SMSF trustees have an option at the moment to contribute personal injury claim payments to their fund without it being counted towards the non-concessional cap. Now it looks like the personal injury payment parameters may be grandfathered in super reforms.
There is, under present rules, a 90-day window to treat such payments in this way. However in the long post-Budget process, where the threads of announcements are teased out and clarified (usually by those with “skin in the game”) some concerns have been raised about possible ramifications from the government’s announced reforms to super pensions and contribution caps.
As no mention seems to have been made in the Budget papers released in May, various commentators have until now been fearful that SMSFs may be set to lose the ability to carve out such personal injury payments from cap totals.
However a recent comment from the Assistant Treasurer Kelly O’Dwyer looks like calming the waters — at least on this one contentious issue for superannuants. Speaking at a accounting body’s event in early June, O’Dwyer said that the government is aware that there may be a perceived issue in this area, and that should her government be re-elected (a now-standard corollary) extensive consultation with all stakeholders will be undertaken before implementation of any reforms.
“We know that there will be some people who will be caught by the changes, and we need to make sure where there are unintended consequences, that we are able to properly deal with those in the legislation,” O’Dwyer said.
“We have taken a very conscious decision to exempt structured settlements and court orders for personal injury payments from both the $1.6 million transfer cap, and with the lifetime non-concessional cap,” (which is $500,000).
She added that the issue can be important for a quite significant section of the retiree and pre-retiree community who have high health costs and other demands from health related daily needs.