Private ruling: Non-concessional contributions
Date of advice: 4 December 2018
Published: March 2019

Ruling: Q1: 1. Is the amount that a person (Your Client) plans to contribute to a complying superannuation fund a payment arising from a structured settlement or order for personal injury for the purposes of section 292-95 of the Income Tax Assessment Act 1997 (ITAA 1997)? 2. Will the above amount be excluded from being a non-concessional contribution for the 2018-19 financial year under subparagraph 292-90(2)(c)(ii) of the ITAA 1997? | A1: 1. No. 2. No.


Relevant legislative provisions: Income Tax Assessment Act 1997 section 292-80 | Income Tax Assessment Act 1997 section 292-90 | Income Tax Assessment Act 1997 section 292-95

Reasons for decision: Summary: The amount that Your Client intends to contribute to a complying superannuation fund is not a contribution covered under section 292-95 of the ITAA 1997. Therefore, the intended contribution will not be excluded from being a non-concessional contribution under subparagraph 292-90(2)(c)(ii) of the ITAA 1997. | Detailed Reasoning - Non-concessional contributions: In accordance with section 292-80 of the ITAA 1997, non-concessional contributions for a financial year made to a complying superannuation fund are subject to the non-concessional contributions tax if the amount of non-concessional contributions for the year exceeds the relevant non-concessional contributions cap for the year. Non-concessional contributions are defined in section 292-90 of the ITAA 1997. However, under subsection 292-90(2) of the ITAA 1997, a number of contribution types are specifically excluded from being non-concessional contributions for a financial year. In particular, contributions covered under section 292-95 of the ITAA 1997 that arise from payments that relate to structured settlements or orders for personal injuries. The combined effect of subsections 292-90(2) and 292-95(1) 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 generally means that a person can contribute the proceeds of a personal injury settlement or court order to a superannuation fund without breaching the non-concessional contributions cap. A contribution is covered under subsection 292-95(1) of the ITAA 1997 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, or such longer period as the Commissioner allows, 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. *To find definitions of asterisked terms, see the Dictionary, starting at section 995-1. | Detailed Reasoning - Certification from 2 legally qualified medical practitioners: As noted above, paragraph 292-95(1)(c) of the ITAA 1997 requires that two legally qualified medical practitioners certify that, because of the ill-health, it is unlikely that the person can ever be gainfully employed in a capacity for which they are reasonably qualified because of education, experience or training. It is clear from reading the provision that the onus for determining the personal injury is ascribed to the two legally qualified medical practitioners. Fulfilling that responsibility would involve, not only a medical opinion as to the taxpayer's physical and mental capabilities but also consideration as to what constitutes appropriate employment, based upon the taxpayer's education, training and experience. Further, the requirement that the personal injury is likely to result in the taxpayer being unable ever to be employed in a capacity for which they are reasonably qualified extends to full-time employment, part-time or casual employment. A person who is not able to work full-time but can work part-time or casual in any employment for which the taxpayer is reasonably qualified will not meet the requirement of paragraph 292-95(1)(c) of the ITAA 1997. In this case, after examining the contents of the medical reports provided, it is considered that none of the reports satisfy the requirement prescribed in paragraph 292-95(1)(c) of the ITAA 1997. The three medical reports provided confirm Your Client’s personal injury resulted in a limited capacity to participate in employment. However, the certificates do not attest to Your Client being unable to ever be gainfully employed in a capacity for which they are reasonably qualified because of education, training or experience. The legislation under subsection 292-95(1) of the ITAA 1997 is very specific with regard to the medical certificate requirements. Accordingly, based on the reports provided, it is our view that Your Client does not satisfy the medical certificate requirements. This view is supported by the fact that Your Client is currently employed. Further to the above, it should be noted that where the conditions under subsection 292-95(1) the ITAA 1997 are not met, the Commissioner has no discretion within those provisions to exclude the contribution from being a non-concessional contribution. Accordingly, as the requirements in subsection 292-95(1) of the ITAA 1997 have not been satisfied, the proposed contribution will not be excluded from being a non-concessional contribution under subparagraph 292-90(2)(c)(ii) of the ITAA 1997.

This advice applies for the following period: Income year ending 30 June 2019 | We considered these to be relevant facts: As a child, Your Client sustained injuries from a motor vehicle accident. | As a result of the accident, Your Client suffered injuries to the brain, chest and head. Subsequent medical tests have shown a significant cognitive deficit. | Your Client commenced a claim for damages for personal injuries. | Subsequently, an out-of-court settlement was reached between the parties to the claim. The terms of the settlement are set out in a Judgment which stated that Your Client is to be paid a specified amount (the Settlement Sum). | Your Client plans to contribute the Settlement Sum to a complying superannuation fund. | The contribution to a complying superannuation fund will be made within 90 days of the receipt of the Settlement Sum and an election form will be lodged. | You have provided reports from three legally qualified medical practitioners which have certified that: | ● Your Client has an impaired capacity to participate in employment, even in a tailored environment. | ● Your Client is unemployable on the open employment market. Their employment duties may be limited and deficits are beyond the range that most employers would accept. | ● Your Client has problems which will be challenging in any type of occupation. | Since the relevant income year, Your Client has been employed on a part-time basis in a sheltered environment and under heavy supervision. | Your Client’s is under 30 years of age.