If you’ve suffered from an injury or illness and cannot go back to work then you might be eligible for a total and permanent disability payout from your superannuation insurance. Before going down this road, however, many people have some questions to ask about TPD payouts and their implications on things like tax, Centrelink and future work. Here are five of the most frequently asked questions on TPD payouts:
How much would I get as a TPD payout?
In New South Wales the amount you are paid if your TPD claim is successful is dependent on your level of insurance cover when you last worked. The definition of total and permanent disability differs depending on your insurance policy, however, you are normally eligible if you’ve been unable to work more than three to six months due to an injury or illness. If your claim is successful then your TPD lump sum payout is typically between $60,000 and $500,000.
Your TPD payout will be paid once your claim is finalised and approved. This means that there is no hard and fast rule on how long it will take, as it is dependent upon the complexity of the case and the speed with which the insurance company can make a decision. In addition, once the insurance company has made their decision the trustee of the superannuation fund will also undertake their own assessment as well. Therefore, on average, successful TPD claims are normally finalised and paid out in 6 to 12 months. It can take less time than this in cases where the evidence is clear and the claim is straightforward.
Will claiming a TPD payout impact my Centrelink benefits?
If you receive a TPD lump sum payout and keep the lump sum in your bank account, this may be counted as a financial asset and be included in your Centrelink income and assets testing. Further, you may be precluded from receiving Centrelink payments into the future depending on the amount of your lump sum. It is best to contact Centrelink and confirm the implications of receiving a TPD lump sum.
What are the implications of my TPD payout on my tax?
A successful TPD payout is initially paid into your superannuation account, which is not considered taxable income and therefore will not require you to pay tax on the payout as long as that money stays in the superannuation account until you reach 60 years of age. If you choose to receive the TPD payout in the form of a lump sum you may need to pay a superannuation lump sum withdrawal tax.
It is best to talk to your superannuation fund to find out what portion may be tax-free. Further, it is recommended you speak to an accountant for advice in relation to any tax implications.
Can I go back to work after a TPD payout?
There are some instances where after a TPD payout the person recovers due to rehabilitation, medical intervention or some other factor and is able to go back to work. If your condition has improved and you are able to go back to work after a TPD payout, you will generally be able to do so and not be required to repay your TPD lump sum.
However, it is important to consider that when you make a TPD claim you must provide true and accurate information. Therefore, if you provide false information the insurance may claim that you made a fraudulent claim and seek repayment.