Thinking of making a TPD claim through your super? Here’s what you need to know about eligibility, tax, Centrelink, and how to strengthen your case

If you’ve had to stop working due to illness, injury or a permanent condition, you may be eligible to make a Total and Permanent Disability (TPD) claim through your superannuation. This type of insurance benefit is designed to provide financial support when you need it most, but the path to a successful claim can be tricky to navigate.

From tax implications to Centrelink concerns, and what happens if you’re self-employed, there’s a lot to consider. Many Australians don’t realise they have TPD cover included in their super, or how to access it. Worse still, insurance policies are often full of fine print that can make or break your claim.

At Gordon Legal, we’ve helped hundreds of people across Australia get the benefits they deserve. In this article, we break down some of the most common questions about disability insurance within super, so you know what to expect and how to protect your rights.

How does a TPD payout impact my tax obligations?

Most TPD payouts are made via your superannuation fund. If your benefit is paid into your super account, it’s not immediately taxable. But if you withdraw the money, part of it may be taxed depending on:

• Your age at withdrawal
• The components of your superannuation (taxable vs tax-free portions)
• Whether your condition qualifies for a “disability super benefit” under tax law

It’s important to get financial and legal advice before withdrawing a large lump sum.

In most cases, TPD claims require that you are unlikely to return to work—either in your own job or any job you’re reasonably suited for, depending on the policy wording.

Once your TPD benefit has been approved and paid, you typically won’t be required to repay it—even if your health improves and you’re able to return to work later on.

However, it’s crucial to ensure that all information provided during your claim is honest and accurate. Insurers rely on this information to assess your eligibility. If it’s found that you knowingly submitted false or misleading details, the insurer may consider the claim fraudulent and could pursue repayment of the benefit.

Yes—unfortunately, TPD policies are full of exclusions and restrictions, which insurers often rely on to deny claims.

Common limitations include:

• Pre-existing medical condition exclusions
• Mental health condition exclusions (especially in older policies)
• Waiting periods (e.g., must be off work for 3-6 months)
• Medical treatment and rehabilitation clauses
• Retraining
• Age restrictions (cover often stops at 65–70)

Your superannuation disclosure documents will outline the exact terms. If something doesn’t add up, we can help you challenge it.

It depends on the definition of “TPD” in your policy. Some policies cover you if you can’t return to your usual occupation. Others only pay if you’re unable to do any work suited to your skills, training, or education.

If you can still work in some capacity, but not in the job you had before your illness or injury, you may still be eligible, especially if your policy uses the “own occupation” test.

Both are types of insurance offered through superannuation, but they differ in criteria:

• TPD: You’re permanently unable to return to work due to illness or injury.
• Terminal illness: You’ve been diagnosed with a condition likely to cause death within 24 months (certified by two doctors).

Terminal illness claims generally result in faster payouts with fewer disputes, but both require detailed medical evidence.

Yes, age is one of the most critical factors. Most super funds automatically cancel TPD cover after you turn 65 or 70, unless you opt to extend it (if available).

You must also have held active cover at the time you became disabled, so don’t assume your policy is current without checking.

Under Australian law, super accounts are considered inactive if they haven’t received contributions for 16 months. If your account becomes inactive:

• Your insurance cover (including TPD) may be automatically cancelled
• You may not be able to make a claim
• You might need to opt-in to reactivate cover

Always check with your fund, especially if you’ve stopped working due to injury or illness and no longer receive employer contributions.

Being self-employed doesn’t exclude you from claiming TPD, but it can make it more complex. You’ll need to show that you can no longer perform the essential duties of your occupation, or any occupation you’re reasonably suited for.

You may be asked for:

• Tax returns and profit/loss statements
• Business registration documents
• Evidence of your role and responsibilities

If you’re self-employed and unable to work due to a medical condition, legal help can bolster your application and cut through red tape.

Good news—you can potentially claim on more than one policy, as long as:

• Each policy was active at the time of your injury or illness
• Each fund has separate insurance arrangements
• You meet the eligibility criteria for each

There’s no rule saying you can only claim once, but each claim requires its own documentation and application process. A lawyer can help you manage multiple claims efficiently and avoid delays.

Not directly. You can receive Centrelink benefits (like the Disability Support Pension) while also being eligible for a TPD payout. However:

• Centrelink may count your TPD lump sum as an asset or income, which could reduce or suspend your payments
• You must report the TPD payment to Centrelink to avoid penalties
• You may need financial advice to manage both sources of support effectively

Always disclose your TPD claim to Centrelink to stay compliant and avoid issues later on.

Making a TPD claim through your super can feel like reading another language, full of exclusions, confusing terms, and long delays. And when you’re already dealing with a life-altering condition, fighting an insurer shouldn’t be something you do alone.

At Gordon Legal, we specialise in cutting through the jargon and standing up to insurers. We work on a No Win, No Fee basis, and we’ve helped everyday Australians claim what’s rightfully theirs, even when insurers said no.

If you’ve been forced out of work due to disability, get in touch with us today. We’ll explain your options in plain English, help you understand your policies, and guide you through every step of your claim.

Because at Gordon Legal, it’s personal. And we’re on your side.