When your TPD claim is approved and the funds are in your super account, you'll need to decide how to receive them. The two main options are a lump sum or an account-based pension (income stream).
Lump sum
Most people take their TPD payout as a lump sum. The entire amount is released to you at once.
- Pros: Immediate access, flexibility to pay off debts, invest as you choose, or fund major expenses
- Cons: Risk of spending down the capital; may affect Centrelink asset tests; tax may apply to the lump sum in some cases
Account-based pension (income stream)
You leave some or all of the money in super and convert it to an account-based pension, drawing a regular income.
- Pros: Regular income; investment earnings on remaining balance can be tax-advantaged within super; Centrelink treatment may be favourable
- Cons: Less flexibility; balance can deplete over time; complex rules apply
Age considerations
Under 60: tax is payable on both lump sums and income streams from the taxable component. The permanent incapacity tax offset can reduce this. Over 60: both are typically tax-free.
Get financial advice
This is a significant decision that depends on your age, health, Centrelink situation and long-term financial goals. A financial adviser with superannuation expertise can help you model the options. Start with our free eligibility check first.