How much tax do you pay on a TPD payout from super?

If you are under 60, the taxable component (taxed element) of a TPD lump sum withdrawn from super is taxed at a maximum of 20% plus the 2% Medicare levy — 22% effective. If you are 60 or over, the lump sum taxed element is completely tax-free. The tax-free component is never taxed. Because TPD withdrawals are disability superannuation benefits, the tax-free component is increased by a 'future service' uplift, so most people pay far less than 22% of the whole payout (ATO super lump sum tax table, updated 26 May 2026).

What is the tax-free uplift on a TPD super withdrawal?

Under section 307-145 of the ITAA 1997, the tax-free component of a disability super lump sum is increased by: benefit amount x days to retirement / (service days + days to retirement). Days to retirement run from the day you became unable to work to your last retirement day — generally your 65th birthday. The younger you are when disabled, the bigger the tax-free uplift. To qualify, 2 legally qualified medical practitioners must certify that you are unlikely ever to work again in a job you are reasonably qualified for (ATO, Calculating components of a super benefit, updated 12 November 2025).

Do I pay tax if I leave my TPD payout inside super?

No. Tax applies when you withdraw the money, not when the insurer pays it into your super account. You can leave the payout in super, withdraw part of it, or wait — once you turn 60, a lump sum withdrawal of the taxed element is tax-free. You can also take it as a disability income stream, which is taxed at your marginal rate less a 15% offset. Compare the options before withdrawing.

Does a TPD payout affect Centrelink payments?

A TPD lump sum is generally not counted as ordinary income for Centrelink purposes, but once it is paid out of super it becomes an assessable asset, and financial assets are deemed to earn income. That can affect asset-tested and deeming-affected payments such as JobSeeker or the Disability Support Pension. While the money stays in super and you are under Age Pension age, it is usually not assessed. Check your situation with Services Australia before withdrawing.

How long does a TPD payout take?

Insurers and super funds commonly take several months to assess a TPD claim — complex claims can take longer. This calculator works out the tax on an approved payout; it says nothing about approval odds or timing. Two-doctor certification is also needed for the concessional tax treatment, so get that paperwork right early.

TPD Payout Tax Calculator

Work out the tax on a TPD lump sum withdrawn from super — the disability tax-free uplift, the 22% rate if you're under 60, and your net in hand. Verified against ATO rules, July 2026.

Last verified: 20 July 2026

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General information and estimates only — not legal, financial or tax advice. Always check your specific award, agreement or contract, or a qualified professional, before you rely on the result.

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