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.
What will the election mean to you?
Sign up to our free newsletter, including this weekend’s coverage of the election.
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.