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Home / Super booster / Super contributions / Case study: Making super contributions from compensation payments

Case study: Making super contributions from compensation payments

Aakash Mehta Aakash Mehta

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. If you exceed these limits, you’ll be liable to pay extra tax.

  • The concessional contributions cap is currently $30,000 per year (unless you are eligible to use the carry-forward rule)
  • The non-concessional cap is $120,000 per year (unless you are eligible to use the bring-forward rule).

But there is another situation where super contributions can be made outside the abovementioned contribution caps.

If the super contribution arises from a personal injury payment or a structured settlement, you may be able to exclude all or part of it from your non-concessional contribution cap. This also means that no extra tax will apply to this type of contribution.

Another exemption is that such contributions are not included in the calculation of your total superannuation balance and transfer balance cap. We will discuss in the below case study how this can be very beneficial for the person making such a contribution.  

Eligibility criteria

The Income Tax Assessment Act (ITAA) 1997 section 292–95 provides information on the eligibility criteria for a payment to be contributed to super and excluded from the non-concessional contribution cap.

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About the author

Aakash Mehta
Aakash Mehta
Aakash Mehta is a financial adviser and has been working in the financial planning profession for more than 7 years. He has an undergraduate degree in commerce, a post-graduate degree in international finance and a diploma in financial planning. His day-to-day work exposes him to real life financial planning issues around superannuation, retirement, insurance and estate planning, and he contributes to SuperGuide by writing case studies and articles on various financial planning strategies.
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Responses

  1. Zhi Li Avatar
    Zhi Li

    if SMSF member’s now 76 years old, can he still be making super contributions from compensation payments to his SMSF (any age limit?) Thank you.

    1. SuperGuide Avatar
      SuperGuide

      No, a member aged 76 can’t make a super contribution from a compensation payment. The age limit for personal injury (structured settlement) contributions is 75.
      All personal super contributions other than downsizer amounts must be made to a super fund either before age 75 or within 28 days of the end of the month the member turned 75.

  2. Kalvin White Avatar
    Kalvin White

    Hi,
    Wondering if you could help with Workers Compensation contributions please.

    Our client has a SMSF and each week a deposit is paid into the SMSF bank account.

    My question is are they treated as personal concessional or non concessional ? The client cannot return to his previous occupation and also received a lump sum payment for 3 years in arrears.

    1. SuperGuide Avatar
      SuperGuide

      Hi Kalvin,

      If super is being paid on your client’s regular worker’s compensation payments it is most likely to be an employer super contribution, not a personal contribution. Employer contributions are concessional.

      If your client has actively chosen to make personal super contributions out of their regular worker’s compensation then they may have elected either salary sacrifice (concessional) or personal after tax (non-concessional) contributions.

      You can confirm the contribution type with the payer. The relevant data about the contributions should also be available to the SMSF via the superstream data that is uploaded with each contribution.

      Best wishes
      The SuperGuide team

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