Super TPD claims and Child Support

Successful TPD Claims

Will my superannuation TPD claim impact my child support payments? The answer is yes, the taxable portion of your superannuation withdrawal after a TPD claim being approved, is counted as taxable income, and will impact your child support arrangement.

Though as always, there are nuances to this, read on for more information.

Please note, this is not financial advice, please do not take any action based on this article, everyone’s situation is different, please seek financial advice if you have questions about your particular situation.

Public versus Private Child Support Arrangement

A public child support arrangement means that at the end of the financial year, the Child Support Agency (CSA) will get a feed from the ATO give the taxable income for each ex-partner for the past financial year. The CSA will then apply their formula to work out the child support payment, and write out to both ex-partners with details of the child support payments for the following year.

Superannuation TPD versus Non-superannuation TPD

If someone holds a Total & Permanent Disability (TPD) policy outside of superannuation and is the owner of the policy, the approval and payment of the TPD payment is paid tax free to the beneficiary/owner of the policy. This type of payment does not impact a person’s child support arrangement.

However, most Australians hold their TPD insurance through their superfund, or is “linked” to their super account and premiums are paid for from their super account. When these types of TPD claims are approved, the TPD proceeds are paid into super, the person then has a decision, they can:

  • Leave the funds in super
  • Withdraw a portion or all of their funds
  • Rollover a portion or all of their benefit to another super account

If a person leaves their funds in superannuation and/or rolls over to another fund, there would be no impact to their child support arrangement.

If the person makes a withdrawal and they are under age 60, there will be a taxable and tax free portion of the withdrawal (for more information on this look at this page: https://www.tpdclaimsadvice.com.au/tax-on-tpd-claims/). The taxable portion of the withdrawal is included in the persons taxable income and does impact a person’s public child support arrangement.

How much will it impact my child support?
The child support calculation is fairly complicated and there are a number of steps involved in the calculation. The calculation includes a number of variables from each ex-partner, including: taxable income, number of children relating to the child support arrangement, any other children, share of care, Centrelink payments, etc.

The Child Support Website has an easy to use calculator: https://processing.csa.gov.au/estimator/About.aspx. You can put in the details for your current details and taxable income. You can then go back to the income page and add in estimated taxable portion of your super TPD withdrawal to see what impact this will have on your child support arrangement for next year.

Is there anything else I can do?

If you don’t notify the CSA about your super/TPD withdrawal/s for the financial year, the above is how CSA will assess your TPD withdrawal.

However, you can talk to the CSA and try and explain to them that your super withdrawal is “not income…” and they may be able to reduce the impact of your TPD claim and withdrawal.

For more information: https://my.gov.au/en/services/raising-kids/separated-parents/managing-finances-when-youre-separating/child-support.