What should you do with a TPD and Personal Injury Payment?
- Michael Sauer
- Sep 23
- 2 min read
When you have been through a serious personal injury, disability or illness it is imperative you receive financial advice to ensure you make the best decisions with your proceeds.
The difference between a quality financial strategy and poor decision could cost tens of thousands in tax and lost Centrelink benefits.
To illustrate this, let me take you through a few examples...
Eligible personal injury compensation allows people to make unlimited contributions into superannuation. This could be a highly tax effective strategy if the person also meets the TPD definition and can create a tax free account based pension to withdraw the money as they need.
However, if they put the money into super and don't meet the TPD definition, it could be a disastrous outcome if the money is trapped in super until their preservation age (often age 60).
Where a TPD Insurance claim is made inside super, another common mistake can be that people withdraw the money and trigger lump sum TPD tax. They may have good intentions, for instance to pay down their mortgage, however by doing so they could trigger tax that could be avoided via alternative strategies.
Where a client may have assets and income below the Centrelink income and asset test for Disability Support Pension, it is also imperative that the strategy considers how to maximise a client's DSP entitlement. For example, money that is used to pay down primary residence debt or left in superannuation before age 67 helps reduce the total assessable assets and could result in a greater Centrelink entitlement.
When we help clients, our role is to:
Determine which strategy outcomes to take and to optimise
Minimise overall tax, often via the use of Account Based Pensions (where applicable)
Minimise TPD tax (where applicable)
Maximise Centrelink Disability Support Pension (where applicable)
Help people invest their money appropriately for their long term benefit
Help process insurance claims
Complete a cost benefit analysis to determine whether a special disability trust should be used
We are happy to chat with all people who are in the process of, or have just received a personal injury claim and/or TPD proceeds to talk through your options. We often find that the larger the entitlements, the greater our strategy benefits can be for clients. You can reach out: