprived of the concessional benefit. They were the correct amounts and made in accordance with Mr Liwszyc's employment entitlement for the relevant financial years. 37 Mr Liwszyc argues, as I understand it, that if the contribution is treated as being made at any date other than that at which he wishes it to be made, he is being unjustly or unlawfully deprived of the benefit that Parliament intended be conferred upon him. As to the June 30 payments, he contends that the circumstance of payment make it clear that there was every attempt to ensure that the payment was received in the correct financial year. 38 Mr Liwszyc particularly contends that late payment constitutes 'special circumstances' and therefore satisfied the first limb. In particular, he urges that a late payment made by an employer on behalf of an employee, 'by definition', constitutes 'special circumstances' and that relief from the statutory rule is consistent with the objectives of the Division. A late payment made by an employer as part of an employee's entitlement 'requires the Commissioner to exercise his discretion' under s 292-465(5) ITAA 1997 (emphasis added). A late payment by an employer should not deprive Mr Liwszyc of the benefit granted to him by Parliament. Imposition of an ECT is not intended by Div 292 as a means of depriving Mr Liwszyc of benefits granted by Parliament. It should not be applied to contributions made by an error or made by a third party contrary to the wishes of the contributor. 39 The Commissioner to reallocate late payments of concessional contributions or a contribution made by clerical error, Mr Liwszyc says, results in a manifestly unjust, unfair and inappropriate outcome for the taxpayer. The refusal by the Commissioner to reallocate a late payment of concessional contributions or a contribution made by clerical error is inconsistent with the spirit and intent of the concessional superannuation contribution legislation and the effect of the Commissioner's failure to exercise a discretion creates a discrepancy in ITAA 1997. 40 By a written outline of submissions received from Mr Liwszyc by email after the hearing of his appeal, Mr Liwszyc sought leave to supplement his oral argument. While there was no leave to file the further material, the Commissioner indicated that he had no objection to the Court receiving the supplementary submissions. I granted leave for Mr Liwszyc to rely on his supplementary submissions so that his arguments could be considered in full. 41 In his written submissions, Mr Liwszyc asked the Court to include contributions paid on 22 July 2008 of $1,796.64 (Company Contribution) and $21,287.49 (Salary Sacrifice Contribution) to be included in these proceedings. He accepts that four payments made on the 22 July 2008 and 30 June 2009 were late payments for the preceding years hence under the statutory application of the law belong to the years in which they were received. Mr Liwszyc submitted that the payments of $1,796.64 on the 22 July 2008 and $8,499.00 on 30 June 2009 were compulsory company contributions. He notes that the payments of $21,287.49 on 22 July 2008, $30,000.00 on the 30 June 2009 were Mr Liwszyc's salary sacrifice contributions from earnings in financial years 2007/2008 and 2008/2009. Mr Liwszyc submitted that the company was instructed that the salary sacrifice contributions were for the financial years 2007/2008 and 2008/2009 respectively. The agreed bundle of evidence shows that AMP was informed that the salary sacrifice contributions were for the financial years 2007/2008. Mr Liwszyc submitted that the payment of $13,970.66 on 27 May 2010 was a bookkeeping mistake. 42 In his written submissions, Mr Liwszyc argued as follows (although much of the argument had already been made): Company compulsory contributions are different from salary sacrifice contributions to the superannuation funds as one is compulsory and the other voluntary. Company compulsory contributions are prescribed by Parliament for a specific year and if the company does not pay this within that year it may result in an entitlement loss to a taxpayer. In such a case a 'special circumstance' arises as a citizen is being financially penalised by the action of a third party. Salary sacrifice contributions are voluntary. The ordinary meaning of 'contribution' is '1. The act of contributing 2. something contributed' (emphasis added). A voluntary contribution must reflect the will of the contributor and the purpose for which it was given. In the event that the purpose of the contributor is not met then it is no longer a voluntary contribution. The Commissioner has no power to change the designation of salary sacrifice to a year other than specified by the contributor. Since the Commissioner does not allow the fund providers to return salary sacrifice contributions to the contributor, the Commissioner must relocate the salary sacrifice contributions to the years volunteered by the contributor. The interpretation of 'special circumstance' stated in PS LA 2008/1 24 and adopted by the authorities submitted by the Commissioner rely on a definition that 'special circumstance' are an unusual circumstance, or a circumstance out of the ordinary. Mr Liwszyc does not rely on his circumstance being 'unusual, uncommon or out of ordinary'. An appropriate definition of 'special circumstance' in his case would be '[a] circumstance that result[s] in an outcome which is unjust, unreasonable and inappropriate' (emphasis added). The circumstance which lead to the ECT assessment and allocation of the contributions made on 22 July 2008 to the 2008/2009 year are special as they lead to an outcome which is unjust, unreasonable and inappropriate. In the case of an employer contribution, 'special circumstance' is loss of entitlements due to the actions of a company. In the case of salary sacrifice, the 'special circumstance' relates to loss of entitlements due to the action of a company. In the case of salary sacrifice, the 'special circumstance' relates to the fact that the disputed contributions were not volunteered by Mr Liwszyc for the financial years 2007/2008 and 2009/2010 hence they cannot be treated as his contributions. Mr Liwszyc submitted that in the case of the payment of $13,970.66 the 'special circumstance' relates that it is neither a company contribution nor a voluntary salary sacrifice.

ANALYSIS 43 The essential question relates to when the contributions to the AMP account were made. There is a further question as to whether there are 'special circumstances' and a further question as to whether a determination would have been consistent with the objects of Div 292. Finally, there are issues going to the exercise of discretion.

The approach 44 There is a particular question as to the time at which a 'contribution' will be deemed to be made. There are some competing approaches to consideration of the remedial statutory provisions. Although it may be accepted that the object of Div 292 is intended to be beneficial, so that it might also be construed beneficially, it is also recognised that fiscal statutes are to be construed strictly. 45 In Bull v The Attorney-General for New South Wales (1913) 17 CLR 370 Isaacs J said (at 384): In the first place, this is a remedial Act, and therefore, if any ambiguity existed, like all such Acts should be construed beneficially: per Lord Loreburn L.C. in Bist v London and South Western Railway Co (1907) AC, 209, at p 211. This means, of course, not that the true signification of the provision should be strained or exceeded, but that it should be construed so as to give the fullest relief which the fair meaning of its language will allow. 46 However, in The Commissioner of Taxation of the Commonwealth of Australia v Westraders Pty Ltd (1980) 144 CLR 55 Barwick CJ observed (at 59-60): It is for the Parliament to specify, and to do so, in my opinion, as far as language will permit, with unambiguous clarity, the circumstances which will attract an obligation on the part of the citizen to pay tax. The function of the court is to interpret and apply the language in which Parliament has specified in those circumstances. The court is to do so by determining the meaning of the words employed by the Parliament according to the intention of the Parliament, which is discoverable from the language used by the Parliament. It is not for the court to mould or attempt to mould the language… 47 A little later, Gibbs J in Western Australian Trustee Executor and Agency Co Ltd v Commissioner of State Taxation of the State of Western Australia (1980) 147 CLR 119 said (at 126-127) : The established rule that no tax can be imposed on a subject by an Act of Parliament without words which clearly show an intention to lay the burden upon him does not mean that the court will strive to find loopholes where none are apparent; the words of the Act must be given a fair and reasonable construction without leaning one way or the other. However … if the terms of the Act plainly impose the tax they should be given effect, equally if they do not reveal a clear intention to do so the liability should not be inferred from ambiguous words. If the words in question are words of exception or exemption the same rules of construction should be applied. 48 In my view the approach to be applied was set out over a century ago by Isaacs J in Scott v Cawsey (1907) 5 CLR 132 (at 154-155): When it is said that penal Acts or fiscal Acts should receive a strict construction I apprehend it amounts to nothing more than this. Where Parliament has in the public interest thought fit in the one case to restrain private action to a limited extent and penalise a contravention of its directions, and in the other to exact from individuals certain contributions to the general revenue, a Court should be specially careful, in the view of the consequences on both sides, to ascertain and enforce the actual commands of the legislature, not weakening them in favour of private persons to the detriment of the public welfare, nor enlarging them as against the individuals towards whom they are directed. 49 See also B.P. Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 (at 280) (per Lord Simon of Glaisdale, Viscount Dilhorne and Lord Keith of Kinkel). 50 Similarly, the courts have more recently favoured the purposive approach, Kirby P noting in Deputy Commissioner of Taxation v Chant (1991) 24 NSWLR 352 (at 352): Purposive construction of taxation legislation: A provision such as s 221P of the Act is not to be construed in isolation. It must be read with reference to the purpose which it seeks to achieve. The modern approach to statutory construction requires courts to avoid a purely textual examination of legislative works and to seek out, instead, the purpose of the legislature so as to fulfil that purpose, within the words actually used: cf Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 423; see also the comments of the editor in Australian Tax Practice annotations on s 221P, vol 9, 4218.1 at 4218.4. Many of the problems which have bedevilled the construction of the Income Tax Assessment Act (Cth) have derived from the adoption of a purely textual approach and from a tendency to treat the labyrinthine complexity of the Act as an excuse for dealing with it in a special way, different from that adopted in the case of other statutes. There is no legitimate basis for adopting such an approach to the interpretation of the Act. So far as I am concerned, it is just another statute of the Federal Parliament. Within any authority binding on me, its words must be given their ordinary meaning, so far as possible to achieve their ostensible purpose.

The date of the contributions 51 The ITAA 1997 does not define 'contribution' or when a contribution is made. It follows that the meaning of contribution should be construed having regard to the context and underlying purpose of the legislative provisions in which the term appears: Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 (at 381-382). 52 The Macquarie Dictionary (6th online ed, Macmillan, 2013) defines 'contribution' in this way: noun 1. the act of contributing. 2. something contributed. 3. an article contributed to a magazine or the like. 4. an impost or levy. 5. Law a payment made in recognition of a shared liability, such as the payment by one insurer to another in the case of double insurance. 53 In the context of superannuation the Macquarie Dictionary (6th online ed, 2013) has these definitions: employee contribution noun an after-tax payment made from one's salary into a regulated superannuation fund. employer contribution noun a payment into an employee's nominated superannuation fund, made by the employer on behalf of the employee and not assessed as part of the employee's taxable income. 54 To consider the context, it is to be noted that the concessions in relation to superannuation funds are given only to those who comply with the regulatory provisions in the Superannuation Industries (Supervision) Act 1993 (Cth) (SISA). Funds which comply are complying superannuation funds. Such a fund must be a regulated fund under the SISA. It must have a trustee and such funds ordinarily take the form of a trust. As a trustee, the assets and income, profits and gains of the fund are held on trust on behalf of members of the fund. There is a sole purpose test in the SISA requiring fund trustees to maintain the fund solely for the purpose of providing retirement or similar types of benefits to or in respect of fund members. 55 The Commissioner points to the fact that in 1989 when a new section (s 82AAC) of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) was substituted for the previous section that allowed a deduction for an amount set apart as a superannuation fund, the Explanatory Memorandum emphasised that amounts set apart but not actually paid to a superannuation fund would be denied deduction. Only amounts paid to a fund as a contribution would subsequently be deductible. This was specifically in relation to 'contributions to superannuation funds for benefit of employees'. This would suggest, the Commissioner argues, that the fact that the funds were simply waiting to be paid is insufficient for them to be treated as constituting a contribution to a superannuation fund. 56 It is argued for the Commissioner, and I accept, that as references to making 'contributions' occur repeatedly throughout Pt 3-30 ITAA 1997, 'contribution' should be given a construction which would promote the purpose or object underlying Pt 3-30. Part 3-30 is a scheme attracting tax consequences to, amongst other things, the making of contributions to superannuation providers, this being, in turn, intended to promote the object of enabling taxpayers to provide for their retirement, in turn, attracting obvious public policy benefits. 57 The date of a contribution determines: (a) the income year in which a person making the contribution can claim a deduction, if allowable, in respect of the contribution (s 290-60(3) and s 290-150(3) provided that deductions are allowable only in the income year in which the contributions are made. (b) the income year in which the superannuation provider receiving contribution must, if required, include the contribution as assessable income; and (c) presently relevant, the financial year in which the contribution is included in a person's concessional or non-concessional contributions for the purpose of ECT. 58 Shortly after the events the subject of this appeal, the Commissioner published Tax Ruling 2010/1 entitled 'Income tax: superannuation contributions' (Tax Ruling). It has been modified four times, most recently in October 2012. The Tax Ruling deals with a number of matters. In relation to 'contribution', the Tax Ruling said (footnotes omitted): Earlier statutory contexts and case law on former provisions 119. Although the income tax law has, for many years, included specific provisions allowing deductions for superannuation contributions, very few Court and Tribunal decisions have been required to consider the meaning of 'contribution'. To the extent to which they have, some (such as those which concerned whether an amount had been set apart as a superannuation fund) are not, strictly speaking, relevant to the current income tax provisions which are expressed differently. However, those cases do add to the overall context in which the income tax laws should be interpreted. 120. For example, in the Commissioner of Taxation v Roche although Pincus J was required to consider the purpose for which a contribution was made he noted that the relevant payment 'augmented the size of the fund'. 121. In Lend Lease Corporation Ltd v Commissioner of Taxation Hill J made a similar observation in relation to the provision that allowed a deduction for an amount set apart as a fund: When the section refers to an amount being set apart as a fund, it appears to envisage a case where the act of 'setting apart' either creates an existing fund or supplements an existing fund … [with] the consequence that the amount has become subjected to the trusts of a fund. 122. A similar view was expressed by Doyle CJ in Hills Industries Ltd & Anor v Commissioner of State Taxation & Anor in relation to payroll tax legislation that was also concerned with amounts paid to, or set apart as, a superannuation fund: But the question remains of whether the act of crediting each account was a payment of money to a superannuation fund or a setting apart of money as a superannuation fund. As I observed earlier, the assets of the Fund held by the trustee were not increased by the crediting of these amounts. It is clear that the Fund referred to in the Rules comprises all of the assets of the Fund. Prima facie, one would expect that a payment of money to the Fund, or a setting apart of money (as an augmentation of) the Fund would increase the Fund, in the sense of resulting in an increase in the assets of the Fund. … How a thing of value increases the fund's capital 150. The capital of a superannuation fund may be increased by something of value provided directly or indirectly in a number of ways. 151. A 'contribution' is not limited to a direct payment of cash to the superannuation provider. A superannuation contribution can be made by transferring funds or other assets to the superannuation provider. Subject to the restrictions in the SISA on a superannuation fund acquiring assets from a related party, a transfer of an asset to a superannuation fund may be a contribution in specie. Transfer of funds 152. A superannuation fund's capital is most commonly increased by transferring funds to the superannuation provider. A transfer of funds, can occur in a number of ways including by cash, electronic transfer of funds, money order, bank cheque, personal cheque or through the use of a promissory note issued by a related party (the maker) at face value to the superannuation provider. 153. The funds can be denominated in Australian currency or a foreign currency. 154. However, if the capital of the fund is to be increased, there must be an actual transfer of funds to the superannuation provider. No payment will be made if the cheque, promissory note or similar negotiable instrument is not honoured. 155. How the transfer occurs is relevant to both whether the fund's capital is increased and when a particular contribution is made. Various cases and texts have noted that cheques and other negotiable instruments are not the same as cash. 156. For example, in Sidney Raper Pty Ltd v. Commonwealth Trading Bank of Australia [1975] 2 NSWLR 227, Moffit P said at 233 a bank cheque or other negotiable instrument although being treated by many as equivalent to, or as good as cash, is still a cheque and not cash. It is effectively converted to cash on presentation to the relevant financial institution if the drawer of the cheque has sufficient funds available in the account with the institution. 157. As noted in 'Mann on the Legal Aspect of Money' in the course of discussing the concept of 'payment': … the mere acceptance of the cheque or other instrument by the creditor does not of itself constitute 'payment', for it does not have the effect of making funds available to the creditor; such instruments only constitute payment if they are subsequently honoured … 158. In a similar vein, Rich J in Permanent Trustee Co (Executors of Estate of F H Prior, deceased) v. Federal Commissioner of Taxation, in discussing whether income was derived for the purposes of the ITAA 1936, noted that: [t]o see whether income has been derived one must look to realities. Usually payment of interest by cheque involves a receipt of income, but payment by a valueless cheque does not … You do not transform interest into an accretion of capital by writing out words on a piece of paper. There must be some reality behind them. Some accretion of value to corpus. 159. Further, Chalmers & Guest on Bills of Exchange states that a cheque, being payable on demand, is intended as an instrument which will immediately be paid. This can be contrasted with a bill of exchange, which is said to be a credit instrument which is frequently drawn payable at a future date. 160. An amount set aside but not actually paid is not a contribution. It is well established that the making of a journal entry in the books of an entity does not alone establish a payment. However, an actual payment, albeit to reimburse the superannuation provider for an expense incurred in operating the fund, may constitute a contribution. 161. An entity, often an employer sponsor of a superannuation fund, may agree to reimburse the superannuation provider for certain expenses incurred in operating the fund. For example, the employer may agree to reimburse the trustee for certain insurance premiums or administration costs of the fund. Consequently, the trustee may periodically invoice the employer for an amount of such expenses. This may be a reimbursement of the actual costs incurred and paid in operating the fund or be a payment of an amount based on some other figure such as a percentage of the salaries of every employee. This reimbursement increases the capital of the fund in the same way as any other transfer of funds and for the reasons set out in paragraphs 145 to 147 of this Ruling will be taken to be made for the purpose of benefiting the members of the fund. … General rule - a contribution is made when received by the fund 182. A superannuation contribution is made when the capital of the fund is increased. As explained in paragraphs 183 to 210 of this Ruling, the contribution may be made when an amount is received, or ownership of an asset is obtained or the fund otherwise obtains the benefit of an amount. Contributions of funds 183. A contribution of funds as cash or an electronic funds transfer, is made when the amount is received by the superannuation provider or credited to the relevant account. 184. It has been suggested that a contribution made by electronic funds transfer may occur as soon as the contributor has done everything necessary to effect a payment. The Commissioner does not accept that is sufficient to increase the capital of the fund. 185. Electronic payment systems operate through contractual arrangements between the: • payer and payer's financial institution; • payer's financial institution and payee's financial institution; and • payee's financial institution and payee. 186. When a financial institution agrees to accept a payment instruction it notifies the receiving institution of the details of the payment. In Australia there are several different clearing systems for the transferring of information and netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. Most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight. As such, it is not until an amount is credited to a bank account of the superannuation provider that a contribution will be taken to be made. 187. A superannuation provider's account statement would normally provide the best evidence as to when a contribution is received. However, in limited circumstances, other evidence may be used to determine when a contribution is made. For example, a transfer of funds between the linked accounts of a member of a self-managed superannuation fund and the fund held at the same financial institution may result in a contemporaneous debit and credit to the respective accounts with the funds being immediately available for use of the self-managed superannuation fund. When such a transfer occurs on a week-end, it is common for bank statements to show the transaction occurring on the next business day. Evidence, such as a computer print-out recording the receipt of the amount into an account of the superannuation provider, may be used to establish the timing of the contribution. (emphasis added) 59 In Federal Commissioner of Taxation v Roche (1991) 105 ALR 95 (at 101), referred to in this ruling, Pincus J said: Although the evidence with respect to the events at the end of the 1982 and beginning of the 1983 year appears to me to be a rather weak foundation for the ultimate conclusion, I have been unable to conclude that it involved any legal error. To revert to the central point relied on by the Commissioner, the finding that the expenditure at the end of the 1982 year was incurred to construct a large tax deduction without any immediate monetary outlay by the partnership is no doubt correct. But the expenditure also augmented the size of the fund. Unless one were to hold that a desire to get a tax deduction or a practice of lending money out of the fund to assist the employer's business must be taken to be inconsistent with the existence of a s 23F(2)(a) fund, no identifiable legal error can be discerned. The most one could say is that the factual result arrived at seems surprising. (emphasis added) 60 Although the Commissioner relies upon the observation by Pincus J that the sum of money involved augmented the fund, it does not appear to me that this case is of particular assistance to the Commissioner. The decision was really concerned with the question of whether or not a fund could be maintained for a purpose within s 23F of the legislation as it then stood, even if an important reason for its having been established and maintained was the obtaining of tax deductions. Section 23F required that the fund be maintained solely for superannuation. His Honour observed (at 99) that it was not conceivable that Parliament intended the exemption from income tax conferred by s 23F to be available only to taxpayers who have acted as they did without regard to the taxation concessions which are available to those who establish and maintain superannuation funds. It is very difficult to see how this decision illuminates the question of when a contribution is made, whether it be at the time of remitting funds by BPay or the time at which the funds are electronically recorded as having been received. 61 Both within the context of the object and purpose of the statutory provisions in the normal sense of the language, if the issue was the proper meaning of 'contribute', the verb, I think it would be open to argue and probably the preferable construction that one contributes at the point of time when funds are irreversibly dispatched to the correct destination. 62 However, it is 'contribution' repeatedly appearing in the statute. Taken in the statutory context, a contribution does not become a contribution at all until the point of time at which it is actually received. There is no doubt that the fund is meant to be built up for the benefit of members. That is consistent with the concept of superannuation contributions having been made gradually over the course of a person's working life as explained in the Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 (at [1.9]) (EM). 63 This understanding of 'contribution' tends to support a conclusion that a superannuation contribution will have been made at the time when the capital of the fund is actually increased or augmented. Relevantly to this case, in the case of a contribution of funds by way of an electronic funds transfer, the contribution will be made when the amount is received by the superannuation provider or credited to augment the relevant account. In contrast to this, Mr Liwszyc argues that a contribution made by electronic funds transfer, in this case BPay, occurs as soon as the contributor has done everything necessary to effect a payment. 64 The Commissioner makes the point (repeating the substance of his Tax Ruling) that electronic payment systems operate through contractual arrangements between the payer's financial institution and the payee's financial institution; and the payee's financial institution and the payee. At the time when a financial institution agrees to accept a payment instruction, it notifies the receiving institution of the details of the payment. 65 The evidence adduced (over and above the Tax Ruling) reveals that in Australia, there are several different clearing systems for the transferring of information and the netting of amounts to be transferred between institutions. The clearing rules of these systems bind the financial institutions but not the customers. In this particular case, the relevant bank processing the BPay instruction at issue relies upon contractual cl (5.4) of the BPay Biller Agreement which specifies: The Participating Biller acknowledges that Payer Directions received by a Payer Institution after its Payment Cut-Off Time will be processed by the Payer Institution and included in a Payment Instruction on the next Banking Business Day. 66 Further, other possibilities of delay are explained in cl 6 of the Biller Agreement. 67 There is no evidence before the Court that all transactions between institutions are processed instantaneously in real time. There would be no reason to expect this necessarily to be so albeit that there may well be instances when transactions are processed on the same day. 68 As Thompson Reuters (2013) Law Relating to Banker and Customer suggests, most small payments between institutions are not processed in real time but are subject to deferred net settlement which occurs overnight (see [4.1860], [4.1980] and [4.2090]). This is what happened in this instance. 69 In my view, the better argument is that the contribution was made on the date the funds were actually received. Once that is understood (and, indeed, as part of the context), nothing in the ITAA 1997 permits a taxpayer or a superannuation provider to deem a contribution to have been made on a date other than the date on which it was in fact made. Stipulating by some covering email or communication that it is intended for some other date, namely, the date on which the BPay entry was made, does not change the reality of the actual date of receipt.

Special circumstances 70 It follows that Mr Liwszyc needs to demonstrate special circumstances on which the Commissioner should have acted in his favour. 71 It goes without saying that 'special circumstances' require that there is something unusual or different outside the ordinary course of events. In a different context, Burchett J in Minister for Community Services and Health v Chee Keong Thoo (1998) 78 ALR 307 observed (at 324) (although Davies and Wilcox JJ found it unnecessary to expand upon the meaning of special circumstances) that the core of the idea of 'special circumstances': is that there is something unusual or different to take the matter out of the ordinary course, according to which the presumptions set out in the clause would be expected to apply. As a result, the ordinary course appears less appropriate or fair. Cf. Crabtree v. Hinchcliffe (Inspector of Taxes) (1972) AC 707 at 731 per Lord Reid; Jess v. Scott (1986) 12 FCR 187 at 195; Regina v. Secretary of State for the Home Department, Ex parte Mehta (1975) 1 WLR 1087; Re: X and the Adoption of Children Ordinance 1965 [1984] FCA 193; (1984) 2 FCR 533; Cortez Investments Ltd. v. Olphert & Collins (1984) 2 NZLR 434 at 437, 439, 441. In the reasons of the majority of the Administrative Appeals Tribunal, reference is made to Beadle v. Director-General of Social Security [1984] AATA 176; (1985) 60 ALR 225 at 228-9, where the joint judgment of Bowen C.J., Fisher and Lockhart JJ. discusses the meaning of the expression "special circumstances" as used in s.102(1)(a) of the Social Security Act 1947 (Cth). Their Honours said: "The legislature has indicated that six months latitude is sufficient in the normal case. The Director-General has power to fix a longer period in special circumstances. Presumably in this context special circumstances must include events which would render the six months unfair or inappropriate. ... The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase 'special circumstances', although lacking precision, is sufficiently understood in our view not to require judicial gloss." 72 The Macquarie Dictionary (6th ed, 2013) defines 'special' in this way Special adjective 1. of a distinct or particular character. 2. being a particular one; particular, individual, or certain. 3. relating or peculiar to a particular person, thing, instance, etc.: the special features of a plan. 4. having a particular function, purpose, application, etc.: a special messenger. 5. dealing with particulars, or specific, as a statement. 6. distinguished or different from what is ordinary or usual: a special occasion. 7. extraordinary; exceptional; exceptional in amount or degree; especial: special importance. 8. especially beloved or favoured: Myra was special to us. noun 9. a special person or thing. 10. a special train. 11. an item sold at a special, usually bargain price. 12. History a convict receiving special indulgence because of ability or birth. 13. a special edition of a newspaper. 14. a special constable. … 73 Taken in context, the usage of 'special circumstances' in the present instance is a usage which permits the decision-maker to relieve an applicant from the operation of a statutory rule. It is necessary to examine, within that context, whether or not the case is something unusual or different, taking it outside of the ordinary course. However, as noted in Beadle v Director General of Social Security (1985) 60 ALR 225 (at 228) (by Bowen CJ, Fisher and Lockhart JJ), having regard to s 292-465(3)(b), the consideration that the ordinary rule leads to an unfair, unreasonable or inappropriate result must be subordinate to the requirement that making the determination is consistent with the object of the legislation, in this case, Div 292. 74 The EM reflected this approach, providing (at [1.117]): The courts have considered what 'special circumstances' means in many different contexts. This is clear from the case law that special circumstances are unusual circumstances, or circumstances out of the ordinary. Where the circumstances are special will vary from case to case as the context requires, but in this context they must make it unjust, unreasonable or inappropriate to impose the liability for [ECT]. 75 The matter is well put, with respect, in AAT Case 11,379 (1996) 34 ATR 1175 (at [5]-[6]): 5. The term "special circumstances" has been the subject of numerous judgments and decisions in courts and tribunals. The ways in which people conduct their affairs are so numerous that legislators cannot predict, and hence allow for, every possible set of circumstances. Therefore, it is not possible, nor desirable, to attempt to codify the circumstances to be regarded as special. Each case is different to every other case and has to be treated on its merits. The point of legislation which allows for a discretion to be exercised in "special circumstances" is recognition of the fact that strict application of the legislation may in some unusual or unforeseen cases result in an unjust, unreasonable or inappropriate result; a result that the legislation did not intend. 6. There is no doubt that the applicant is unlucky to have fallen over the wrong side of the boundary line by such a small margin. I do not regard this fact as being special enough to invoke the desired discretion. In every piece of legislation where rights or entitlements are created there will be a division between those who qualify and those who do not. Those people whose cases fall marginally one side or the other may regard themselves as either lucky or unlucky as the case may be. So be it. 76 In my view, the difficulty for Mr Liwszyc is that it cannot be said: the BPay transfer initiated on one day and received the next is a 'special circumstance' (I am mindful that this conclusion has also been reached in previous decisions of the Administrative Appeals Tribunal (AAT): Rawson and Commissioner of Taxation [2012] AATA 322 (at [91]) and Chantrell and Commissioner of Taxation [2012] AATA 179 (at [31]-[32])); or that the fact that a subordinate bookkeeper made an error in making the contribution on 27 May 2010 is a special circumstance. 77 As submitted by the Commissioner, simple errors of this nature do not constitute special circumstances: see Tran and Commissioner of Taxation [2012] AATA 123 (at [15]). An innocent mistake or ignorance of the law does not in itself constitute a 'special circumstance' nor do simple errors, albeit innocent errors or other mistakes which are made in good faith. Equally, the fact that an error was made by another person does not in itself constitute 'special circumstances'. Although Mr Liwszyc was unaware of the precise details and timings of the payment, he had left it to the bookkeeper to arrange the payments. However, she was his subordinate, susceptible to his discretion and control as a matter of law and reality. He did not take steps sufficient to ensure that the payments she made were the right amounts at the right times.

The objects of Div 292 ITAA 1997 78 It is strictly not necessary then to consider whether a determination to allocate to another financial year all or part of Mr Liwszyc's concessional contributions would be consistent with the object of Div 292 ITAA 1997 but for completeness I will consider this question. I am obliged to accept the Commissioner's submissions that this cannot be so. The mechanics of the Division are designed to limit movement of assets into superannuation by imposing a cap on any contributions exceeding a certain figure from time to time and discouraging by taxing contributions which exceed the cap. The taxing takes the form of the imposition of ECT which is designed to discourage, as its name suggests, the making of excessive contributions beyond the cap. 79 The reality of the present situation is that Mr Liwszyc was by virtue of his office in the company in a position to ensure that contributions made in the financial year did not exceed the contributions cap. The statement received by Mr Liwszyc from AMP, as at 2 August 2009 showed that the contributions which were received on 1 July 2009 were received by AMP in the 2009/2010 financial year and all of the further contributions for that year were made after that date. Additionally, in relation to the contributions made on 1 July 2009, Mr Liwszyc's concessional contributions for the 2008/2009 financial year totalled $84,585.13 when the cap for the year was $100,000. From this it follows, in any event, that a reallocation of $38,499 from 2009/2010 to 2008/2009 would still cause him to exceed the 2008/2009 cap. 80 While it is easy to understand these events occurring, the approach taken by the Commissioner does accord with numerous decisions of the AAT and conforms with the particular Division of the Act. It may, on one view, particularly in relation to the payment made on 30 June and received on 1 July seem to be a rather rigid position to adopt but there is a limit to any discretionary power which the Commissioner is able to exercise to treat the payment as being made on the date it was sent rather than received. 81 But even from a very practical point of view, and without intending any criticism, there is no obvious reason why the payment could not have been made a week earlier such that the problem did not arise.

Discretionary factors 82 Assuming, contrary to my conclusions that the preconditions in s 292-465(3) ITAA 1997 are satisfied, in other words, that it was even permissible for the Commissioner to make a direction, I accept the Commissioner's submission that there is no mandatory obligation for the Commissioner to reallocate the payments in the manner requested. Section 292-465(1) uses the term 'may'. 83 Section 292-465(5) provides that the Commissioner may have regard to whether it would be more appropriate to reallocate a contribution made in the relevant financial year to another financial year instead. In this regard, the Commissioner says that it is relevant to take into account that Mr Liwszyc was in a position to supervise and control the actions of the bookkeeper, even though, as a matter of course, he did not actively do so in relation to the timing of various payments. Shortly put, it is argued that there are no factors within subs (5) and subs (6) to which the Commissioner could have had regard which would require that a discretion must be exercised favourably to Mr Liwszyc. That is, I repeat, even if these factors could fall for consideration having regard to the Commissioner being precluded from making a determination if there were not special circumstances. 84 For the purpose of subs (6), an examination of the terms of any agreement or arrangement between Mr Liwszyc and the bookkeeper may support a conclusion that he depended upon her as to the timing and the amount of the contribution to be made but it was clear that she was a bookkeeper under his control as an officer of the company. Even though it may be a commonplace occurrence, it does not appear to me that simply leaving the determination of the time and amount of a payment of a contribution to an employee would be a particularly favourable factor insofar as Mr Liwszyc was concerned. Further, I find that the documentation from AMP kept him informed or enabled him to be informed as to the level of contributions which had been made at any given time. 85 Further and in conclusion, as the appeal relates to an exercise of a discretion by the Commissioner I must be satisfied that there was an error in the decision not to exercise the discretion in Mr Liwszyc's favour rather than simply substitute some different exercise of discretion. 86 Although Mr Liwszyc has argued that there was an error on the part of the Commissioner in failing to exercise a discretion in his favour, he has not successfully pointed to any consideration the Commissioner failed to take into account which he was obliged to take into account or any extraneous matter which he took into account which he should not have considered. The contention advanced both before the Commissioner and this Court that the entitlement was being taken away with total disregard to the spirit of the legislation fails, in my respectful view, to take into account the features of the legislation discussed in these reasons.

CONCLUSION 87 Both the Commissioner and the Court together with Mr Liwszyc are bound by the statutory provisions. While it may be accepted that it is entirely commonplace to delegate tasks of this nature and that entirely innocent errors were made, the legislation does not enable the errors to be corrected. No error on the part of the Commissioner has been demonstrated. 88 It follows that the appeal must be dismissed with costs. I certify that the preceding eighty-eight (88) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.