Does a TPD Payout Affect Centrelink Payments?
A TPD payout offers the financial stability needed to rebuild after an injury or condition that’s left you unable to work. But will this TPD payout affect my Centrelink benefits?
The answer is: It depends.
It all boils down to what you do with the funds, how you withdraw them, and how Centrelink decides to interpret your financial situation. But don’t worry—we’re here to translate the gobbledygook into plain English so you can make decisions that are both informed and strategic.
Let’s unravel this puzzle. Shall we?
The TPD Payout: Your Lifeline in a Lump
Let’s talk about what a TPD payout is. If you’re approved for a TPD claim, the money usually lands in your superannuation account first. At this stage, you can breathe easy—your Centrelink benefits are safe and sound.
But here’s the twist: Centrelink doesn’t care much about the payout itself while it’s sitting in your super. It’s when you decide to withdraw those funds that things get interesting.
The Centrelink Effect: How TPD Payouts Change the Game
Once you withdraw your TPD payout from your super, you’re introducing it into the real world—your real world. Maybe you want to pay down a mortgage, cover medical bills, or finally take that holiday you’ve been dreaming about. Whatever your plans, Centrelink payback and preclusion starts being relevant.
How a TPD Payout May Impact Centrelink
Here’s the crucial part: whether your TPD payout affects your Centrelink payments depends on how it is treated under the Income and Assets Test.
The Income Test: Is Your Money Making Money?
Let’s say you withdraw a portion of your payout and stash it in a savings account. That’s where Centrelink’s Income Test comes in. If the money starts earning interest, Centrelink counts that interest as income. Even small amounts can affect benefits like the Disability Support Pension (DSP) or JobSeeker Payment.
The Assets Test: What’s in Your Piggy Bank?
Centrelink also applies the Assets Test, which takes a long, hard look at what you own. If you withdraw your payout as a lump sum and don’t use it on exempt items (like your home), it could push you over the asset limit. This might reduce—or even eliminate—your payments.
TPD Payouts - The Complexity of "What You Do With It"
Here’s where it gets interesting: it’s not just about having the money; it’s about how you use it.
- Paying Off a Mortgage: If you use your TPD funds to pay down your home loan, Centrelink won’t count your home as an asset.
- Covering Living Expenses: Using the payout for daily costs or non-assessable items (think medical bills or essential repairs) is another smart move.
- Investments: But the moment your money starts generating returns, Centrelink starts doing the maths.
Why Professional Advice is Non-Negotiable
If all this sounds overwhelming, that’s because it is. The devil, as they say, is in the detail, and Centrelink’s Income and Assets Tests are no exception. This is why getting advice from professionals—financial advisers and our TPD lawyers—isn’t just a recommendation; it’s a lifeline.
Financial Advisers
A good financial adviser will help you:
- Structure your withdrawal in a way that minimises impact on your benefits.
- Explore options like offsetting your mortgage or spending on exempt assets.
TPD Lawyers
While we’re not financial advisers and unable to provide financial advice, we’re specialised in navigating the TPD claims process. At Withstand Lawyers, our experienced TPD lawyers will guide you through the legal maze, ensuring you know exactly what to expect when your payout lands all on a No Win No Fee basis.
Once your TPD claim has been approved our TPD lawyer will recommend you seek financial advice and offer you an option to consult with a financial consultant we refer our clients to, who specialises in TPD claims, Centrelink and tax.
The Takeaways
- Your TPD Payout in Superannuation: No impact on Centrelink benefits while the funds remain in your super account.
- Withdrawing a Lump Sum: Once withdrawn, your payout is subject to Centrelink’s Income and Assets Tests.
- The Use of Funds: Paying off a mortgage or covering daily expenses can limit the impact, but investments could reduce your entitlements.
- Professional Guidance is Key: Legal and financial advice can save you from unintended consequences. We are not Centrelink or financial advisors.
Why This Matters
It’s easy to assume that a TPD payout is your golden ticket to financial freedom. And it is—provided you understand the rules.
At Withstand Lawyers, we’ve seen it all: clients who made uninformed decisions and lost benefits, and others who planned strategically and came out ahead. The difference is stark, and it comes down to having the right advice at the right time.
Ready to Take the Next Step?
If you’re considering making a TPD claim and wondering how it might affect your Centrelink benefits, don’t leave anything to chance. At Withstand Lawyers, we’re here to guide you through the process, ensuring you fully understand your rights and options.
Take the first step today with our free eligibility check. Our team will assess your situation and provide clear advice on your claim. Plus, we’ll handle your case on a No Win, No Fee basis, so there’s nothing to lose.
Let our TPD lawyers help you make your TPD claim a step toward financial security. Together, we’ll ensure your payout works for you—not against you.
Issa Rabaya
• Bachelor of Laws
• Graduate Diploma in Legal Practice
• Approved Legal Service Provider to the Independent Review Office
• Member of the Law Society
Issa Rabaya
• Bachelor of Laws
• Graduate Diploma in Legal Practice
• Approved Legal Service Provider to the Independent Review Office
• Member of the Law Society
