Take Advantage
In order to take advantage of this exemption your payment needs to meet at least one of the following criteria:
- The payment is for the settlement of a claim for compensation or damages for personal injury.
- The payment is for the settlement of a claim for personal injury suffered in relation to workers compensation.
- The payment is made following a court order for compensation or damages for personal injury.
It’s also important to note that if your payment combines personal injury compensation with other compensation, for medical expenses or property damage for instance, only the amount relating to personal injury is exempt from the super contribution cap.
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Timing is crucial
You need to make the contribution within 90 days of whichever of the following events occurs last:
- Receipt of the payment (when you or your legal representative receives it).
- An agreement for the settlement of a personal injury payment is reached.
- A court order for a personal injury payment is handed down.
You also need to advise your super fund you are claiming the exemption before or at the time of the contribution.
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Tax free access?
If you can make a Personal Injury Payment into superannuation, you might also qualify to release your super based upon Total and Permanent Disability rules.
This may then permit you to commence a retirement phase pension which has tax-free earnings.
If established correctly it can also provide you with a tax-free income and access to lump sum withdrawals.
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Read Article: Personal Injury Settlements