ATO Interpretative Decision

ATO ID 2007/224 (Withdrawn)

Superannuation

• This ATO ID is withdrawn because it contains a view in respect of provisions contained in the Protected Estates Act 1983 and that Act was repealed with effect from 1 July 2009 and therefore those provisions do not apply after the 2008-2009 income year. Furthermore, this ATO ID also contains references to the Office of the Protective Commissioner, which merged with the Public Trustee NSW and was renamed as the NSW Trustee and Guardian from 1 July 2009.
  Additionally, this ATO ID was written initially based on a specific case, and it is highlighted within its content that ...
  '..in this case the Protective Commissioner has directed that the damages must be paid to an account ...'
  The interpretative decision made here, for which is highlighted in this ATO ID was determined as a directive, specific to an individual case, and therefore should not apply to all cases in similar scenario's.
  Subsequent to its withdrawal, this ATO ID is not to be a precedential ATO view in respect of decisions for other income years.
  This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

In this case, does the 90 day period a person is allowed by subparagraph 292-95(1)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) to make a non-concessional superannuation contribution from a court ordered personal injuries payment commence when the amount is paid from the court to the Office of the Protective Commissioner?

Decision

No. In this case the 90 days commences when the Office of the Protective Commissioner releases the money to the persons appointed as managers of the protected person's estate. A contribution made by the managers of the estate to a superannuation fund within 90 days of their receipt of the personal injuries payment can be excluded from being a non-concessional contribution.

Facts

A child was injured in a car accident.

The child was awarded damages pursuant to a court order. At that time, the court ordered that certain monies be paid into court. Some of that money was released to pay the child's medical expenses, with the balance invested.

Some time later, the Supreme Court made an order under section 13 of the Protected Estates Act 1983 (NSW) that the child is incapable of managing their affairs.

The Court further ordered two adults be appointed as managers of the child's estate pursuant to section 22 of that Act.

The Court order also noted that the personal injuries damages that were invested under the earlier court order should paid out to the managers of the child's state.

The damages, including the income earned while invested, was subsequently paid to the Office of the Protective Commissioner.

The money remains in an account held by the Protective Commissioner.

The managers of the child's estate will, if able, contribute the money held by the Protective Commissioner to a superannuation fund as the Protective Commissioner has directed that the payment be made to a bank account in the name of the protected person for the purpose of being contributed to a superannuation fund.

The managers have sought advice from the Tax Office as to whether the amount can be excluded from the non-concessional contributions cap under section 292-95 of the ITAA 1997.

Reasons for Decision

The combined effect of subparagraphs 292-90(2)(c)(ii) and 292-95(1)(b)(i) of the ITAA 1997 is to ensure that a contribution made from a person's personal injury damages is excluded from the person's non-concessional contributions. This means that a person can contribute the proceeds of a personal injuries settlement or court order to superannuation without breaching the non-concessional contributions cap. However, to exclude a contribution made from the proceeds of a court ordered damages payment, subsection 292-95(1)(b) of the ITAA 1997 requires the contribution to be made within 90 days of the later of the day:

•

of receipt of the payment from which the contribution is made, or

•

on which the court order was made.

The Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006 described this requirement as follows:

1.96 The contribution must be made to a superannuation fund within 90 days of the payment being received or the structured settlement or order coming in effect, whichever is later. [Schedule 1, item 1, paragraph 292-95(1)(b)]

In this case, no superannuation contribution has been made within 90 days of the court order.

Further, no contribution has been made within 90 days of the amount being received by the Office of the Protective Commissioner.

Under section 13 of the Protected Estates Act, the Supreme Court of NSW can order that the estate of a person (a protected person) is to be subject to management under this Act. By section 22 of this Act, the Court can appoint suitable persons as managers of the estate of a protected person. Under section 30 of this Act, the Protective Commissioner may authorise and direct the functions of a manager of a protected person's estate.

Such directions appear to be given to managers in all cases. Fact Sheet No 3 issued by the Office of the Protective Commissioner states that while a person may have been formally appointed as a manager of a protected person's estate, the manager has no power or authority to manage the person's financial affairs until the manager is issued with a document called 'Directions and Authorisations'. These 'Directions and Authorisations' are settled after the managers and the Office of the Protective Commissioner have met to discuss the needs of the protected person.

We have considered the scheme of the Protective Estates Act and the fact sheet referred to above. Further, we note that in this case the Protective Commissioner has directed that the damages must be paid to an account opened in the name of the protected person for payment into a superannuation fund within 90 days.

For the purposes of subparagraph 292-95(1)(b)(i) of the ITAA 1997, we have concluded that 'the day of receipt of the payment from which the contribution is made' is not the day that the court released money to the Office of the Protective Commissioner. Rather we consider 'the day of receipt' to be day the money is released to the managers of the protected person's estate as required by:

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the order appointing the managers, and

•

the Protective Commissioner's direction to pay the amount to an account opened in the name of the child.

That is, 'the day of receipt' will in this case be the day the money is paid by the Office of the Protective Commissioner to the bank account in the name of the child.

Provided the managers of the estate make a superannuation contribution within 90 days of the day the money is placed in that account, the contribution can be excluded from being a non-concessional contribution for the purposes of section 292-90 of the ITAA 1997.

Note that the other conditions of section 292-90 of the ITAA 1997 will also have to be satisfied. This includes the condition that two legally qualified medical practitioners have certified that, because of the personal injury, it is unlikely that the child can ever be gainfully employed in a capacity for which he is reasonably qualified because of education, experience or training as required by paragraph 292-95(1)(c) of the ITAA 1997. Also, when making the contribution, the managers will be required to give the relevant superannuation fund the Contribution for personal injury form (Nat 71162) as required by paragraph 292-95(1)(d) of the ITAA 1997.

Year of income:  Year ended 30 June 2008

Legislative References:
Income Tax Assessment Act 1997
   section 292-90
   subparagraph 292-90(2)(c)(ii)
   section 292-95
   paragraph 292-95(1)(b)
   subparagraph 292-95(1)(b)(i)
   paragraph 292-95(1)(d)

Other References:
Paragraph 1.96 of the Explanatory Memorandum to the Tax Laws Amendment (Simplified Superannuation) Bill 2006
Exclusion from the transitional non-concessional contributions cap (Nat 70645)
Transitional contributions personal injury election (Nat 70801)
Contributions for personal injury form (Nat 71162)
Fact Sheet No 3 issued by the Office of the Protective Commissioner

Keywords
Superannuation
Superannuation contributions
Superannuation excess contributions tax
Non-concessional contributions
Non-concessional contributions - personal injury payments

Business Line:  Superannuation

Date of publication:  14 December 2007

ISSN: 1445-2782