Tribunal upholds ATO decision on excess transfer balance

According to the court documents, Mr Jacobs wrote to the ATO on 22 March 2017 to advise that he had estimated the annuity would provide $29,335 in income for the financial year ended 30 June 2017, and that he also had a superannuation balance of approximately $1,117,000 but was unable to accurately forecast what that might be on 30 June 2017.

He also told the ATO that he did not want to go over the $1,600,000 million transfer balance cap and incur a tax liability.

Mr Jacobs requested that the ATO advise how the CSS annuity would be used in the $1.6 million superannuation threshold calculation.

On 19 April 2017, the ATO replied to Mr Jacobs’ query regarding the superannuation changes effective 1 July 2017. The ATO advised that “most defined benefit income stream don’t have a readily available account balance; therefore, special rules have been developed to value them, which is called the special value”.

The special value is based on multiplying the annual amount payable under the defined benefit income stream when it commences being on 1 July 2017 by 16, the ATO explained.

On 14 November 2017, the Commonwealth Superannuation Corporation (CSC), as administrator of the CSS, lodged a transfer balance account report form for the period commencing 1 July 2017, which indicated that Mr Jacobs had a CSS capped defined benefit income valued at $477,958.11. This amount is what is known as the special value.

On 12 December 2017 Australian Administrative Services, as administrator of AustralianSuper, lodged a transfer balance account report form for the period commencing 1 July 2017, indicating that Mr Jacobs had an AustralianSuper account-based superannuation income stream valued at $1,152,236.42.

On 23 January 2018, the ATO issued an excess transfer balance determination form for the period commencing from 1 July 2017 indicating that Mr Jacobs had an excess capital amount of $30,194.53, a current total transfer balance cap of $1,600,000 and a current transfer balance of $1,631,716.71.

The ATO advised Mr Jacobs on 23 January 2018 that as it had determined that he had exceeded the cap and was required to commute an amount of $31,716.71 out of his superannuation income streams by 26 March 2018.

On 12 February 2018, the CSC lodged a transfer balance account report form for the period commencing 1 July 2017 which indicated that Mr Jacobs had a CSS capped defined benefit scheme superannuation income stream valued at $477,958.11.

Mr Jacobs wrote to the ATO on 28 February 2018 requesting a review of the ATO’s determination and advised that, upon the receipt of the ATO’s determination, he had contacted his AustralianSuper fund and his CSS fund for further information and lodged a withdrawal request for the notified amount on the same day.

He also told the ATO that because he was overseas for a substantial part of May and June 2017, he had to make a calculation as best he could in the time available in order to be under the cap.

“I believe that I made a fair and reasonable effort to comply with the new arrangements in the context of the very little definitive information available at the time from any source,” he told the ATO.

On 9 March 2018, Australian Administrative Services lodged a transfer balance account report form for the period commencing 1 July 2017 which indicated that Mr Jacobs had commuted $31,716.71 from his Australian superannuation scheme as required by the ATO determination.

On 18 April 2018, the ATO determined that Mr Jacobs had a current excess transfer balance earnings amount of $1,735.02 for the period commencing 1 July 2017 and an excess transfer balance tax liability of $260.25.

The ATO then issued Mr Jacobs with a superannuation excess transfer balance tax notice of assessment on 10 May 2018 because he had exceeded his transfer balance cap and had an excess transfer balance tax liability of $260.25 which was due for payment by 14 May 2018.

On 10 May 2018, Mr Jacobs lodged a formal objection to his excess balance tax liability assessment and contended that the assessment was wrong because of the general inadequacy of timely, official precise information on the change to super cap which would have better informed him on what he needed to do and by when in order that he would not incur an additional tax liability.

Mr Jacobs also noted in his objection that media coverage prior to June 2017 generally implied action needed to be finalised by 30 June 2017 and the letter from the ATO dated 19 April 2017 confirmed the changes were effected 1 July 2017 and did not in any way indicate there could be opportunities to act post 30 June when information became clearer.

He also stated that he had made the best calculations he could based on the information available to him before 30 June and was confident he would not exceed the cap and that he had not been aware at the time of the extension up to 31 December to take appropriate steps.

On 4 July 2018, the ATO advised Mr Jacobs that it had not allowed his objection to the superannuation excess transfer balance tax notice of assessment dated 23 April 2018.

The ATO said in its decision that it had informed Mr Jacobs on 19 April 2017 of how the special value of the defined benefit income stream was calculated and had referred him to the ATO website for further information and to its law companion guide 2016/10 which would have provided him with the necessary information relating to the excess transfer balance cap on the transitional rules applicable to him.

The Tax Office also stated that while the transitional rules would have enabled him to remove any excess capital by 31 December 2017, in his case he would have been in excess of his transfer balance cap by $30,194.53 and did not commute that amount before 31 December 2017, and it was Mr Jacobs’ responsibility to be aware of any tax or superannuation changes and how they specifically applied to him.

It also pointed out that the commissioner has no discretion to alter the commencement date for his assessment from 1 July 2017 and no authority to remit the excess transfer balance tax even in the event that there were mitigating factors.

In its determination, the tribunal said the fact that Mr Jacobs calculated the value of the special benefit incorrectly or applied an incorrect formula did not satisfy the burden of proving that the assessment was incorrect.

“Mr Jacobs now acknowledges that he made an error and that information was available to him. The ATO also referred him to the relevant information well before the end of the transitional period in April 2017,” it stated.

“Mr Jacobs suggests that there should be discretion to waive the tax liability where he made a minor error and was not aware of the transitional provisions. However, no such discretion exists in the legislation.”

The tribunal found that based on the available evidence, Mr Jacobs had failed to establish that the assessment of his excess transfer balance tax liability was excessive.