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Edited version of your written advice
Authorisation Number: 1013025640094
Date of advice: 30 May 2016
Ruling
Subject: Personal injury contribution to a self-managed superannuation fund
Question
Can the Commissioner grant your client an extension of time to make a contribution arising from a structured settlement or order for personal injuries under section 295-95 of the Income Tax assessment Act 1997 (ITAA 1997) if the contribution is made more than 90 days after the required period set out in paragraph 295-95(1)(b) of the ITAA 1997?
Answer
No.
This ruling applies for the following period
Year ended 30 June 2016
The scheme commenced on
1 July 2015
Relevant facts and circumstances
Your client was injured in an accident several years ago.
Your client received a personal injury compensation during the relevant income year.
A medical practitioner has determined that your client can never be gainfully employed again.
Your client placed the funds from the personal injury compensation payout into a short term deposit for three months.
Your client wishes to make a personal injury contribution to their self-managed superannuation fund (SMSF) under section 292-95 of the Income Tax assessment Act 1997 (ITAA 1997).
Relevant legislative provisions
Income Tax Assessment Act 1997 section 292-85
Income Tax Assessment Act 1997 section 292-90
Income Tax Assessment Act 1997 section 292-95
Reasons for decision
Summary
The Commissioner does not have a discretion to grant your client an extension of time to make a contribution arising from a structured settlement or order for personal injuries under section 295-95 of the Income Tax assessment Act 1997 (ITAA 1997) if the contribution is made more than 90 days after the required period set out in paragraph 295-95(1)(b) of the ITAA 1997
Detailed Reasoning
Non-concessional contributions are defined in section 292-90 of the ITAA 1997 and include certain contributions and amounts that are not included in the assessable income of a complying superannuation fund. Generally, non-concessional contributions include personal contributions for which an income tax deduction is not claimed, spouse contributions and excess concessional contributions.
Under section 292-85 of the ITAA 1997 a person has excess non-concessional contributions for a financial year if the amount of the person's non-concessional contributions for the year exceeds the person's non-concessional contributions cap for the year
Under section 292-95 of the ITAA 1997 payments arising from structured settlement or orders for personal injury that are contributed to superannuation are excluded from the non-concessional contributions cap.
Section 292-95(1) 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.
(c) 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).
All conditions under section 292-95(1) of the ITAA 1997 must be met before the contribution to superannuation is excluded from the non-concessional contributions cap.
Under paragraph 292-95(1)(b) of the ITAA 1997 the contributions arising from a structural settlement or court order for personal injuries must be made within 90 days of the later of:
• the day the taxpayer received the personal injury payment;
• the day an agreement for settlement of the personal injury payment was entered into; or
• the day on which a court order for the personal injury payment was made.
In this case your client received a personal injury during the relevant income year. Your client placed the monies into a short term deposit for three months. The period of 90 days as referred to in paragraph 292-95(1)(b) of the ITAA 1997 has lapsed. Therefore the condition under paragraph 292-95(1)(b) of the ITAA 1997 has not been met.
It should be noted that the Commissioner does not have a discretion under the income tax legislation to grant your client an extension of time to make a contribution arising from a structured settlement or order for personal injuries under section 295-95 of the ITAA 1997 if the contribution is made more than 90 days after the required period set out in paragraph 295-95(1)(b) of the ITAA 1997.
As mentioned above, all conditions under subsection 292-95(1) of the ITAA 1997 must be met before the contribution to superannuation is excluded from the non concessional contributions cap. As your client does not meet one condition under that section, your client is not entitled to make a superannuation contribution under section 292-95 of the ITAA and have it excluded from the non-concessional contributions cap.