Will you get superannuation contributions on workers compensation payments?

Will you get superannuation contributions on workers compensation payments?

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.

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Learn more about superannuation

What is MySuper?

MySuper accounts are basic, low-fee accounts. If you don’t nominate a superannuation fund, your employer must choose one for you that offers a MySuper account.

MySuper accounts offer two investment options:

  1. Single diversified investment strategy

Your fund assigns you a risk strategy and investment profile, which remain unchanged throughout your working life.

  1. Lifecycle investment strategy

Your fund assigns you an investment strategy based on your age, and then changes it as you get older. Younger workers are given strategies that emphasise growth assets

What are reportable employer superannuation contributions?

Reportable employer superannuation contributions are special contributions that an employer makes on top of the regular compulsory contributions. One example would be contributions made as part of a salary sacrifice arrangement.

What are reportable superannuation contributions?

For employees, there are two types of reportable superannuation contributions:

  • Reportable employer super contributions your employer makes for you
  • Personal deductible contributions you make for yourself

What are concessional contributions?

Concessional contributions are pre-tax payments into your superannuation account. The payments made by your employer are concessional payments. You can also make concessional contributions with a salary sacrifice.

When did superannuation start?

Australia’s modern superannuation system – in which employers make compulsory contributions to their employees – started in 1992. However, before that, there were various restricted superannuation schemes applying to certain employees in certain industries. The very first superannuation scheme was introduced in the 19th century.

When did superannuation start in Australia?

Australia’s modern superannuation system – in which employers make compulsory contributions to their employees – started in 1992. However, before that, there were various restricted superannuation schemes applying to certain employees in certain industries. The very first superannuation scheme was introduced in the 19th century.

How can I increase my superannuation?

You can increase your superannuation through a ‘salary sacrifice’. This is where your employer takes part of your pre-tax salary and pays it directly into your superannuation account. Like regular superannuation contributions, salary sacrifices are taxed at 15 per cent when they are paid into the fund.

How does superannuation work?

Superannuation is paid by employers to employees, at least once every three months. The ‘superannuation guarantee’ is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary. The guarantee is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

Superannuation is generally taxed at 15 per cent. However, if you earn less than $37,000, you will be automatically reimbursed up to $500 of the tax you paid. Also, if your income plus concessional superannuation contributions exceed $250,000, you will also be charged Division 293 tax. This is an extra 15 per cent tax on your concessional contributions or the amount above $250,000 – whichever is lesser.

You can withdraw your superannuation when you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

 

Do I have to pay myself superannuation if I'm self-employed?

No, self-employed workers don’t have to pay themselves superannuation. However, if you do pay yourself superannuation, you will probably be able to claim a tax deduction.

How do you open a superannuation account?

Opening a superannuation account is simple. When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You might want to provide your tax file number as well – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

How long after divorce can you claim superannuation?

You or your partner could be forced to surrender part of your superannuation if you divorce, just like with other assets.

You can file a claim for division of property – including superannuation – as soon as you divorce. However, the claim has to be filed within one year of the divorce.

Your superannuation could be affected even if you’re in a de facto relationship – that is, living together as a couple without being officially married.

In that case, the claim has to be filed within two years of the date of separation.

Either way, the first thing to consider is whether you’re a member of a standard, APRA-regulated superannuation fund or if you’re a member of a self-managed superannuation fund (SMSF), because different rules apply.

Standard superannuation funds

If your relationship breaks down, your superannuation savings might be divided by court order or by agreement.

The rules of the superannuation fund will dictate whether this transfer happens immediately, or in the future when the person who has to make the transfer is allowed to access the rest of their superannuation (i.e. at or near retirement).

Click here for more information.

SMSFs

If your relationship breaks down, you must continue to observe the trust deed of your SMSF.

So if you and your partner are both members of the same SMSF, neither party is allowed to use the fund to inflict ‘punishment’ – such as by excluding the other party from the decision-making process or refusing their request to roll their money into another superannuation fund.

This no-punishment rule applies even if the two parties are involved in legal proceedings.

Click here for more information.

Financial consequences

Superannuation funds often charge a fee for splitting accounts after a relationship breakdown.

Splitting superannuation can also impact the size of your total super balance and how your super is taxed.

Click here for more information.

What are personal contributions?

A personal contribution is when you make an extra payment into your superannuation account. The difference between personal contributions and salary sacrifices is that the former comes out of your after-tax income, while the latter comes out of your pre-tax income.

What is superannuation?

Superannuation is money set aside for your retirement. This money is automatically paid into your superannuation fund by your employer.

What superannuation details do I give to my employer?

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.