Compensation is usually paid out due to a work-related injury or illness, injuries received in a car accident or injuries received because of the negligence or fault of another person.
If a super contribution arises from a personal injury payment or a structured settlement (from a compensation payout), you may be able to exclude all or part of it from your non-concessional contributions cap.
This also means that no extra tax will apply to this contribution. It is only the part of the compensation that relates to personal injury that can be contributed to super.
Therefore, the court order or the agreement between parties must clearly state the payment breakdown. Compensation payments usually impact any Centrelink entitlements the member may be receiving. Any super balance unrelated to the compensation payment will also affect the member’s total super balance and transfer balance cap.
Generally, super contributions are of two types – concessional and non-concessional.
There are annual caps (limits) on the amount of concessional and non-concessional contributions you can make. You’ll be liable to pay extra tax if you exceed these limits.
Three types of payments are eligible:
Once the payment satisfies the above criteria, the following three conditions must be met to make the super contribution:
If you are unsure how your compensation payment may affect your contribution caps, consult your provider or a licensed professional as soon as possible.