Edited version of your written advice

Authorisation Number: 1051414377171

Date of advice: 17 August 2018

Ruling

Subject: Lump sum superannuation benefit

Question

Will the amount, received as superannuation disability lump sum, be excluded from the calculation of your transfer balance cap?

Answer

No.

This ruling applies for the following period:

Year ending 30 June 2018

The scheme commences on:

1 July 2017

Relevant facts and circumstances

You are a member of the Fund.

Your date of birth is in 1981

You suffered an injury resulting in permanent disability.

Following on from your injury, you applied for a total permanent disability payment by your insurance company through the Fund.

At that time, you provided the Fund with certification by two legally qualified medical practitioners that because of the personal injuries you sustained, you would be unlikely to ever be able to be gainfully employed in a capacity for which you are reasonably qualified because of education, experience or training.

The TPD claim was initially denied by the Fund.

You engaged legal representation, who, acting on your behalf, made a complaint to the Fund against the decision to reject your disability claim.

As a result of the complaint, you received a letter from your legal representatives as follows:

We refer to your claim and are pleased to tell you that we won the superannuation disability claim and you will be paid the disability lump sum.

A statement from the Fund (“Your 30 June Super Statement”) for the year ended 30 June 2017 shows the following amounts were deposited:

● “TPD claim”; and

● “Personal non-concessional”.

You used the TPD payment to begin an unrestricted non-preserved disability life-long pension, paid monthly through another fund. This is an account-based pension. You have provided a letter, along with your rollover benefit summary, showing this.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 294-15

Income Tax Assessment Act 1997 Section 294-20

Income Tax Assessment Act 1997 Section 294-80

Income Tax Assessment Act 1997 Section 307-80

Income Tax Assessment Act 1997 Subsection 995-1(1)

Reasons for decision

Summary

The disability lump sum received from your superannuation fund will not be excluded from the calculation of your transfer balance cap.

Detailed Reasoning

Transfer balance account

Pursuant to section 294-15 of the Income Tax Assessment Act 1997 (ITAA 1997), a person commences to have a transfer balance account if they have, at any time, been the recipient of a superannuation income stream. The transfer balance account commences on the later of 1 July 2017 or the day that a person first starts to be a retirement phase recipient of a superannuation income stream.

Recipient of a superannuation income stream

Subsection 294-20(1) of the ITAA 1997 states that a person is a retirement phase recipient of a superannuation income stream at a time if they have a superannuation income stream in the retirement phase at that time and a superannuation income stream benefit is payable at that time.

Subsection 294-20(2) of the ITAA 1997 states that a person is also the retirement phase recipient of a superannuation income stream at a time if:

(a) The superannuation income stream is in retirement phase at that time; and

(b) The superannuation income stream is a deferred superannuation income stream; and

(c) A superannuation income stream benefit from the superannuation stream will be payable to you after that time.

Superannuation income stream benefit

Subsection 307-80(1) states that a superannuation income stream is in the retirement phase if a superannuation income stream benefit is payable from it at that time.

In this case, you have previously met a condition of release (by virtue of permanent incapacity) and are receiving pension benefits from your income stream.

Consequently the superannuation income stream is in the retirement phase and your transfer balance account will commence on 1 July 2017.

Structured Settlements

A structured settlement is the result of an agreement between the parties to a personal injury case. A personal injury case may arise from medical negligence, sporting accidents, motor vehicle accidents, and public liability or product liability.

The parties to the case will generally be you or your legal personal representative (for example a trustee or person with your general power of attorney), the defendant (who is the person or organisation you are seeking compensation from), and in most cases the defendant's insurer.

There is an alternative transfer balance debit for contributions from structured settlements made before 1 July 2017 under section 294-80 of the ITAA 1997.

If all of the relevant conditions are met, the individual will generally have a transfer balance account of nil as at 1 July 2017.

In this instance, the payment you received from the Fund was not in relation to a structured settlement. It was not related to the settlement of a personal injury claim based on the commission of a wrong, or a right created by statute, effected by a written settlement agreement between the parties, and did not arise under an Australian workers compensation law. Nor was the payment the result of the order of a court in respect of a claim based on the commission of a wrong, or a right created by statute.

Rather, the payment you received was a disability superannuation benefit.

Disability superannuation benefit

A disability superannuation benefit is defined under subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) as follows:

disability superannuation benefit means a superannuation benefit if:

(a) the benefit is paid to a person because he or she suffers from ill-health (whether physical or mental); and

(b) 2 legally qualified medical practitioners have certified that, because of the ill-health, it is unlikely that the person can ever be gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience or training.

Following on from the dispute with the Fund, you received a disability superannuation benefit.

You then rolled over this amount to another fund, and began an unrestricted non-preserved disability life-long pension.

Conclusion

As this amount was not contributed from a structured settlement (but rather from a disability superannuation benefit), you are not entitled to use the alternative transfer balance debit. The amount received as superannuation disability lump sum will not be excluded from the calculation of your transfer balance cap.