Unpacking the ins and outs of superannuation disability benefits

A superannuation benefit can be accessed under the PI condition of release in several ways, with each option having different tax implica- tions which can result in very different outcomes. This paper outlines the process to meet the PI condition of release and the tips, traps and pitfalls when helping your clients decide how they access their benefits.

Meeting the PI condition of release: Superannuation regulations and interaction with the tax rules

A superannuation disability benefit payable on meeting the PI condition of release can comprise of the member's superannuation interest and insurance proceeds from a total and permanent disability (TPD) policy-if any-held in that superannuation fund.

Where a TPD insurance policy is held within superannuation, the proceeds of the claim are paid to the fund. Generally, from 1 July 2014 only TPD policies that align with the PI condition of release can be held within superannuation. Individuals who can claim under grandfathered policies that commenced before 1 July 2014 may not subsequently access their super benefits as they may not satisfy the PI condition of release - for example, own occupation TPD policies.