Is a financial services compensation payment to your superannuation fund considered to be 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:
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.
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Is a financial services compensation payment to your superannuation fund considered as a contribution?
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