Edited version of administratively binding advice

Authorisation Number: 1012637265351

Advice

Subject: Non-concessional contributions.

Question

Will the contributions you intend to make from personal injury proceeds be non-concessional contributions for the purposes of section 292-90 of the ITAA 1997?

Answer

No, provided all the conditions will be satisfied.

Income periods

Year ending 30 June 2014.

Relevant facts

You are a member of a self-managed superannuation fund (the Fund).

During the 2013-14 income year you received an amount in respect of your claim for personal injury:

Payments were made pursuant to the Safety, rehabilitation and Compensation Act 1998 (SRC Act).

You wish to make contributions to the Fund consisting of the injury proceeds and have them excluded from your non-concessional contribution cap for the 2013-14 income year.

You have provided copies of medical documents certifying your permanent incapacity.

Relevant legislative provisions:

Income Tax Assessment Act 1997 Section 292-80.

Income Tax Assessment Act 1997 Section 292-85.

Income Tax Assessment Act 1997 Section 292-90.

Income Tax Assessment Act 1997 Subsection 292-90(2).

Income Tax Assessment Act 1997 Paragraph 292-90(2)(c).

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 Subsection 292-95(2).

Income Tax Assessment Act 1997 Subsection 292-95(3).

Income Tax Assessment Act 1997 Subsection 292-95(4).

Income Tax Assessment Act 1997 Subsection 292-95(5).

Reasons for decision

Summary

The contributions you intend to make from your personal injury funds will be excluded from being non-concessional contributions, and therefore excluded from the non-concessional contributions cap, for the 2013-14 income year provided all the requirements are satisfied for each contribution.

Detailed reasoning

Non-concessional contributions

Non-concessional contributions made to superannuation funds are subject to an annual cap in accordance with subsection 292-85(2) of the Income Tax Assessment Act 1997 (ITAA 1997). For the 2013-14 income year, the non-concessional contributions cap is $150,000.

Non-concessional contributions for an income year are defined under section 292-90 of the ITAA 1997 and include:

• personal contributions for which an income tax deduction is not claimed;

• contributions a person's spouse makes to their superannuation fund account;

• transfers from foreign superannuation funds (excluding amounts included in the fund's assessable income) and

• excess concessional contributions (if any) for the income year.

Exclusions from the non-concessional contributions cap

Under subsection 292-90(2) of the ITAA 1997 a number of contribution types are excluded from being non-concessional contributions and are therefore excluded from the non-concessional contributions cap for the relevant income year. In particular, subparagraph 292-90(2)(c)(ii) excludes a contribution covered under section 292-95.

Section 292-95 of the ITAA 1997 covers contributions arising from structured settlements or orders for personal injuries. The contributions you intend to make are from compensation proceeds you received under sections 24 and 27 of the Safety, rehabilitation and Compensation Act 1998 (SRC Act) for permanent impairment and non-economic loss.

Whether the planned contributions satisfy the exclusion requirement will be discussed below.

Conditions to be satisfied

Section 292-95 of the ITAA 1997 states:

(1) A contribution is covered under this section if:

(a) the contribution arises from:

(i) the settlement of a claim that satisfies the conditions in subsection (3); or

(ii) the settlement of a claim in relation to a personal injury suffered by you under a law of the Commonwealth or of a State or Territory relating to workers compensation; or

(iii) the order of a court that satisfies the conditions in subsection (4); and

(b) the contribution is made within 90 days after the later of the following:

(i) the day of receipt of the payment from which the contribution is made; or

(ii) in relation to subparagraph (a)(i) or (iii) - the day mentioned in subsection (2); and

(c) 2 legally qualified medical practitioners have certified that, because of the personal injury, it is unlikely that you can ever be *gainfully employed in a capacity for which you are reasonably qualified because of education, experience or training; and

(d) no later than the time the contribution is made to a *superannuation plan, you or your *legal personal representative notify the *superannuation provider in relation to the plan, in the *approved form, that this section is to apply to the contribution.

(2) For the purposes of subparagraph (1)(b)(ii), the day is:

(a) for a settlement mentioned in subparagraph (a)(i):

(i) the day on which the agreement mentioned in paragraph (3)(c) was entered into; or

(ii) if that agreement depends, for its effectiveness, on being approved (however described) by an order of a court, or on being embodied in a consent order made by a court - the day on which that order was made; or

(b) for an order mentioned in subparagraph (1)(a)(iii) - the day on which the order was made.

(3) For the purposes of subparagraph (1)(a)(i), the conditions are as follows:

(a) the claim:

(i) is for compensation or damages for, or in respect of, personal injury suffered by you; and

(ii) is made by you or your *legal personal representative;

(b) the claim is based on the commission of a wrong, or on a right created by statute;

(c) the settlement takes the form of a written agreement between the parties to the claim (whether or not that agreement is approved by an order of a court, or is embodied in a consent order made by a court).

(4) For the purposes of subparagraph (1)(a)(iii), the conditions are as follows:

(a) the order is made in respect of a claim that:

(i) is for compensation or damages for, or in respect of, personal injury suffered by you; and

(ii) is made by you or your *legal personal representative;

(b) the claim is based on the commission of a wrong, or on a right created by statute;

(c) the order is not an order approving or endorsing an agreement as mentioned in paragraph (3)(c).

(5) If a claim is both:

(a) for compensation or damages for personal injury suffered by you; and

(b) for some other remedy (for example, compensation or damages for loss of, or damage to, property);

Subsections (3) and (4) apply to the claim, but only to the extent that it relates to the compensation or damages referred to in paragraph (a), and only to amounts that, in the settlement agreement, or in the order, are identified as being solely in payment of that compensation or those damages.

As the planned contributions have arisen from settlement of a claim in relation to a personal injury suffered by you under a law of the Commonwealth, subparagraph 292-95(1)(a)(ii) applies. As a result, further requirements under section 292-95 must be satisfied:

_ the contribution is made within 90 days of the later of the payment being received or the order coming into effect;

_ two legally qualified medical practitioners have certified that as a result of the injury the injured person is unlikely to ever be able to be gainfully employed in a capacity for which they were reasonably qualified because of education, experience or training; and

_ a notice in the approved form is provided to the trustee of the superannuation fund no later than the time the contribution is made stating that section 292-95 of the ITAA 1997 applies to the contribution.

According to the facts you plan to make the contributions within 90 days of the personal injury payment having been received. As such, provided you make the contributions within the 90 day requirement, paragraph 292-95(1)(b) will be satisfied.

You have provided medical documentation certifying that you are permanently and totally incapacitated and will never work again. These documents satisfy the requirements in paragraph 292-95(1)(c) of the ITAA 1997.

No later than the time the contributions are made, paragraph 292-95(1)(c) of the ITAA 1997 requires a notice in the approved from to be provided to the trustee of the fund stating that section 292-95 of the ITAA 1997 applies to the relevant contributions

Provided a notice in the approved form (contributions for personal injury form - NAT 71162) is supplied to the trustee no later than each time a contribution from injury proceeds is made to the fund, this requirement will be satisfied.

Further issues for you to consider

The legislation does not stipulate whether all the proceeds from an injury payout must be contributed to a superannuation fund for the non-concessional contribution exclusion to apply. It also does not specify whether the proceeds from an injury payout must be contributed as a single contribution or whether multiple contributions can be made. Lastly, there is no explicit requirement for the trustee of the superannuation fund to acknowledge the approved form. The legislation only specifies that the notice must be received before or at the time the contribution is made.

As such, the exclusion will apply to whatever proportion you choose to contribute to your superannuation fund provided each separate contribution satisfies the requirements of section 292-95 of the ITAA 1997 listed above.

Where contributions are excluded from being non-concessional contributions, they are also excluded from the non-concessional contributions cap. As such, they will not count towards the bring-forward provision.

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