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Maximising Your Superannuation TPD Payout: A Comprehensive Guide

Most Australians aren’t aware that their superannuation fund is there for more than retirement. If you’re unexpectedly forced out of work by a personal injury, and you can show that your injury qualifies as a total and permanent disability (TPD), you may be eligible for a lump sum payment into your superannuation account within approximately 6 months. 

Here, we’ll unpack how your superannuation fund can serve as a safeguard: The super insurance types, benefits and maximisation strategies.

Understanding superannuation and insurance

Superannuation funds not only serve as a means to save for retirement but they also encompass various insurance advantages. These advantages serve as a safeguard, granting financial security to both you and your loved ones in unfortunate circumstances such as death, or the inability to work due to illness or injury.

Life insurance

Life insurance pays out a lump sum of money to your beneficiaries when you pass away. This can help to cover the cost of your funeral, outstanding debts and other related expenses. Some superannuation funds offer life insurance as a default inclusion, which means that you will be automatically covered unless you opt out.

Income protection insurance

Also referred to as salary continuance cover, income protection insurance pays out a monthly income if you are unable to work due to illness or injury, helping to replace your lost income and ensure that you can continue to meet your financial obligations. Income protection insurance is not always included as a default inclusion in superannuation funds, so you may need to opt in if you want to be covered.

TPD insurance

TPD insurance offers financial security in the event of a severe ailment or injury that results in an individual being incapable of working. TPD insurance is commonly provided as a standard component in superannuation funds.

TPD overview: How your Superannuation Policy Can Help With a Disability

TPD insurance coverage is commonly utilised by individuals who are forced to retire early from the workforce. By accessing this type of payment from your super account, you can avoid the need to withdraw all of your superannuation funds prematurely.

If you have sustained a permanent disability that prevents you from working, the TPD insurance payout offers essential disability benefits to protect your future and the well-being of your family. This compensation can bring relief, alleviating any concerns you may have had about supporting yourself or your family following a severe injury.

Eligibility criteria for filing a TPD claim

The definition of TPD can vary from one superannuation fund to another. Nonetheless, it generally means that you’re unable to work in any position that you are reasonably suited to by education, training or experience.

To be eligible for a TPD claim, you must be ‘totally and permanently disabled,’ meaning that you’re unable to perform at your occupation due to an injury or illness. Your TPD must be certified by a medical professional, and you must have been a member of a superannuation fund for at least 12 months before your TPD claim is approved.

In the past, disabled individuals could simply show that their injuries made it impossible for them to continue in their previous career to qualify for a payout. Today, you must demonstrate that you cannot be easily retrained or reskilled for a different career, which could make qualification harder. Additionally, elements like age, employment background and severity of disability all play into the claims process. 

If you fulfil the necessary requirements, you have the option to submit a TPD claim to your superannuation fund. The specific procedure for filing a claim may differ among different funds, but it generally entails presenting medical proof, completing a claim form and providing relevant supporting documents.

Timeline for TPD payouts

A TPD insurance claim takes around six months for the insurance company to assess. However, it can take longer if there is a dispute, or be wrapped up in a shorter time frame if your claim is extremely clear and you have the right superannuation disability attorneys on your side.

Be aware that once the insurance company has made its decision in regards to your TPD claim, the trustee of the superannuation fund will need to follow up with their own separate assessment of the claim. This can add an extra month or two to the process.

When a TPD insurance claim is approved, the lump sum is paid into your superannuation account. You have the choice to withdraw the entire balance, withdraw part of it or leave the full balance in your super. Based on your financial situation, type of payout and potential tax liability, you can decide what makes sense for you.

Factors affecting the size of the payout

There are several factors that can influence the size of the payout you receive; understanding these components is important for maximising your superannuation payout in the event of a disability.

TPD policy definitions

How TPD is defined in your superannuation policy plays a big role in determining how much you’ll receive as a payout. There are two common definitions: “any occupation” and “own occupation.” 

The “any occupation” definition is stricter and requires you to prove that you can’t work in any job you’re reasonably qualified for. On the other hand, the “own occupation” definition is more favourable because it looks specifically at your ability to perform the duties of your own occupation.

Level of disability

The severity and permanence of your disability will directly impact the size of your TPD payout. Insurers typically assess the extent of your impairment and evaluate its impact on your ability to work. The more severe and long-lasting your disability, the higher the likelihood of a larger payout.

Superannuation balance

The balance in your superannuation account can influence the size of your TPD payout. Some policies have a fixed payout amount, while others calculate the benefit based on a percentage of your superannuation balance. If your balance is substantial, it can potentially lead to a larger payout.

Waiting period

Most TPD policies have a waiting period of three to six months, which is a specified period you must wait after becoming disabled before you can claim a payout. The length of the waiting period can affect the size of the payout: Longer waiting periods may result in a larger payout due to the accumulation of funds in your superannuation account during that time.

Age and income

Your age and income at the time of disability can also impact the size of the TPD payout. Younger individuals with higher incomes may receive larger payouts since they have more years left in their working life and potentially higher superannuation contributions.

To maximise your chances of receiving a fair and appropriate payout, you and your lawyer will collaborate to thoroughly analyse the factors relevant to your situation. Your lawyer will guide you through the complexities of the process, ensuring effective navigation and optimization of your claim.

Tax considerations for TPD payouts

Whether there is a tax-free component to your payout will depend on your age, and why and how you receive this payment. Accessing your super through an insurance claim can be for one of three reasons:

Temporary incapacity

A temporary incapacity payment in the form of income protection insurance benefits or any voluntary applicable employer-funded benefits will consist of a taxable income stream. You can qualify for temporary incapacity if a physical or mental illness makes it so you are unable to work either in your full capacity or in any capacity. You’ll pay tax on this kind of payout as you would normal income.

Permanent incapacity

A permanent incapacity payment is typically a lump sum that you may be eligible for if two medical practitioners certify that you are unable to ever work again due to mental or physical illness or injury. If you have a TPD insurance benefit and are found to be entitled to it, a superannuation trustee may be able to reduce the tax burden you pay through a tax-free uplift, which can apply when withdrawing super funds under permanent incapacity condition.

Terminal medical condition

If you have a terminal medical condition, and two medical practitioners have certified that you have 24 months or fewer to live because of your illness or injury, you may gain access to your super and make a tax-free lump sum withdrawal.

What regulators or regulations preside over superannuation disputes?

There are five regulatory bodies governing superannuation funds in Australia, and one or more of these bodies may be involved if there is a dispute with your super.

The Superannuation Complaints Tribunal

The SCT operates under the auspices of the Superannuation (Resolution of Complaints) Act 1993, which lays out the process for dealing with any complaints about superannuation and acts as an independent dispute resolution body.

The Australian Taxation Office

The ATO is charged with ensuring that self-managed superannuation funds (SMSFs) comply with rules and regulations and that the correct tax is applied to all superannuation savings within such funds. If you are a member of an SMSF, additional complexities can arise in regard to payouts if the fund has not been correctly managed.

The Australian Securities and Investments Commission (ASIC)

ASIC upholds the Corporations Act 2001, helping safeguard consumer rights, particularly with regard to superannuation. As the overseer of the financial services sector, including superannuation, ASIC is responsible for ensuring the adherence of superannuation trustees to their fund members’ conduct and disclosure obligations. This regulatory authority also extends to insurance products provided by superannuation funds.

The Australian Prudential Regulation Authority (APRA)

APRA supervises regulated superannuation funds (aside from SMSFs) and is responsible for ensuring funds are prudently managed at all times by reviewing each fund’s compliance with the Superannuation Industry (Supervision) Act 1993 (Cth)

The Department of Human Services (DHS)

The DHS is responsible for the administration of applications from superannuation fund members for the early release of super on compassionate grounds. If your injuries are so severe that your lifespan has been shortened, you may be able to get the entirety of your super released early on compassionate grounds so you can set your affairs in order beyond what you can achieve with a TPD payout.

Legal Assistance for Superannuation Disability Claims

You have the right to make a disability claim to your superannuation fund. GMP Law’s team of expert superannuation disability claim lawyers can assist you in navigating the complexities of gathering documentation and filing the claim.

We operate on a no-win, no-fee basis, making it easy for you to get legal help when you need it. No-win, no-fee is a legal agreement that ensures transparency and fairness. It eliminates hidden clauses or charges and ensures that all payment details are openly discussed upfront. This agreement covers all expenses associated with the ongoing claim process, including court fees and medical reports.

In the unlikely event that we are unsuccessful, the victim will not be required to pay a contingency fee for our collaborative efforts.

Contact us for a review of your superannuation disability claim today.


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Gerard Malouf & Partners have provided friendly, experienced legal advice to communities across Australia for over 35 years. Our Personal Injury Lawyers have taken on ten’s of thousands of cases and we are proud to have won billions of dollars for our clients.
Meet the diverse and dynamic team of compensation lawyers and supporting staff that have made this all happen below. Our multi-lingual team can discuss your claims in Arabic, Assyrian, Turkish, Greek, Italian, French, Serbian, Croatian, Armenian, Mandarin, Hindi, Punjabi or Malayalam.
Meet the diverse and dynamic team of compensation lawyers and supporting staff that have made this all happen below. Our multi-lingual team can discuss your claims in Arabic, Assyrian, Turkish, Greek, Italian, French, Serbian, Croatian, Armenian, Mandarin, Hindi, Punjabi or Malayalam.

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