Many of the people that we help with disability insurance claims, like TPD, income protection or trauma insurance claims, are also claiming or being paid Centrelink JobSeeker or Disability Support Payments (DSP). In these cases, it’s important to understand the impact of claiming and being paid any of these disability insurance benefits may have on your Centrelink benefits.
The impact varies depending on:
- the Centrelink benefit in question (i.e. JobSeeker or Disability Support Pension);
- the insurance benefit being claimed and paid (e.g. TPD or trauma or income protection); and
- your personal circumstances (e.g. single or in a relationship, homeowner or not a homeowner).
Types of Centrelink benefits impacted by disability insurance claims
The first consideration is the specific Centrelink benefit you are receiving.
There are two specific Centrelink benefits that will impact what payments you may be eligible for under a disability insurance claim:
- JobSeeker payment: This payment is designed for individuals who are actively looking for work.
- Disability Support Pension (DSP): The DSP is intended for individuals who have a permanent disability that prevents them from working.
Centrelink assets tests and income tests
Centrelink conducts both assets tests and income tests to determine your eligibility for JobSeeker and DSP benefits. Here’s how disability insurance benefits like TPD, income protection and trauma insurance may fit into these tests.
Income test
Under the Centrelink income test for both JobSeeker and DSP, you can earn an amount each fortnight without that income impacting your fortnightly Centrelink payments. However, if you exceed the relevant amount, your Centrelink benefits will be offset.
Earnings can be from work, investment or income protection payments. The amounts and offsets are different for JobSeeker and DSP payments, but the general approach to the income test is the same. The income test thresholds are set by Centrelink and change each year.
The income test thresholds are different for single people and people in relationships.
Assets test
The Centrelink assets test considers your total assets, for example, shares, property and cash. This can include any lump sum payments from TPD or trauma insurance. If these disability insurance payouts increase your total assets beyond the allowable limit, the amount of your Centrelink payments will be reduced in proportion to the value of the assets above the limit. Eventually, the reduction can completely offset the Centrelink benefits.
The assets test thresholds are different for single people and people in relationships.
Assets held in super do not usually count toward your asset thresholds (until withdrawn from super), nor does the value of a home that you own and which you live in (usually). The assets thresholds are lower for people that own homes (i.e. you can hold less in assets and still get JobSeeker or DSP payments if you own a home).
Type of disability insurance benefits and how they interact with Centrelink income and assets tests
Different types of insurance, such as Total Permanent Disability (TPD) claims, trauma insurance, or income protection, can have varying effects on Centrelink payments.
Income protection insurance and Centrelink
Income protection insurance typically replaces a portion of your income if you can’t work due to illness or injury. Because it is considered regular income, it will impact your JobSeeker payments and your DSP payments if you are paid above the income test threshold.
Total Permanent Disability (TPD) insurance and Centrelink
TPD benefits are usually paid as a lump sum when you can no longer work due to a disability. While lump sums may not directly affect your JobSeeker payments in the same way as ongoing income, they will be considered an asset for Centrelink purposes.
If the TPD payment is made into your super, it will have no impact on your Centrelink payments, because superannuation is exempt from the assets test. However, if the TPD benefit is not paid to super or if you withdraw the TPD benefit from your super account, it will usually count toward your assets for the Centrelink assets test.
If the super money (including the TPD benefit) is withdrawn from super in regular (weekly, fortnight or monthly increments) as an income stream, these payments will usually be considered income from a Centrelink perspective.
Trauma insurance and Centrelink
Trauma insurance pays a lump sum upon the diagnosis of a specific illness. Similar to TPD, while it may not be counted as regular income, you must declare it. Depending on the amount of insurance you have, this could influence your JobSeeker or DSP payments, especially if it pushes your financial assets above the allowable threshold. Trauma benefits are not usually held in super.
Get help from a disability insurance lawyer
Understanding the relationship between disability insurance benefits and Centrelink payments is vital for anyone navigating these systems. Each individual’s circumstances are unique, and what applies to one person may not apply to another. It’s advisable to seek professional advice or consult with Centrelink to fully understand your situation and ensure you’re receiving the benefits you’re entitled to without any unintended consequences.
If you have any questions or need further assistance with your disability insurance claim or Centrelink benefits, don’t hesitate to reach out to our team. We’re here to help you navigate these complexities and advocate for your rights.
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