Recently, I’ve received several inquiries regarding the treatment of fee-for-no-service refunds. I can only assume that some affected institutions are trying to finalise payments by the end of this financial year. I posted on this matter in August last year but, due to the increased activity, I thought it worthwhile to repeat that post.

The ATO has published a fact sheet to explain the impact on contribution caps if compensation amounts are received from financial service providers due to inappropriate advice or fees for no service. Here’s a summary.

1. If the super fund engaged the service provider.
   1. This will not be a contribution.
2. If the member personally engaged the provider.
   1. If paid directly to the fund it is a concessional member contribution in the year received
   2.  If paid to the member and subsequently contributed to the fund it is a non-concessional contribution unless a valid notice of intent to clam is processed.
   3. If the member directed the provider to pay the member compensation to the fund it is a non-concessional contribution unless a valid notice of intent to claim is processed.
3. If there is no right to seek the compensation received.
   1. If paid directly to the fund it is a concessional member contribution in the year received.

If contribution caps are exceeded, the Commissioner may exercise discretion to disregard the excess contributions or reallocate them to another year. Discretion is unlikely for 2.2 and 2.3. The full text of the fact sheet is available here.