Under Australian Law, you may be able to access your super benefits due to temporary or permanent incapacity.
Temporary Incapacity
Under super legislation, you are classified to be temporarily incapacitated if you are suffering from a physical or mental illness and your income has been negatively affected due to being:
- unable to work at all or
- work fewer hours than you normally would
Due to the temporary incapacity you need may need to supplement your income via your super fund, therefore this condition of release is generally used to release insurance benefits from your super provider.
You will receive your super benefit in regular payments (income stream, cannot be converted into a lump sum) over the time you are unable to work, either through:
- income protection policy or
- voluntary employer-funded benefits only (contributions in excess of compulsory 9.5%)
Note: If you are receiving sickness benefits from you employer, you wont be eligible for any super benefits. In addition, if you do not have either of these benefits and your income has been negatively affected due to suffering temporary incapacity, you may need to apply to your super fund for release on compassionate grounds.
Tax payable on your super payment will be determined on a number of factors.
Rate of tax on income stream payments will be determined by whether you are under preservation age (or of preservation age), taxable and non-taxable components of income stream received and if the taxable component has tax or untaxed elements.
- Under preservation age or preservation age and under 60 – Taxed component: Taxed at your marginal tax rate (MTR) but you then receive a tax offset of 15%
- Under preservation age or preservation age and under 60 – Untaxed component: Taxed at your marginal tax rate (MTR).
- Age 60 and over – Taxed component: No tax payable
- Age 60 and over – Untaxed component: Taxed at your marginal tax rate (MTR) but you then receive a tax offset of 10%
Permanent Capacity
Under super legislation, you are classified to be permanently incapacitated if you are suffering from a physical or mental illness that is likely to stop you from working ever again in a job you were qualified to do by education, training, and experience. This type of withdrawal is sometimes classified as “disability super benefit”.
To satisfy your super fund provider, you must have at least two medical practitioners certify that you have a permanent physical or mental illness which will prevent you from returning to work ever again.
You will receive your super benefit in either a lump sum or regular payments (income stream) via:
- Total & Permanent Disability (TPD) insurance that you may have in your super fund and/or
- Other super benefits you may have accumulated (you may not need to withdraw if you have sufficient TPD benefit).
Tax payable on your super payment will be determined on a number of factors.
Rate of tax will be determined by whether you are under preservation age (or of preservation age), on your decision to receive benefit via a lump sum or income stream, taxable and non-taxable components and if the taxable component has tax or untaxed elements.
- Under preservation age or preservation age and under 60 – Income Stream: Taxed component: Taxed at your marginal tax rate (MTR) but you then receive a tax offset of 15%
- Under preservation age or preservation age and under 60 – Income Stream: Untaxed component: Taxed at your marginal tax rate (MTR)
- Under preservation age or preservation age and under 60 – Lump Sum: Taxed component: Taxed at your marginal tax rate (MTR) or between 17 and 22% (depending on your age, whichever is lower)
- Under preservation age or preservation age and under 60 – Lump Sum: Untaxed component: Taxed at your marginal tax rate (MTR) or 32% (whichever rate is lower) unless lump sum payment exceeds untaxed plan cap ($1.48 million 2018/19) if you exceed untaxed cap you will be taxed at top marginal tax rate 47%
- Age 60 and over – Income Stream: Taxed component: No tax is payable
- Age 60 and over – Income Stream: Untaxed component: Taxed at your marginal tax rate (MTR) but entitled to a tax offset of 10%
- Age 60 and over – Lump Sum: Taxed component: No tax is payable
- Age 60 and over – Lump Sum: Untaxed component: Taxed at your marginal tax rate (MTR) or 17% (whichever rate is lower) unless lump sum payment exceeds untaxed plan cap ($1.48 million 2018/19) if you exceed untaxed cap you will be taxed at top marginal tax rate 47%
Speak to a professional or contact our office if you would like some assistance in gaining access to your super due to temporary/permanent incapacity or if you would like a review of any insurance implications attached to your account in the instance you may require to access in the future.