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ATO releases decision impact statement on early access to super case


The ATO has published a decision impact statement on a decision by the Administrative Appeals Tribunal which found the ATO should have used its discretion to exclude superannuation benefits received by an SMSF member as assessable income.

By Miranda Brownlee5 minute read

In March this year, the Administrative Appeals Tribunal handed down its decision in the case Wainwright and Commissioner of Taxation (Taxation) [2019] AATA 333, which involved two farmers in Queensland, Mr and Mrs Wainwright, who were also trustees of an SMSF.


Mr and Mrs Wainwright had purchased a property in their own names for $700,000 on 28 September 2007. They had used cash from the fund’s bank account to pay for the property, including an additional amount of $24,995.00 to pay the stamp duty for the transaction.

As trustees of the fund, they entered into a contract on 28 September 2007 to acquire a farming property from Mr Wainwright for $1.1 million. The $700,000 used to acquire the first property was treated by the parties as the payment of the fund’s deposit for purchasing the second property.

The taxpayers were not able to complete the contract concerning the second property on 31 January 2009, and the taxpayers were unable to repay the $700,000 deposit to the fund after they fell on hard times.

The taxpayers experienced a decline in their news agency business. In or around June 2009, they returned to dairy farming, which coincided with a drought. The drought was broken by flash flooding in January 2011 and the dairy market began to decline in January 2011. The taxpayers were forced to sell their dairy herd, and were required to sell their properties to pay their debts.

The taxpayers did not declare the superannuation benefits received from the fund in their assessable incomes for the 2008 and 2009 income years.

The commissioner issued amended income tax assessments, including $12,497 in assessable income for each taxpayer for the 2008 income year, which represented the amount accessed to pay the stamp duty in relation to the first property.

It also issued an amended income tax assessment for the 2009 income year which included $700,000 for the deposit that was not repaid to the fund for the second property.

Administrative penalties for recklessness and shortfall interest charges were also imposed.

Mr and Mrs Wainwright were disqualified from being trustees of the fund under section 126A of the Superannuation Industry (Supervision) Act 1993 (SISA).

While the AAT affirmed the amended assessments for the 2008 income year, it determined that the commissioner should have exercised his discretion under subsection 304-10(4) of the ITAA 1997 to exclude the amount of $700,000 from Mr Wainwright’s assessable income.

The tribunal confirmed that the decision by the taxpayers as trustees of the fund not to take any action against Mr Wainwright to recover the $700,000 paid as a deposit did give rise to a superannuation benefit to Mr Wainwright pursuant to subsection 304-10(1) of the ITAA.

However, having regard to the evidence, the AAT decided that the commissioner should have exercised the discretion under subsection 304-10(4) of the ITAA 1997 to decide that it was unreasonable to include the $700,000 in Mr Wainwright’s assessable income for a range of reasons.

These reasons included the fact that the transaction was a legitimate arm’s length, documented transaction and the taxpayer had no intention of deceiving, evading or cheating, and the transaction was entered after receiving professional advice.

The AAT also noted that the taxpayer was unable at the relevant time to complete the contract he had undertaken through no fault of his own and the benefit he received in 2009 resulted from facts that arose after he had entered into a legitimate transaction and resulted from events principally beyond his control.

In its decision impact statement, the ATO said the case was “highly factual” and the decision of the AAT concerning the exercise of the commissioner’s discretion under subsection 304-10(4) of the ITAA 1997 was open to it on the facts and evidence before it.

“In making this decision, the tribunal identified a series of factors, including some events which occurred after the relevant superannuation benefit was provided by the fund,” the ATO stated.

“In considering these factors, the tribunal did not refer to the weight or degree of relevance it had given or applied, to events that had occurred after the superannuation benefits were provided by the fund.”

The ATO also stated that little weight should be given to events that occur after superannuation benefits have been provided when deciding whether to exercise the discretion.

It also said that the commissioner will develop a Law Administration Practice Statement to provide further clarity on the exercise of the discretion set out in subsection 304-10(4) of the ITAA 1997.

The ATO said the decision does not have any implications for any related advice or guidance.

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ATO releases decision impact statement on early access to super case
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Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

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