The general rule at 60+
Once you've reached age 60, lump sum withdrawals from a taxed super fund — including TPD insurance proceeds — are tax-free. You don't need to declare them in your tax return and there's no Medicare levy applied.
When tax can still apply after 60
- Untaxed funds: some government / public sector schemes are "untaxed" — different rules apply.
- Income stream option: if you take the payout as a super income stream, the earnings rules differ.
- Death benefit paid to a non-dependant: not the claimant scenario, but worth flagging.
What about my insurer's withholding?
Super funds sometimes withhold PAYG tax by default on TPD payments and refund it at tax time, or after you supply a tax file number declaration confirming your age. A specialist can fast-track this so you don't have to wait for a refund.
Run your own numbers
Use the free TPD tax calculator to confirm your estimate, then book a free phone review with an AFSL-authorised adviser who can confirm exactly what you'll receive.