Total Permanent Disability and Disability Support Pension
I am a 38 year old male with a wife and 2 young children. I have been on a Centrelink Disability Support Pension for just over 2 years now and my wife has been on carers pension for almost 12 months. I have recently been told that I will never be able to return to work, by my doctor and surgeon. (I have had 2 failed back surgeries).
I have just realized that I have a old but active superannuation account with insurance for TPD and that I am still currently insured for $209K.
What would be the consequences if I was able to claim TPD from my super fund in regards to our centrelink pensions?
Would we still be able to receive our fortnightly pensions or would centrelink take them off us ? What taxes would I be responsible for ?
Unfortunately as I was injured in April 2008, I have waited to long to be able to make a claim against my ex employer (best mate also), as in QLD we have only 3 years to lodge for personal injuries at work. I am currently looking into an extension to lodge, but don't really like my chances. I have no income protection either.
Any response would be greatly appreciated as I am now finding ourselves in a difficult position.
Thankyou in advance
To receive any insurance benefit, you first have to make an insurance claim. Contact the super fund and ask for a claim form.
An insurance policy held through a super fund is owned by the trustee of the super fund and the fund member is the life insured.
When a claim is made, the insurance benefit is paid to the trustee. The trustee will determine how the insurance benefit may be paid in accordance with the relevant trust deed and superannuation law.
The entire super benefit must be held in the super fund until a condition of release is satisfied such as permanent incapacity.
Please note that not all TPD claims will meet the definition of permanent incapacity under superannuation law. Where this is the case the trustee will hold the entire super benefit until a condition of release is satisfied.
Information provided without taking into account your objectives, financial situation or needs.
I have to agree with Andrew start getting the claims paperwork happening.
Depending on who setup your Super you may even have an adviser attached to it. You can check this, as they are normally mentioned on the statements you receive from the Super fund. If they have been receiving a commission for service then make them help you out with this and get some service.
Now move with haste as some super funds can drop your cover if you haven't been contributing to it.
Andrew I am sure you will agree that chances are if you meet the definition for the TPD payout then your Trustee will most probably pay it as the SIS act isn't meant to be a complete pain in the %##.
Having an experienced Adviser in the mix means they should act as your advocate. I shouldn't be dismissive but if it is an industry fund they may not have that service or care, No commissions, no ones getting paid except the union and the trustees.
2 Years ago I took over dealing with a TPD claim for a local in our Rural community who was sold a policy at the bank. When he needed help with the claims process the bank planner or maybe it was the manager told him come back when he got the pay out. I helped him out Pro Bono as I was so pissed at the attitude of the bank, which will remain nameless.
Go figure as between the insurance and the other legal compensation that was paid he came into some serious money, that he then took elsewhere.
I know a guy up in Cairns who may do some Pro Bono, and I know a bloody good insurance Lawyer in East QLD, if you run into Trouble.
All the best with it and give me a buzz if you have a few questions I maybe able to help with.
It sounds like you have 2 main questions
1) What tax would be payable if you were successful in making a TPD claim
2) What effect would the lump-sum (assuming you took it out of super) have on your current disability support pension.
This is not advice, but rather seeks to give you some discussion points for when you seek advice.
1) Tax payable
Assuming you are successful in the TPD claim, and in meeting a condition of release from super, you can generally choose to take your 'benefit' in the form of a lump-sum or income stream. The taxation treatment is different for both and depends on the break down of your super balance. Your total balance is comprised of a 'taxable' and 'tax-free' component. The tax-free component, as the name suggests, is tax-free. The taxable component, if withdrawn as a lump-sum under age 55 is taxed at 20% plus medicare levy (so 21.5%).
If successful in the TPD claim (as Andrew Newman has said), the payment is paid to the trustee of your super fund - for simplicity's sake, we'll say that the payment is paid into your super balance. The trick is that the benefit will be split into taxable and tax-free components using the following formula.
tax free = amount of benefit x days to retirement / (service days + days to retirement)
Of course, I don't know how many service days you've had, so it's impossible to accurately calculate your tax-payable. See what I mean about getting advice?!
2) Centrelink Pension
For this, I'd recommend going to (or ringing) Centrelink and booking in with a FIS officer. Their specific job is to advise you on how potential lump-sums (or extra income) may affect your pension. Once again, I do not know your circumstances, but if you have debt (say a home loan), you could pay this out using the proceeds with little or no change to your pension.
There's a bunch of strategies that a qualified financial adviser could assist with to minimise the impact on a pension (that's assuming that there is any impact - it depends on your overall assessable assets and income).
In summary, find an financial planner/adviser who has strong experience with TPD claims, social security and super - and work through the best strategy for you and your family. There could be upfront costs (maybe somewhere between $1,000 and $3,500 - just a guess) but in your case, I think they're well worth it. At worst however, book an appointment with a Centrelink FIS officer to see how a potential lump-sum will affect the pension.
Thanks for your replies. They have given me some clarity on my position.
I have engaged the services of a solicitor recently on a " no win, no pay " basis to look into my options and to try and see if we would be able to get the extension. They believe there may a chance we could get it as some new information has come to light recently by way of the severity of my condition which was not previously known. I have read many many forums and case studies regarding this and understand that it is a case by case prospect and very difficult to achieve. But in saying that, you have to at least try.
My super fund have changed my insurance coverage numerous times over the past several years, having coverage and then not having coverage and then having coverage again. I think this is because I had no funds going into my account. There was a enough of a balance in there to cover premiums for insurance, but as you may know, the wording of their policies are very tricky and difficult to understand. Most recently, my super fund reinstated my coverage as they changed insurance companies and as a result my policy also changed.
I must again thank you very much for your replies, I have found them very helpful. This is a great service being offered on here and it is great to see that there are still people out there like yourselves that are willing to help others.