Insurance and super
What a TPD claim through super is actually worth after tax
A total and permanent disability payout is quoted as an insured amount. What arrives is that amount minus tax that depends on your age, your service dates and how you take it — and most people hold cover in more than one fund.
The insured amount is not the amount. And it is rarely only one policy.
Total and permanent disability cover held inside superannuation pays into the fund, not to you. Getting it out is a second step with its own rules: a lump sum taken before 60 is taxed on its taxable component at 22% plus the 2% Medicare levy, and on $22,000 of tax per $100,000 that is not a rounding difference.
Against that sits the future service uplift in section 307-145 — the disability superannuation benefit concession, which increases the tax-free component in proportion to the service period you would have had until retirement age of 65. It requires two medical certificates. It is worth a great deal to a younger claimant and progressively less to an older one, and it is routinely left on the table by people who did not know to ask for it.
Most Australians hold default cover in more than one fund. Cover in a fund you stopped contributing to 16 months ago may have been cancelled — and cover you forgot about may still be live.
Both facts change the number, and only one of them is good news.
What it works out
- Every account you hold, together. Multiple policies means multiple claims, multiple definitions and multiple tax calculations, and adding them up is not as simple as adding them up.
- The future service uplift, on your dates. Service start, date of disablement, and 65 — the three dates that decide how much of the payment is tax free.
- The lump sum tax at 22% plus 2% on the taxable component, with the low rate cap of $260,000 applied where you are at or over preservation age.
- Lump sum against income stream. A disability income stream attracts a 15% tax offset and sits under the $2.1 million transfer balance cap — for some claimants it is materially better and for others it is not.
- Every lawful way of taking the money, ranked on what reaches the bank account.
What the full report adds
- Each fund separately and all of them together, because the tax outcome of claiming two policies is not the sum of claiming each one.
- The timing question. Claiming before or after preservation age of 60 changes the answer, and where the claim is close to that date the difference is worth knowing about.
- What happens if a claim is declined. The internal dispute process, the 4 year AFCA window, and what each step costs in time.
- Own occupation against any occupation. Cover written before 1 July 2014 may be on a different definition from anything sold since, and the definition decides whether there is a claim at all.
What it will not do
It does not assess whether you meet the policy definition of total and permanent disability, which is a medical and contractual question decided by the insurer on evidence, and it is not financial or legal advice. What it does is put a number on what a successful claim is worth after tax, so that a settlement offer, a lawyer's fee proposal or a choice between two ways of taking the money can be judged against something.
Everything here runs on the 2026-27 rates and caps.
What people ask before they run it
How much tax do you pay on a TPD payout in Australia?
If the benefit is paid out of superannuation and you are 60 or over, none at all. Under 60, the taxable part of the lump sum is taxed at 22%, which is 20% plus the 2% Medicare levy. But the tax-free part is not what an ordinary member statement says it is: section 307-145 of the Income Tax Assessment Act 1997 recalculates it to cover the years you would have worked, and on a claim at 40 that moves most of the benefit out of the taxable part altogether.
What is the future service uplift on a disability superannuation benefit?
It is a rewriting of the tax-free part of the lump sum. Instead of the ordinary calculation, the tax-free amount becomes the benefit multiplied by the days from the day you stopped being able to work until you turn 65, divided by that same number plus the days you were already in the fund. The younger you are and the longer you had left to work, the more of the benefit comes out tax free. It needs certificates from two legally qualified medical practitioners, and a fund that has not been given them withholds at the ordinary rate.
Can I claim TPD on more than one super fund?
Yes. Cover is a contract with each fund's insurer and each one is claimed separately, so somebody with three super accounts may hold three separate amounts of default cover, and claiming on one does not claim the others. About 4 million Australians held two or more accounts at 30 June 2025, against over 14 million on a single account since stapling. The trap is that the forgotten accounts are usually the ones with no contributions going in, and cover is cancelled on an account with no contributions for 16 months unless the member elects in writing to keep it.
How long do I have to lodge a TPD claim in Australia?
Where employment permanently ended because of the disability, the claim has to reach the superannuation trustee within 2 years of that day for the Australian Financial Complaints Authority to be able to hear a complaint about the answer, and the complaint itself has to reach AFCA within 4 years of the decision. Where employment did not end because of the injury or illness, the limit is six years from the decision. The clock runs from the day work permanently ended, not from the day the fund said no. The insurer and the fund can still pay outside it — what is at risk is the free, binding review if they do not. AFCA Rule B.4.1.1.
Do you give financial or legal advice?
No. This is an information service: it applies the published superannuation and tax rules to the figures you enter and shows what they produce, with every working visible. It ranks the ways of taking a benefit on one stated arithmetic measure — what reaches your bank account — and does not recommend one. We take no share of any claim and we are not paid by any fund, insurer or law firm.
Everything on TPD Claim Value
The estimate is free, and it is a real one.
Works out what an Australian total and permanent disability claim paid through superannuation is worth after tax — across every super account held, applying the future service uplift in section 307-145 of the Income Tax Assessment Act 1997 — and ranks every lawful way of taking the money on what actually reaches the bank account.
Start the TPD Value calculator
