Compensation received by super funds from financial institutions and insurance providers

A super 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 fund 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.

If a super fund receives such compensation, the trustee of the fund needs to be aware of possible super, income tax and goods and services tax (GST) consequences. The consequences depend on the circumstances in which the compensation amounts are received.

Compensation includes any amount received by the super fund in respect of a right to seek compensation or a cause of action, or any proceeding by the super fund for that right or cause of action.

It does not matter whether there is any admission of guilt or liability by the financial institution or insurance provider in making the payment.

The ‘right to seek compensation’ is the right of action arising at law or in equity which vests in the trustee of the super fund on the occurrence of any breach of contract or other compensable damage or injury.

If you have any questions, feel free to ask them in the comment section. We will be happy to answer all your queries.