Author: KaraATO(Community Support)Community Support 8 May 2026
Hi @krisr,
The tax treatment of income protection benefits held in super depends on when and how you access them.
Amounts paid into super by an insurer aren’t taxed when they’re credited to your account. Instead, tax is worked out when the money is paid out of super, based on your age and the condition of release you meet.
The group insurance credit held in your super is treated the same as any other super benefit for tax purposes. This means the normal super tax rules apply when you’re eligible to access the money.
It is not:
- taxed while it stays in your super account, and
- treated as a new contribution when you withdraw it.
Contributions into your super fund are either concessional (before‑tax) or non‑concessional (after‑tax), and this type of insurance amount doesn’t become a non‑concessional contribution when it leaves the fund.
If you take money from super before age 60, the taxable part is usually taxed at 15% plus Medicare levy, but from age 60 payments from a taxed fund are generally tax‑free. Once you turn 65 there are no cashing restrictions and you can access your super at any time.
We don’t decide whether tax should be applied while amounts are held in super. That’s the role of your super fund trustee, who applies the tax rules when benefits are paid, in line with superannuation and tax law.
If you or the super trustee is still unsure it's worth considering advice from a registered tax agent or financial adviser who specialises in this area.
Author: krisr(Newbie)Newbie 12 May 2026
I really appreciate your helpful reply Kara.
Can you confirm that I've correctly understood...
The pre-tax portion of my income protection benefit that has been sent to Super by my insurer (due to my benefit being greater than my calculated income at time of disability), will only be taxed by the trustee at the time of withdrawal, in accordance to the same rules of taxation that apply to the rest of my super balance.
Can you please clarify...
- is this "group insurance credit" considered to be a concessional contribution? If so...
- Must it be taken into account when calculating the amount of personal concessional contributions I can make, according to the "personal contributions cap"?
And also
- Since I've met the super conditions of release (i.e. permanent incapacity), my insurer has given me the choice of
- receiving the total IP benefit directly from them vs
- continuing to send the portion to super as previously calculated. They have not been able to advise me how taxation would be applied to this money in Super.
- under this circumstance should I choose for them to continue to pay this money to super, will it continue to be treated as a "group insurance credit" according to the information above?
- Once I cease to meet the conditions of release (i.e. if I don't provide medical certificates every year), does this return to the previous SIS regulations whereby the portion of my IP benefit MUST be retained in Super as a group insurance credit?
I've asked these questions of my Insurance Company and broker, Numerous representatives of the Super trustee, financial advisor, solicitor and accountant. None of them to date have been able to provide an answer. Yet it is very important to the decisions I am making.
You have already given me more clear information than I've been able to achieve so far and I would be very grateful if you can provide answers to these additional questions.
Thank-you
23 views
3 replies