The majority of TPD claims are made through superannuation insurance. People are often concerned that a TPD payout from a superannuation fund will reduce the balance in their super account. Thankfully, this isn’t the case. In fact, because TPD compensation is paid to your super account, it will actually increase the balance.
Most people don’t think about super until it’s time to retire, but it can also act as a safety net for those with a disability. At TPD Compensation Lawyers, our sole focus is helping individuals get the Total and Permanent Disability entitlement they deserve.
Call us at 03 9966 7188 for a FREE consultation. TPD Compensation Lawyers serve clients in Melbourne and throughout Victoria.
What Is Superannuation Insurance?
In addition to saving money for retirement, superannuation insurance can provide you with financial support if you aren’t able to work. Super usually includes the following types of cover by default:
- Total and Permanent Disability (TPD) Insurance: Paid as a one-time lump sum if it is determined that an injury or illness will prevent you from working again.
- Income Protection Insurance: Provides regular payments for a specified time period while you are unable to work.
- Death Cover (Life Insurance): Paid as a lump sum to beneficiaries when a person passes away.
Most Australians have superannuation cover through their employer, with employer contributions to super totalling more than $133 billion at the end of March 2024. As such, most people with a Total and Permanent Disability will apply for a TPD payout from a superannuation fund set up by their employer.
How Do TPD Payouts Work?
Whether you have TPD cover through your employer’s super or you purchase your own policy (in which case TPD is managed outside of super), receiving a TPD entitlement is not automatic. As with other insurance products, you will need to prove that you meet the eligibility criteria.
This involves filling out an application describing the injury or illness. In addition to granting the insurer permission to access your medical records, you will need to include at least two statements from doctors attesting that you are totally and permanently disabled. The insurer will be looking for comprehensive medical documentation that clearly establishes how the condition affects your ability to work.
If your application is approved, you will receive notice of the decision and the amount of the entitlement in writing. For those with TPD through super, the payout should be added to your super account shortly thereafter. Those with TPD outside of super will receive a payout straight from the insurer.
Does a TPD Payout Affect My Super Balance?
Yes, but not in the way you’re probably thinking. Many people assume that a TPD payout is taken out of their super account. In reality, the balance in your account actually goes up because the benefit is added to your super!
To put it simply, TPD benefits are paid from the superannuation fund to the individual claimant’s account—not the other way around. You don’t have to worry about preserving your retirement savings because the TPD payout is added on top of the money you already have.
As for a TPD payout outside of super, the funds are paid to you directly. Your super balance will stay the same if you successfully claim Total and Permanent Disability on a policy you own.
What Happens to My Super After a TPD Payout?
Most super insurers pay Total and Permanent Disability compensation as a lump sum. What you do with the TPD payout from a superannuation fund is up to you. Your options include:
- Leaving your funds in super: The money will sit in your super account tax-free until you are of preservation age (between 55 and 60, depending on when you were born). Once you reach the preservation age, you can withdraw money from your super without having to pay taxes.
- Rolling funds over to a different super account: If you have multiple super accounts, you have the option of transferring some or all of the money from one fund to another. This may be beneficial for retirement savings, but we strongly advise speaking with a financial professional before taking this step.
- Withdrawing a portion of the funds: Disabled individuals have bills like everyone else, and they often face additional expenses related to their condition. It may be necessary to withdraw some of the funds from super to make up for the loss of income from your prior employment.
- Setting up an income stream: An income stream provides regular payments from your super account. Not all superannuation funds provide this option, but it can be helpful for managing the money you have in super and tending to your financial needs.
- Withdrawing your entire super balance: You also have the option of taking all of the money out of your super account and using the funds however you see fit. If you withdraw the full amount prior to the preservation age, a portion of the withdrawal may be taxed.
The financial and tax ramifications of accessing money in a super account can be difficult to predict. For people with a Total and Permanent Disability, the money they have in super effectively replaces the wages they would earn from working. As such, we can’t stress how important it is to consult a financial professional when deciding what to do with a TPD payout from a superannuation fund.
Read More: What to Do with a TPD Payout
Get Help from TPD Compensation Lawyers Today
Whether you have TPD through super cover or a policy you bought yourself, knowledgeable legal counsel can make a big difference in getting your claim approved. At TPD Compensation Lawyers, we understand how insurance companies operate. Our expertise enables us to guide and support you through the application process, as well as advocate for you in the event of a dispute.