Superannuation Overpayments – Contributions made in error
Payroll mistakes occur and from time to time – either human error or computer error, resulting in an employer making a superannuation contribution in error. Seeking to recover such overpayments via litigation is complicated and expensive, especially where amounts involved are not large.
An alternative, in instances of genuine administrative error, is to request a refund of the overpaid superannuation contribution directly from the employee’s superannuation fund.
Some such scenarios include where:
- a contribution is paid into the wrong employee’s account;
- a clerical error results in the contribution being paid twice;
- a contribution is paid to the wrong fund; or
- a contribution is made that was not in accordance with the employee’s instructions.
Australian Prudential Regulation Authority’s (“APRA”) Prudential Practice Guide SPG 270 – Contribution and Benefit Accrual Standards recommends that it is “good practice” for a superannuation fund to establish a policy on the treatment of contributions made due to an administrative error and contains some guidance on such a policy.
Where an administrative error concerns the amount of a contribution, for example, where $200 was supposed to be contributed but $2,000 was mistakenly contributed, the additional $1,800 may be refunded without breaching the preservation rules, assuming sufficient documentary evidence is provided.
While an administrative error may be rectified without reference to APRA, APRA expects the superannuation fund to ensure appropriate documentary evidence is provided.
If an employer considers an administrative error has occurred with the quantum of the contributions to any employee’s superannuation fund and wishes to have those contributions refunded, the employer can contact the superannuation fund to determine whether it has a policy on refunding contributions, and if so, obtain a form to complete. Each trustee may, in their discretion, set their own rules about the information and supporting documents that must be provided.
Some superannuation funds will not have a published policy or form but will request the employer to provide a letter with details of the overpaid contribution and supporting evidence, to enable the trustees to consider the request.
Other superannuation funds will have a policy and form. For example, First State Super’s ‘Refund of Contributions’ form sets out details of the information that must be provided to request a refund, including the type of contribution, reason for the error and the date of the error. First State Super requires the employee’s signed authorisation where the contribution was made more than 12 months ago, but not otherwise.
When making a refund request, employers should take into account that there can be some limitations on the superannuation fund’s capacity to refund an overpayment, for example where an employee has rolled over their superannuation to another superannuation fund. Also, if the value of unit prices has decreased during the period between the payment and the refund claim, the amount of the refund may be less than the amount contributed.
APRA has made it clear that this rule only applies to genuine administrative errors, not other errors. Except in extraordinary circumstances, a refund is not available where an employee considers they received poor advice or the employee actually intended for the superannuation contribution to be made, but did not understand the implications of making the contribution.