Compensation payments: Avoiding contribution issues
Superannuation fund trustees who receive compensation from financial institutions and insurance providers must consider how receipt of these payments may impact a member’s contribution caps.
A superannuation fund may have a right to seek compensation if it entered into a legal contract or agreement with a financial services provider or insurance provider, paid the fees or premiums from the fund’s assets, allocated the cost to the members, and:
- the financial service or advice was not provided
- the advice was deficient, or
- the insurance premiums for death or disability insurance cover were overcharged.
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.
If a superannuation fund receives such compensation, the fund’s trustee must be aware of possible superannuation, income tax and GST consequences for the fund.