Invalidity payments
An invalidity payment is part of an employment termination payment (ETP) your employer gives you. It is made up of a taxable component and a tax-free component. The invalidity payment is part of the tax-free component of the ETP.
You will receive an invalidity payment if both of the following apply:
- you stopped working due to physical or mental ill health before your employment would normally have ended
- 2 legally qualified medical practitioners have certified that it is unlikely you can ever work in a job for which you are reasonably qualified.
If your employment was due to end at a certain age or after a set period of service, you must have stopped working because of ill health before reaching that age or completing that period. In any other case, you must have stopped working due to ill health before the day you turn 65 years old.
Disability super benefits
You may receive a disability super benefit from your super fund if both of the following apply:
- you experience physical or mental ill health
- 2 legally qualified medical practitioners have certified that it is unlikely you can ever work in a job for which you are reasonably qualified.
The payment may be:
- a one-off lump sum
- regular ongoing payments (called an income stream).
We tax lump sums and income stream payments differently. If you can choose how your payment is made, it is important to understand how the different options affect your tax.