ATO urged to reconsider “harsh and unfair” decision against truck driver that stripped him of all his superannuation savings

The deputy president of Australia’s Administrative Appeals Tribunal (AAT) has urged the tax office to reconsider a “harsh and unfair” decision made in 2013 to penalise a retired postal truck driver over $200,000 – all of his superannuation savings.

In a decision handed down earlier this week, AAT deputy president Gary Humphries upheld – with “considerable regret” – a penalty from the Australian Taxation Office (ATO) against former Australia Post truck driver Colin Ward.

In 2008, Ward and his wife had both retired with a collective nest egg of around $470,000 and, with fears for their retirement savings longevity in the roil of the Global Financial Crisis, withdrew their collective savings early in 2008 and put them in term deposits.

Acting on advice from their bank, later that year the two removed their savings from the term deposits into a BT cash only pension fund, contributing an amount of exactly $450,000 to take advantage of the ‘bring forward’ rule for the financial year. However, through this rule, there is a condition that no non-concessional contributions can be made in the subsequent two financial years.

After discovering their chosen fund did not have a fixed interest rate as they believed, Ward and his wife withdrew their money and returned it to term deposits. In 2010 they were advised to establish a self-managed super fund (SMSF), and then deposited two non-concessional contributions into them, each of $450,000, after selling their Canberra home.

In 2012, the ATO then sent an excess contributions tax Notice of Assessment to Ward, stating a tax liability of $209,250 thanks to excess contributions.

Since these occurrences, a review by the Inspector-General of Taxation sparked changes to non-concessional contribution tax legislation, with the review of the system labelled “severe” by the Inspector-General.

Humphries labelled it “a penalty of extraordinary harshness”, but upheld the decision through a “strict application of the law”. However, the deputy president pleaded with Tax Commissioner Chris Jordan and Minister for Finance Mathias Cormann to nix the penalties as “an act of grace payment”.

“Setting out only to protect his and his wife’s superannuation nest egg after a lifetime of low-paid employment, and acting in good faith with professional advice, Mr Ward has unwittingly forfeited to the Tax Office the entire proceeds of his superannuation savings,” Humphries said in the initial 2015 decision.

“I urge the Commissioner to reconsider the fairness of enforcing this penalty on Mr Ward. If he will not, I reiterate my commendation to the Minister for Finance to consider an act of grace payment.”

Speaking to Fairfax, Ward said the tax office’s approach was “vicious”, and that the five-year-long legal case had taken a toll on their finances and health.

“We’ve been crushed and it’s all little bit too much for an ordinary bloke,” he told Fairfax.

“I wasn’t a high-income earner and my last wage was $54,000 before tax. My wife worked part-time and together we managed to save for our retirement and then they go and take it off you.”

SmartCompany contacted the ATO but did not receive a statement prior to publication.

NOW READ: Budget 2018: Your complete guide to superannuation changes

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John Hutchinson
John Hutchinson
2 years ago

Using sandpaper to rough up a Cricket Ball in a Test Match is totally Un-Australian according to the Prime Minister and yet this totally acceptable. Disgusting lowlifes at the ATO and our elected representatives. I’m sure Constitutionally, the penalty is unacceptable as well, but I’m no lawyer.

Amy Gold Coast
Amy Gold Coast
2 years ago

Digusting behaviour from the ATO, this man clearly was trying to do the right thing by getting professional advice and you rip him of his retirement savings.
Seems the leaders of this country are not about helping it’s citizens at all. Its all about gathering more revenue so they can spend it without any repercussion, or start another Gov department so they can employ more of their mates.
This country is all about punishment.

haydn
haydn
2 years ago

The problem is the way public servants apply “the rules”. There is often some means of making allowance for this kind of situation in legislation but no one wants to use it because everyone has, in their eyes, to be treated (brutally) equal. That means no one wants to put their backside on the line and make a decision that makes the situation fair(er) for any one individual. One wonders how high in the upper echelons of the ATO this was ever referred.
Why does it take AAT deputy president Gary Humphries to state the bleeding obvious?