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Superannuation insurance payouts: All your questions answered

Most Australians aren’t aware that their superannuation fund is there for more than retirement. If you are unexpectedly forced out of work by a personal injury, and you can show that your injury qualifies as a “total and permanent disability,” you may be eligible for an additional lump sum payment from your superannuation fund. You can withdraw this superannuation disability payment via an insurance claim even if you have not yet reached preservation age.

Superannuation and insurance

Your superannuation fund can carry within itself three types of insurance benefits:

  • Life insurance
  • Income protection insurance
  • Total and permanent disability (TBD) insurance

If you suffer a serious injury that causes an inability to work, income protection can help you bridge the gap while you recover. If you pass away, your beneficiaries can access your superannuation fund and receive the life insurance benefit. TPD cover provides a payout in case you are permanently disabled and cannot work.

Insurance premiums for these types of cover through your super are paid automatically, so you can always contact your fund and find out if you already have this protection or if you can add it in an amount of cover that is right for you to provide an appropriate insurance payout in your time of need.

How can your superannuation policy help with a disability?

The TPD insurance cover payout is specifically designed for people who are forced to leave the workforce early. By being able to access such a super account payment, you can avoid withdrawing all of your superannuation fund early.

If you have been injured in a way that will leave you unable to work due to a permanent disability, your TPD insurance payout provides disability benefits that safeguard your future and that of your family. This compensation can be a huge relief if you have been worried about supporting yourself or your family after a severe injury.

Total and permanent disability claims must be supported with an evaluation from a medical physician. 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 to a different career, which makes qualification harder. However, a law firm with a skilled superannuation and TPD dispute arm can help you get the compensation you need and deserve.

How long does it take to get a TPD payout from a superannuation fund?

In general, 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 regard 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.

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 (SCT)
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. If you have a complaint about the decision and conduct of the trustees of your regulated superannuation fund, any persons acting on the trustee’s behalf, or insurers in relation to insurance policies provided through super funds, the STC is responsible for formally reviewing such complaints and providing a remedy for any negative impact.
The Australian Taxation Office (ATO)

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, extra complexities can arise in regard to payouts if the fund has not been correctly managed.

The Australian Securities and Investments Commission (ASIC)

ASIC enforces the Corporations Act 2001, and is responsible for protecting consumer rights in regard to superannuation as well as the rest of the financial services sector, including superannuation and the conduct and disclosure obligations of superannuation trustees to their fund members. This also covers insurance products provided by the super fund.

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.

What regulators or regulations preside over superannuation disputes?

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.

Do you pay tax on your TPD payout?

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, the rules of your fund may alow you to access your super and make a tax-free lump sum withdrawal.

How is TPD paid out?

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 of the TPD benefit, withdraw part of it, or leave the entire balance in your super. Based on your financial situation, type of payout, and potential tax liability, you can decide what makes sense for you.

You have the right to make a disability claim to your superannuation fund. Our team of expert superannuation disability claim lawyers can assist you in navigating the complexities of gathering documentation and filing the claim, as well as managing disputes and appealing to regulatory bodies if needed. We operate on a no-win, no-fee basis, making it easy for you to get legal help when you need it. Contact us for a review of your superannuation disability claim today.


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Gerard Malouf & Partners
 — Personal Injury Compensation Lawyers

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