SMSF TPD Insurance
Add TPD Insurance to your SMSF Life Insurance policy
SMSF TPD Insurance: Total and Permanent Disability (TPD) insurance provides peace of mind for members who want to safeguard their income and lifestyle if they are permanently unable to work due to a serious illness or injury. As an optional part of our SMSF Group Life Insurance Plan, members can apply for up to $3 million in TPD cover in conjunction with death cover within their SMSF.
TPD is a ‘living insurance’, which protects you against the risk that you will be severely injured or become seriously ill at some stage during your life, leaving you unable to work. It provides a lump sum payment intended to replace your future earnings, cover medical costs and help you and your family adapt to your new circumstances.
Unlike life insurance, which pays a benefit upon death, TPD cover supports you while you’re still alive, when medical bills, rehabilitation costs, and lifestyle changes may suddenly become overwhelming.
You can use your TPD benefit for any purpose, including:
-
Paying off a mortgage or other debts
-
Covering medical or rehabilitation expenses
-
Replacing your lost income
-
Making home modifications for accessibility
-
Investing for future income or financial independence
For many Australians with an SMSF, TPD cover is an essential layer of financial protection that ensures you and your family remain secure — no matter what life brings.
Two Flexible Structures: Inside or Outside Your SMSF
We offer two ways to structure your TPD insurance, giving you the flexibility to choose what works best for your fund and your circumstances.
1. TPD Cover Held Within the SMSF
Holding your TPD insurance inside your SMSF can deliver significant tax advantages. While TPD premiums are generally not tax-deductible to individuals, contributions made to your SMSF to cover insurance premiums can usually be claimed as a tax deduction by the fund — resulting in a cost-effective way to maintain protection.
Benefits of holding TPD within the SMSF:
-
Tax-efficient premium structure
-
Integrated with your existing SMSF Life Insurance
-
Simplified administration under one policy
However, there are some important points to understand:
-
The SMSF is the policy owner and beneficiary, meaning any claim payment is made to the fund.
-
The member can only access the funds once they meet the ATO’s “condition of release” (for example, being permanently unable to work).
-
This may cause delays or restrictions in accessing the benefit.
-
Any payment made under TPD cover will reduce the remaining death benefit held under the same plan.
2. TPD Cover Held Outside the SMSF (Standalone Linked Policy)
For members who want quicker access to their benefits, we also offer standalone TPD insurance held outside of the SMSF, linked to the fund’s life cover. This means that they are still required to take out death cover within the SMSF to qualify for this.
Although this structure offers fewer tax savings, it provides:
-
Direct payment access to you as the insured person
-
The option to apply for ‘Own Occupation’ TPD cover, which can make it easier to qualify for a claim if you’re unable to work in your specific occupation
-
Separation from superannuation release rules, giving more flexibility and control
This option is particularly suited to professionals or high-income earners who rely on specific skill sets that may be difficult to perform following illness or injury.
How Much TPD Cover Can You Apply For?
Each member can apply for up to $3,000,000 of Total and Permanent Disability insurance under the group plan.
Your cover amount can be tailored to your financial commitments, family needs, and future income goals.
When deciding how much to apply for, consider:
-
Existing debts (mortgage, car loans, etc.)
-
Future income requirements
-
Family and dependants’ ongoing living costs
-
Potential medical or rehabilitation expenses
Our experienced advisers can help you calculate an appropriate level of cover for your SMSF members.
Tax Benefits and Considerations
Holding TPD cover within your SMSF allows the fund to claim tax deductions on contributions used to pay premiums, offering a cost-effective advantage over individual retail policies.
However, because the benefit is paid to the SMSF, it’s important to be aware of conditions of release that determine when the payout can be accessed.
When held outside the SMSF, the premiums are typically paid with after-tax income, but the benefit is paid directly to the insured person, avoiding superannuation restrictions.
Already Have TPD Insurance?
If you already have TPD insurance elsewhere, it may be possible to transfer your existing cover into the SMSF Insurance Master Plan under our Takeover Terms.
This ensures you maintain your current:
-
Benefit periods
-
Waiting periods
-
Underwriting terms
without interruption or loss of coverage.
(For more details, see our section on transitioning your current underwriting terms to the SMSF Insurance Master Trust.)
How TPD differs from an injury, illness or trauma event
From the PDS definitions, some clear distinctions emerge:
Time and permanence
-
TPD requires at least three consecutive months of continuous inability to work or perform duties/activities due to the same injury or sickness, and
-
A medical and evidentiary view that you are unlikely ever to return to suitable work, domestic duties, or key daily functions.
A severe but temporary condition – even if it keeps you off work for a while – may not qualify if you are expected to recover enough to resume work or normal activities.
Severity of functional impact
The policy is concerned with functional capacity, not just diagnosis:
-
For working members, can you ever again work in your own occupation, or any occupation you’re reasonably suited to?
-
For home duties, can you ever again perform normal domestic duties, leave home unaided, and engage in any work?
-
Under ADW, can you perform basic physical and cognitive activities such as mobility, lifting, communication, and manual dexterity?
Many injuries and illnesses will be serious but still fall short of this level of permanent functional loss.
Trauma events vs TPD
The policy also contains trauma-type definitions in the Income Protection section (e.g., for specific injuries and medical events).
-
A trauma event is usually about suffering a specified condition (like a heart attack of a defined severity).
-
A TPD event is about the permanent loss of capacity to work or function, regardless of the exact diagnosis.
So, you can be injured or have a serious illness without being totally and permanently disabled under this policy if, over time, you’re expected to recover sufficient function.
Why Choose SMSF Insurance for TPD Cover?
We specialise in insurance designed exclusively for the Australian SMSF market, ensuring compliance, cost efficiency, and simplicity for trustees and members.
We offer:
-
Competitive group rates
-
Flexible structuring options (inside or outside super)
-
Tailored coverage up to $3 million
-
Fast and transparent claim process
Frequently Asked Questions
What does “totally and permanently disabled” mean in plain terms?
In this Plan, being totally and permanently disabled means that, after at least three months of continuous disablement and appropriate medical treatment, the insurer is satisfied – based on medical and other evidence – that you are unlikely ever to return to your normal work, to any work you’re suited for, to full-time home duties, or to key daily living activities (depending on which definition applies to you).
Does every serious injury or illness qualify as TPD?
No. The policy does not pay a TPD benefit simply because:
-
you’ve been off work for a period, or
-
you’ve had a major injury or diagnosis.
The insurer must be satisfied that your condition has caused permanent functional loss as defined in the applicable TPD definition – for example, you are unlikely ever to work in your own or any suitable occupation, or you can no longer perform at least two Activities of Daily Work and are permanently incapacitated.
Does mental illness ever qualify for TPD?
Yes, but only under strict criteria:
-
Your treating psychiatrist, psychologist or Medical Practitioner must believe your mental illness won’t improve; and
-
A psychiatrist appointed by the insurer must assess you as having at least 19% impairment on the Psychiatric Impairment Rating Scale and consider it permanent; and
-
You must also be Permanently Incapacitated.
SMSF-Insurance-PDS-AIA
Short-term or situational mental health conditions that are expected to improve generally would not meet this test.
What is TPD insurance in an SMSF?
Total & Permanent Disablement (TPD) insurance in an SMSF is designed to pay a lump sum if you become so seriously disabled that, under the terms of the policy, you are unlikely ever to return to work or normal duties again.
Who decides if I meet the TPD definition?
Ultimately, the decision is made by the insurer, in its reasonable opinion, after:
-
reviewing medical evidence and reports;
-
confirming you have had all reasonable and usual treatment, including rehabilitation; and
-
considering any other evidence it reasonably requires (e.g. employment and functional capacity information).
How is TPD inside super different from TPD outside super?
- Inside super (your SMSF), TPD is held with Standard Occupation or other super-based definitions and must be attached to Death cover. Benefits are paid to the SMSF trustee, and superannuation and tax rules apply.
- Outside super (non-super), Own Occupation TPD may be available to certain occupations, with benefits paid direct to you as the policy owner.
The definitions, tax treatment and use of benefits can therefore differ.
How much TPD cover can I have inside my SMSF?
Minimum TPD cover is $50,000.
Maximum TPD cover held under the superannuation Policy is unlimited, subject to underwriting.
Your trustee and adviser can help determine an appropriate level relative to your SMSF’s strategy, debts and members’ needs.
Is TPD cover tax-deductible in an SMSF?
Premiums for TPD are generally not tax-deductible for individuals, but contributions made to an SMSF to pay premiums may be tax-deductible to the fund.
What’s the difference between “any occupation” and “own occupation” TPD?
- Any occupation means you cannot work in any role suited to your education, training, or experience.
- Own occupation means you cannot work in your specific job or profession. This option is generally available only outside super.
Can I access my TPD benefit immediately?
If held inside your SMSF, you must meet a condition of release to access the benefit. If held outside, you’ll receive the payment directly.
Who receives the TPD benefit?
For TPD held within your SMSF:
-
The lump sum is paid to the trustee of your SMSF.
The trustee then deals with that benefit in line with superannuation law, the SMSF trust deed, and any relevant benefit payment rules, which can include paying it as a lump sum benefit to you (subject to conditions of release and tax).
Get Protected Today
Safeguard your financial future and protect your SMSF members with comprehensive TPD Insurance.
Whether you hold it within your fund for tax benefits or outside for accessibility, our flexible plans ensure you’re covered when life changes unexpectedly.
Quotes for SMSF Life Insurance are instant, and you can buy SMSF Life cover securely online.
