A super fund may receive compensation from a financial services provider due to the provision of inappropriate financial advice or where fees were paid but no advice was provided. The compensation may include an amount reflecting a refund or reimbursement of adviser fees and/or an amount to compensate for lost earnings. It may also include an interest component.
On 12 August the ATO released a Super contribution caps fact sheet that explains how receipt of these types of compensation payments by a super fund may impact contribution caps. It also explains how to apply to the ATO to request the Commissioner to exercise discretion to either disregard or reallocate the contribution in circumstances where caps are exceeded.
Whether the compensation is a contribution (and therefore counted towards a contribution cap) will depend on the circumstances in which the compensation is received. This includes
Circumstance | Treatment of compensation |
Where the super fund engaged the financial service provider and has a right to compensation | This is not considered to be a contribution and won’t affect contribution caps |
Where the member personally engaged the financial services provider and has a right to compensation | If paid directly by the financial service provider to your super fund (other than at your direction) this is considered a concessional contribution If you directed the financial service provider to pay the compensation to your fund, or it was paid to you and you subsequently contributed it to super, it will be considered a non-concessional contribution |
Where there is no right to seek compensation | This is considered a concessional contribution |
Further information
Australian Taxation Office, Super contributions caps, 12 August 2021