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  • Invalidity or disability payments from employers or super funds

    If you can no longer work due to disability, you may receive payments from your employer or super fund. You need to understand how:

    • you become eligible for these payments
    • the payments are taxed.

    On this page:

    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.

    You will receive an invalidity payment if both:

    • you stopped working due to physical or mental ill health
    • two legally qualified medical practitioners have certified that it is unlikely you can ever work in a job for which you are reasonably qualified.

    See also:

    Disability super benefits

    You may receive a disability super benefit from your super fund if both:

    • you experience physical or mental ill health
    • two 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.

    See also:

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    Last modified: 23 Feb 2021QC 33265