Once your claim has been approved, the insurance company will begin making payments to you. Depending on your policy, these payments may be made in a lump sum or in periodic payments. You should also consult with a financial advisor to ensure that you are making the best decisions for your future.
How is TPD paid out?
TPD is typically paid out in lump sum payments, though some policies may provide for periodic payments. Whether you access your payout via a lump sum or income stream can have a significant impact on the tax you pay as well as welfare benefits you may be able to receive (such as Centrelink). As a result, obtaining advice on the most effective way for you to access your payout can be invaluable.
Do I have to withdraw my entire balance now?
No, you typically don’t have to withdraw your balance immediately but you generally can if you want to. You may want to consider whether you want to put some of your payout into an income stream. An income stream can provide you with a regular income, which may be preferable if you are unable to return to work. It is important to seek advice before making a decision on how to receive your payout, as there can be tax implications as well as implications for Centrelink benefits.
Is a TPD payout considered taxable income?
TPD payouts are not considered to be taxable income although tax is often payable on the amount you receive. Withdrawing your superannuation benefits as a lump sum can result in you being required to pay the Superannuation Lump Sum Withdrawal Tax.
Does a TPD payout affect Centrelink?
Yes, it can – and in some cases, it may reduce the amount of Centrelink benefits you are eligible to receive. For example, if you receive a lump sum TPD payout, this may reduce the amount of Disability Support Pension you can receive. It is important to understand how the income and assets test will be applied to proceeds you receive from a claim. It is not the act of claiming on your TPD insurance that may have an impact on your Centrelink benefits, it is where the money sits (inside/outside of super) once the payout is made that can impact your entitlements. As a result, it is important to seek advice before making a decision on how to receive your payout.
Does Withdrawing from superannuation impact my Medicare Levy assessment?
No, you typically don’t have to withdraw your balance immediately but you generally can if you want to. You may want to consider whether you want to put some of your payout into an income stream. An income stream can provide you with a regular income, which may be preferable if you are unable to return to work. It is important to seek advice before making a decision on how to receive your payout, as there can be tax implications as well as implications for Centrelink benefits.
Does Withdrawing from superannuation affect my Child Support payments?
Your Child Support payments may be affected if you receive a TPD payout. This is because your taxable income may increase, which may result in you having to pay more Child Support. If you are thinking of withdrawing your superannuation as a lump sum, you should seek advice on the potential impact this may have on your Child Support payments.
General Advice Disclaimer
General advice warning: The advice provided is general advice only and in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.
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