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Subject: Non-concessional contributions cap
Question:
Will the Commissioner exercise his discretion to allow an amount proposed to be contributed to a complying superannuation fund to be treated as a contributions arising from a structured settlement or order for personal injuries under section 292-95 of the Income Tax Assessment Act 1997 and not be counted towards the taxpayer's non-concessional contributions cap for the 2012-13 income year?
Advice:
No.
This advice applies for the following period:
Year ended 30 June 2013
The arrangement commences on:
1 July 2012
Relevant facts and circumstances
Your client is under 55 years of age.
Your client suffered an injury a few years ago.
Proceedings commenced in the Supreme Court (the Court) in respect of your client's injuries.
An order was made by the Court for your client to receive a compensation payment.
Your client proposes to contribute one million dollars of the compensation payment to a superannuation fund.
You state that contributing part of the compensation payment to a superannuation fund would improve your client's eligibility for additional assistance from a government organisation.
Relevant legislative provisions
Income Tax Assessment Act 1997 Section 292-90.
Income Tax Assessment Act 1997 subparagraph 292-90(2)(c)(ii).
Income Tax Assessment Act 1997 Section 292-95.
Income Tax Assessment Act 1997 Subsection 292-95(1)
Income Tax Assessment Act 1997 Paragraph 292-95(1)(b)
Income Tax Assessment Act 1997 Subparagraph 292-95(1)(b)(i)
Reasons for decision
Summary
The compensation payment made pursuant to the Court order in respect of your client's injury was made on the payment date.
In order for the superannuation contribution to be excluded from being counted towards your client's non-concessional cap, it must have been made by a specific date, that is, ninety days after the payment date.
There is no provision in the income tax legislation that gives the Commissioner the power to exercise discretion to grant an extension of time for a person to contribute a court-ordered compensation payment after the 90 day period.
Detailed reasoning
Subparagraphs 292-90(2)(c)(ii) and 292-95(1)(b)(i) of the Income Tax Assessment Act 1997 (ITAA 1997) exempt certain contributions made from a person's personal injury compensation from the person's non-concessional contributions cap. This means that a person may contribute proceeds of a personal injuries settlement or court-ordered compensation payment into superannuation without breaching the non-concessional contributions cap.
To exempt a contribution made from the proceeds of a court ordered compensation payment, subsection 292-95(1)(b) of the ITAA 1997 requires that the contribution 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.
In this case, no superannuation contribution has been made within 90 days of the amount being received by your client.
The day of receipt of the payment referred to in subparagraph 292-95(1)(b)(i) of the ITAA 1997 is the day upon which the person who is entitled to the payment under the court order of settlement receives the payment. The person who is entitled to the payment includes an injured person's legal personal representative.
Your client is the recipient of the compensation payment. The payment was received by your client on the payment date. Therefore, the 90 day period commences on the payment date and ends on a specific date.
Discretion
There is no provision in section 292-95 of the ITAA 1997 which extends the time limit specified in subsection 292-95(1)(b) to contribute a court-ordered compensation payment to a superannuation find.
Similarly, there is any other provision of the ITAA 1997 that gives the Commissioner the power to exercise discretion to grant an extension of time for a person to contribute a court-ordered compensation payment after the 90 days. The Commissioner can only exercise discretion when he is given that power under a law he administers.
This is regardless of whether the reasons were within or beyond a taxpayer's control.
Although your client appears to have failed to make a contribution within the time required to qualify for an exemption from the non-concessional contributions cap, your client may still make a contribution up to the non-concessional cap amount into a superannuation fund.
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