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  • Employer or super fund invalidity and disability payments

    When you can no longer work due to invalidity or disability, there are tax implications to consider on any payments received from your employer or super fund. The amounts are taxed differently depending on how it is paid.

    You may be eligible to withdraw it if you meet a condition of release as a result of retirement due to permanent incapacity or invalidity.

    Invalidity payments

    An invalidity payment is part of an employment termination payment (ETP) you receive from your employer as a result of sustaining a permanent disability.

    You will receive an invalidity payment if your employment ceased as a result of ill health and two medical practitioners have certified that it is unlikely you can ever be gainfully employed in an area for which you are reasonably qualified.

    Your ETP is made up of a taxable component and a tax-free component.

    Disability benefit payments

    A disability benefit is a payment you receive if you suffer from physical or mental ill health and two legally qualified medical practitioners certify that it is unlikely you can ever be gainfully employed in an area for which you are reasonably qualified because of education, experience or training.

    You can receive a disability benefit from your super fund or from your employer as either a lump sum or an income stream. There are tax implications to consider as the amounts are taxed in different ways depending on how the benefit is paid.

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    Last modified: 08 Nov 2018QC 33265