While every employer has to pay superannuation contributions of at least 9.5 per cent on top of your regular earnings, you may wonder if you get these contributions when you’re receiving workers compensation payments.
According to the Australian Tax Office’s ruling SGR 2009/2, an employer doesn’t need to make superannuation contributions for worker compensation payments. In effect since July 2009, this rule includes top-up payments made to an employee who is no longer working.
There are some exemptions to this rule, as you are eligible to receive superannuation contributions from your employer if you’re on leave due to an injury or sickness.
When will you get superannuation contributions on workers compensation payments?
The chances of your employer making superannuation contributions on your workers’ compensation payments depends on the workplace agreement or award you’re on.
Modern awards can make provisions related to superannuation contributions when an employee is on leave from work due to an injury or work-related illness, as per the Fair Work Act 2009.
Each modern award has different clauses regarding the superannuation contributions that need to be made for workers compensation payments, but it’s mandatory for an employer to make contributions during the period when a worker is absent from work when they’re unwell or injured.
You must meet specific criteria to qualify for superannuation contributions on workers compensation payments, such as:
- You are unable or unfit to work due to a work-related injury or illness.
- Your injury or illness was caused on or after 5th April 2010.
- You’re getting paid compensation or regular payment from your employer.
- You’re under the retirement age.
- You’re still employed by your employer.
Superannuation contributions need to be paid for no more than 52 non-consecutive weeks during a worker’s compensation claim.
Can you make voluntary contributions to your super from workers compensation?
If you’ve been permanently injured at work, you can make a compensation claim for future loss of earnings, which will be paid in a lump-sum if approved.
If your claim is approved, the final amount will include superannuation contributions, which is projected based on the earnings you would have made in your role had you not been injured. You can make voluntary contributions to your superannuation using this compensation, and as this amount is paid in a lump-sum, the superannuation contribution may be excluded from the non-concessional contribution (NCC) cap.
However, to be eligible to make superannuation contributions from your workers’ compensation payment and be excluded from the NCC cap, you need to satisfy certain criteria as per the Income Tax Assessment Act (ITAA) 1997. These include:
- The payment you’ve received is to settle a claim for compensation or damages caused due to a personal injury, and the settlement must be in a written agreement by both the parties.
- The payment you’ve received is to settle a claim related to a personal injury suffered by you under State of Commonwealth law concerning workers compensation.
- A court has ordered your employer to settle a claim for compensation or damages caused due to a personal injury.
You would also need two legally qualified medical practitioners to certify that your injuries are permanent. In addition, the practitioners would also have to confirm that the injuries will impact your ability to be gainfully employed in a role for which you’re qualified.
It is also important to note that compensation payments that are not related to personal injuries cannot be contributed to your superannuation. Suppose the compensation is paid for both a personal injury and another remedy, like loss of property. In such a scenario, you can contribute funds to your superannuation from the payment made solely for the personal injury. If the claim is not separated, the entire amount will not be eligible for contribution cap exemption.