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TPD insurance and tax

Your premiums may be tax-deductible if you bought TPD insurance through your super fund. That's not likely to be the case if you went direct with an insurer.

1 - 5 of 24
Name Product Maximum Cover Minimum Cover Maximum Entry Age Expiry Age Stand alone or Add on policy hide
TAL TPD Insurance
3,000,000
Not stated
61
65
Standalone or Policy add-on
Choose up to $3 million in coverage. If you’re building a policy with TAL, it’s good to know there are a range of perks included with your life insurance. Examples include a counselling benefit and premium suspension cover. Plus, the option to add coverage for your kids.
Medibank TPD Insurance
$1,500,000
$50,000
60
65
Policy add-on
Secure up to $1.5 million in TPD cover by choosing Medibank. This was more than 7 other providers (out of 14) we reviewed. Medibank health members can score 10% off their life insurance premiums.
NobleOak TPD Insurance
$5,000,000
No minimum
59
75
Policy add-on
Get fully underwritten TPD cover that can be shaped in a way that takes into account your job and other circumstances. The $5 million benefit limit is – alongside RAC – the highest sum on Finder.
ahm TPD Insurance
$1,000,000
$50,000
55
65
Policy add-on
With ahm, you can add up to $1 million in TPD insurance to your policy. You can buy online and there’s no medical exam. Keep in mind that Medibank offers an extra $500k – worth considering if your needs are greater.
Real Insurance TPD Insurance
$1,000,000
$50,000
59
65
Policy add-on
Real Insurance offers up to $1 million in TPD cover. This is pretty competitive versus the market. You can also boost your cover by adding as much as $500k in critical illness insurance.
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Disclaimer: This article contains general advice only and does not consider your own personal circumstances. You should obtain professional advice and verify our interpretation before relying on the information contained in this article.

If you're confused by tax and TPD insurance, we're here to help. This guide will explain when your TPD premiums are tax-deductible and when your payouts are tax-free, so you can make a more informed decision about the cover that's right for you.

Is TPD insurance taxed in Australia?

If you bought Total Permanent Disability (TPD) insurance through your super, then the premiums may be tax-deductible to your super fund. If you bought TPD insurance independently, through an insurer, the premiums are not tax-deductible.

Generally, benefits are not taxed for policies bought independently outside of a super. However, if you bought your policy through super, some of your payout may be taxed.

Outside of superInside of super
Premiums❌ Not tax-deductible✅ Tax-deductible
Benefits✅ Not taxed⚠️ May be taxed

More than 70% of Aussies who have life cover hold it in their super, according to Moneysmart figures.

Are TPD insurance premiums tax-deductible?

If you bought your TPD insurance independently – that means through an insurance company rather than a super fund – your premiums aren't tax-deductible.

However, if you have TPD insurance through your super, your fund may be eligible for a full or partial deduction. The amount your fund can deduct will depend on the type of cover you have.

Type of TPD How much of your premium a fund can deduct
Any occupation100%
Any occupation with any of the following inclusions:
  • Activities of daily living
  • Cognitive loss
  • Loss of limb
  • Domestic duties
100%
Own occupation67%
Own occupation with any of the following inclusions:
  • Activities of daily living
  • Cognitive loss
  • Loss of limb
  • Domestic duties
67%
Own occupation bundled with death (life) cover80%
Own occupation bundled with death (life) cover and any of the following inclusions:
  • Activities of daily living
  • Cognitive loss
  • Loss of limb
  • Domestic (home) duties
80%

It's important to note that the tax deduction is available to the trustee of your superannuation fund, not to you personally. You may still see some benefits, however, as your super fund will usually apply this deduction to your superannuation balance.

If you have a self managed super fund, the situation may be different and potentially more complex, so it's worth speaking with a tax accountant or financial adviser.

Finder survey: What is the main reason Australians of different ages took out TPD insurance?

Response65-74 yrs55-64 yrs45-54 yrs35-44 yrs25-34 yrs18-24 yrs
Peace of mind2.29%1.74%4.66%5.58%5.05%1.03%
I have a mortgage2.91%3.11%3.55%1.38%1.03%
I have financial dependents2.33%1.55%4.06%1.38%
Other0.58%1.55%2.03%
I'm self-employed0.51%0.92%
I'm worried about being made redundant1.03%
Source: Finder survey by Pure Profile of 1110 Australians, December 2023

Are TPD benefits taxed?

Sometimes. It depends on how you paid for your TPD insurance to begin with and whether you want to withdraw the money early from your super account.

  • If you got TPD independently (outside of your super), the benefits generally aren't taxed. You'll get a lump sum if your claim is successful and it's yours to keep.
  • If you got TPD through your super, the TPD benefit will be paid into your super account. If you choose to withdraw money from your super account early – that's between 55 and 60 years old depending on your date of birth – the money you withdraw will be taxed.

The standard tax rate when withdrawing super before retirement age is 22%. However, when withdrawing superannuation following a TPD claim, a portion of your withdrawal will be tax-free. Your super fund will apply a calculation based on your days of service, so the effective tax rate will be different for everybody.

How much are TPD benefits taxed?

If you bought your TPD insurance through your super fund and you claim a benefit, the money may be subject to tax. The amount will depend on your age, how you want to claim the payment and how much you already had in your super account.

How you claim the moneyWhat happens
Withdraw a lump sum before your preservation ageMust pay superannuation lump sum withdrawal tax on the taxable component at a rate of 20% plus Medicare levy.
Withdraw a lump sum after your preservation age but under age 60Must pay superannuation lump sum withdrawal tax on the taxable component at a rate of 15% plus Medicare levy.
Start an income streamThe taxable component of the annual income drawn will be taxable at your marginal tax rate, but with a 15% tax offset.
Leave the balance in super until you're 60If you wait until you're 60 to withdraw money from your super, it is tax-free.

Compare TPD insurance outside of super

1 - 5 of 24
Name Product Maximum Cover Minimum Cover Maximum Entry Age Expiry Age Stand alone or Add on policy hide
TAL TPD Insurance
3,000,000
Not stated
61
65
Standalone or Policy add-on
Choose up to $3 million in coverage. If you’re building a policy with TAL, it’s good to know there are a range of perks included with your life insurance. Examples include a counselling benefit and premium suspension cover. Plus, the option to add coverage for your kids.
Medibank TPD Insurance
$1,500,000
$50,000
60
65
Policy add-on
Secure up to $1.5 million in TPD cover by choosing Medibank. This was more than 7 other providers (out of 14) we reviewed. Medibank health members can score 10% off their life insurance premiums.
NobleOak TPD Insurance
$5,000,000
No minimum
59
75
Policy add-on
Get fully underwritten TPD cover that can be shaped in a way that takes into account your job and other circumstances. The $5 million benefit limit is – alongside RAC – the highest sum on Finder.
ahm TPD Insurance
$1,000,000
$50,000
55
65
Policy add-on
With ahm, you can add up to $1 million in TPD insurance to your policy. You can buy online and there’s no medical exam. Keep in mind that Medibank offers an extra $500k – worth considering if your needs are greater.
Real Insurance TPD Insurance
$1,000,000
$50,000
59
65
Policy add-on
Real Insurance offers up to $1 million in TPD cover. This is pretty competitive versus the market. You can also boost your cover by adding as much as $500k in critical illness insurance.
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Senior writer

Nicola Middlemiss is a contributing writer at Finder, with a special interest in personal finance and insurance. Formerly a business and finance journalist, Nicola has written thousands of articles helping Australians better understand insurance and grow their personal wealth. She has contributed to a wide range of publications, including Domain, the Educator, Financy, Fundraising and Philanthropy, Insurance Business, MoneyMag, Mortgage Professional, Yahoo Finance, Your Investment Property, and Wealth Professional. Nicola has a Tier 1 General Insurance (General Advice) certification and a Bachelor's degree from the University of Leeds. See full bio

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Nicola has written 238 Finder guides across topics including:
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