Generally, super contributions are of two types – concessional and non-concessional.
There are annual caps (limits) on the amount of concessional and non-concessional contributions you can make. If you exceed these limits, you’ll be liable to pay extra tax.
- The concessional contributions cap is currently $30,000 per year (unless you are eligible to use the carry-forward rule)
- The non-concessional cap is $120,000 per year (unless you are eligible to use the bring-forward rule).
But there is another situation where super contributions can be made outside the abovementioned contribution caps.
If the super contribution arises from a personal injury payment or a structured settlement, you may be able to exclude all or part of it from your non-concessional contribution cap. This also means that no extra tax will apply to this type of contribution.
Another exemption is that such contributions are not included in the calculation of your total superannuation balance and transfer balance cap. We will discuss in the below case study how this can be very beneficial for the person making such a contribution.
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Eligibility criteria
The Income Tax Assessment Act (ITAA) 1997 section 292–95 provides information on the eligibility criteria for a payment to be contributed to super and excluded from the non-concessional contribution cap.
There are three types of payments that are eligible:
- Settlements of a claim for compensation or damages for personal injury suffered by the person and the claim is made by the person or their legal representative. Settlement must be by written agreement between the parties (whether or not a court order is required to make the agreement effective).
- Settlement of a claim for personal injury suffered by you under State or Commonwealth law in relation to workers compensation.
- The payment arises from a court order following a claim for compensation or damages due to personal injury, based on the commission of a wrong or right created by statute.
Once the payment satisfies the above criteria, the following three conditions must be met to make the super contribution:
- Two legally qualified medical practitioners certify that, because of the personal injury, it is unlikely the member can ever be “gainfully employed in a capacity for which they are reasonably qualified because of education, experience and training”.
- The member (or their legal personal representative) notifies the super fund by completing a Contribution for personal injury form NAT 71162 when (or before) making the contribution.
- Making the contribution in the required time limit, usually within 90 days of whichever is the latter: receipt of payment, date of court order or agreement made by the parties.
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