A recent Administrative Appeals Tribunal (AAT) case has affirmed superannuants and their advisers cannot rely on one component of ATO information to determine a particular course of action and instead must take into account all relevant materials available.
In Lacey v Commissioner of Taxation, the superannuant, Raymond Lacey, claimed he had relied upon ATO materials to address his excess transfer balance cap (TBC) amount using a particular strategy.
To this end, Lacey attempted to rectify his TBC excess of $63,607.73 by commuting $30,000 and drawing down pension payments of $41,589.96 before the relevant 31 December 2017 deadline.
Specifically, he claimed he had relied upon two poorly worded paragraphs on the ATO website when deciding what to do, the first being: “If you exceed your transfer balance cap, you have to remove the excess from one or more retirement-phase income streams, and pay tax on the notional earnings related to that excess.”
He said the second poorly worded paragraph he trusted said: “If, on 1 July 2017, you are over your $1.6 million cap by $100,000 or less and you remove this excess by 31 December, then you will not have to pay excess transfer balance tax or account for notional earnings.”
Lacey said he took this to mean he could use pension drawdowns to eliminate his excess TBC amount.
The AAT held it was not within its powers to entertain or determine an application against the ATO for misleading or deceptive conduct, but acknowledged Lacey had acted in good faith.
In particular, it was pointed out a reference to ATO Law Companion Ruling 2016/9 would have clarified his misinterpretation of the situation.
“He was taken during cross-examination to other materials that would have clarified that there was not misapprehension that the pension payments would have fixed the issue,” DBA Lawyers senior associate William Fettes said when reviewing the case at the legal firm’s latest Sydney strategy seminar.
“So they sort of gave him some credit, but nothing in his favour here. And they just observed that it was regrettable that all those commonwealth resources were expended in seeking to defend the content of an ATO document where it didn’t have jurisdiction and the document had been replaced by a more informative version.”