A tax win for Queensland Police Officers receiving a TPD Claim

Last week the ATO ruled in our clients favour, that our client’s ‘date of disability’ to be used in the TPD tax-free uplift, should be the actual date that the person stopped being capable of employment due to disability and NOT the date that a doctor signs a report to confirm this.

This has been an ongoing issue we have had with the default superannuation fund for Queensland police officers.

By using this earlier date of disability for the tax calculation, our client will have a higher tax-free portion and therefore pay LESS TAX any subsequent super withdrawals.

This was part 1 of a tax issue we are working on for Qld police officers, part 2 relates to the ‘Retirement Date’ used by the superfund which also disadvantages Qld police officers.

Why the Date of Disability Matters

Under section 307-145 of the Income Tax Assessment Act 1997, the tax-free portion of a disability superannuation benefit lump sum payment is based on a formula that includes the “days to retirement” — calculated from the date you stopped being capable of working due to illness or injury – to your retirement day.

The earlier that date is accepted, the greater the tax-free component of your payout. For many claimants, this can mean a difference of thousands of dollars.

Our Client’s Case & Outcome

Our client, a former Queensland Police Officer, had stopped working in September 2021 due to a health-related incapacity. However, both the super fund trustee’s decision and the ATO’s initial private ruling had used February 2024 as the date he stopped being capable of work — that date being when medical certificates had been issued.

We challenged this ruling on the basis that gainful employment means actual work for reward, not when medical certification was later provided or when receipt of compensation or accrued payments had ceased. After a review initiated by TPD Claims Advice, the ATO agreed with our objection in full and confirmed that the earlier 2021

date should apply. This adjustment significantly increased the tax-free component of the TPD payout, improving the client’s overall after-tax financial position.

What This Means for Other Officers and Claimants

This decision sets an important example for other Queensland Police Officers and emergency services staff dealing with TPD claims:

– You don’t need to be officially “medically retired” or stopped receiving payments via salary or workers compensation for the ATO to recognise your incapacity date.

– The correct date is when you actually ceased being capable of performing your role — not when final medical paperwork is completed.

– Getting this right can increase the tax-free portion of your TPD payment and lead to better financial outcomes.

Part 2: Retirement Date Tax Issue

This was step 1 that we are working on for Qld police officers.

Queensland police officers are also disadvantaged in another way, the ‘retirement date’ used in the tax calculation when making a superannuation withdrawal following a TPD claim uses age 60, rather than age 65 – which is the date all other superfunds use.

We can understand the logic here, the TPD tax legislation does allow for a different retirement age relating to a specific industry, and we understand that police officers under a certain rank are required to retire at age 60. But, we believe the legislation allows either date to be used, and using the earlier date of 60 reduces the TPD tax-free uplift and therefore unnecessarily increases the tax ex-Qld police officers will pay on withdrawal.

If the Qld police officers were in any other superfund, the retirement date of 65 would be used.

How can TPD Claims Advice Help

If you or your clients have had a TPD claim approved ensure they book in for our TPD Financial Consultation BEFORE they access there benefit.

Every TPD claimant will benefit from this consultation. Click the contact us button for more information.