Did your super fund receive a compensation payment?

Erin Robertson • September 8, 2021

Is a financial services compensation payment to your superannuation fund a contribution?

Of late, there have been several compensation payments made by financial services providers to customers that were inappropriately charged or overcharged for insurance premiums or services they did not receive, etc.


New guidance from the ATO helps decipher whether these compensation payments are treated as contributions to your fund. The problem for some people is that where these compensation payments are treated as a contribution to their superannuation fund, they may exceed their contribution cap or attract Division 293 tax (a 15% tax on super contributions imposed on those with combined income and super contributions of $250,000 or more).


In general, the treatment of the compensation depends on who engaged the financial services provider. In general:


  • Super fund engaged the financial services provider and compensation paid to the fund – compensation not treated as a contribution.
  • Individual engaged the financial services provider and compensation paid to the fund but not at member’s discretion – compensation is a concessional contribution in the financial year it is received.
  • Individual engaged the financial services provider and compensation paid to the fund at member’s discretion - compensation is a non-concessional contribution in the financial year it is received


Where neither the member of the fund or the financial services provider had a right to seek compensation, the amount will be a concessional contribution in the financial year it is received by the fund.

 

If you have received a compensation payment from a financial services provider and the payment means you have exceeded your contribution cap, or are liable for Division 293 tax, there is a potential solution to avoid an adverse impact where you did not have control over the payment. In these cases, you can apply to the Tax Commissioner to exercise his discretion to disregard excess contributions or reallocate them to another year.


February 16, 2026
When clients sell a long-held family home, they may be able to channel part of the proceeds into superannuation by using the downsizer contribution rules.
February 16, 2026
As a business owner or investor, time is always tight...
February 16, 2026
Electric vehicles (EVs) are no longer a niche choice...
February 10, 2026
For many Australians, a holiday home does double duty...
By Erin Robertson December 4, 2025
For years, businesses have been moving away from cash – and for good reason.
By Erin Robertson December 3, 2025
The ATO’s rules on self-education expenses are strict, and the line between “deductible” and “non-deductible” can be thin. Getting it right could mean thousands back in your pocket; getting it wrong could mean an ATO adjustment, plus interest and penalties.
By Erin Robertson December 2, 2025
Running, or deciding to set up a self-managed super fund (SMSF) gives you control, but it also brings legal responsibilities.
By Erin Robertson December 1, 2025
If you run a business, you already know the juggling act that comes with managing the payroll process — paying staff on time, managing cash flow, and staying compliant.
By Erin Robertson November 11, 2025
Many businesses hold critical data that poses significant risk to both businesses and their customers if the data they hold is not safeguarded from cybersecurity threats.
By Erin Robertson November 11, 2025
A new Bill before Parliament – the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 – proposes several key changes that could affect small businesses, listed companies, and the not-for-profit sector.
Show More