Income protection through super
Many super funds include income protection, also called salary continuance, as part of their default insurance. It pays you a regular income for a set time if illness or injury stops you working, and the premiums come out of your super balance rather than your pay.
Holding it in super is convenient and can cost less, but the cover is usually narrower than a policy you own yourself. Benefit periods are often shorter, the definitions are set by the fund's group policy, and you can't claim the premiums as a tax deduction because you didn't pay them from your own income. Which is better depends on how much of your income you need to protect and for how long.
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General advice only. It doesn't consider your circumstances. Read the PDS and TMD before you decide.
How income protection in super works
Moneysmart says most super funds offer income protection, and some give it automatically alongside default life and TPD cover. Default cover is for a set amount, and you can usually get it without medical checks. Premiums are deducted from your super balance, which reduces your retirement savings over time.
Benefits are paid by the fund under the temporary incapacity condition of release in superannuation law. In practice that means a monthly income while you are temporarily unable to work, for as long as the cover's benefit period allows. Moneysmart says funds commonly offer benefit periods of two years, five years or up to a certain age.
The same rules that switch default life cover on and off apply here. Funds must cancel insurance on accounts with no contributions for 16 months unless you ask to keep it, and cover doesn't start automatically for new members under 25 or while your balance is under $6,000.
Inside super vs outside super
The comparison below covers the features that change most between the two. Your fund's insurance guide and any retail PDS set the actual terms.
| Feature | Inside super | Outside super (you own the policy) |
|---|---|---|
| Who pays the premium | Deducted from your super balance | You, from your own money |
| Tax deduction for premiums | Not for you personally | Generally deductible if it insures loss of salary or wages |
| Underwriting | Default cover usually without medical checks | Health, job and income questions |
| Benefit period options | Often two years, five years or to an age; varies by fund | Usually a wider range, commonly including to age 65 |
| Extra features | Limited to what the fund's group policy includes | Can include optional extras, within APRA's limits for new policies |
| Payments | Paid through the fund; taxable income | Paid to you; taxable income |
| If you change job or fund | Cover can change or end, and can stop if the account goes inactive | Stays with you while you pay, whoever you work for |
The downsides of income protection through super
Moneysmart lists the disadvantages of insurance through super alongside its advantages. For income protection they come down to cover that may be smaller, shorter or less certain than a policy you own.
- Default cover may not suit you. Moneysmart says it may be lower than what you could get outside super, and eligibility rules apply. A fund's benefit period is often two or five years, which leaves a long illness uncovered after that.
- Cover can end or change. Moneysmart says cover may stop if your account becomes inactive, your balance is too low, you change fund or you reach an age limit. By law, funds cancel insurance on accounts with no contributions for at least 16 months unless you ask to keep it.
- It reduces your retirement savings. Premiums come out of your balance, which matters more as you near retirement because there's less time for it to recover.
- No tax deduction for you. The ATO says you can't claim the premiums when they're paid from your super, while premiums on a policy you own outside super are generally deductible.
- Duplicate cover rarely pays twice. If you have income protection in more than one fund, offset clauses usually stop both paying in full for the same period.
Income protection in seven large super funds
The cover varies a lot between funds. Some give income protection by default and others only if you apply, and the waiting periods, benefit periods and end ages differ. The table compares seven large funds' current terms for a new member.
Your own cover may differ if you joined under an older arrangement or changed it, so check your statement or online account.
| Fund | Default cover? | Waiting period | Benefit period | Cover ends | Most it pays | How to claim |
|---|---|---|---|---|---|---|
| AustralianSuper | Yes, as part of basic cover | 60 days (30 days costs more) | Up to 2 years (5 years or to 65 if you apply) | 70 with a 2-year benefit period; 65 with a longer one | The lower of $30,000 a month or 85% of salary | Contact the fund; its insurance guide sets out the steps |
| Australian Retirement Trust (Super Savings) | No: opt in within 120 days of joining, or apply | 90 days (opt-in cover) | 2 years (opt-in cover) | 65 | 85% of income, up to $5,000 a month (opt-in cover) | ART's make a claim page |
| Aware Super | No, you apply | 60 or 90 days | 2 or 5 years | See the fund's guide | See the fund's guide | Contact the fund; its insurance guide sets out the steps |
| Hostplus | No, you apply | 30, 60 or 90 days | 2 years, 5 years or to 65 | 70 (65 with a to-65 benefit period) | Up to $30,000 a month | Contact the fund; its insurance guide sets out the steps |
| Rest | Yes, as part of Default cover | 60 days (30 or 90 optional) | 5 years | 70 | The lesser of 86.24% of pre-disability income and the amount insured | Rest's income protection claims page |
| HESTA | Yes, 2 units ($500 a month each) | 90 days | Up to 5 years | 67 | The lesser of the amount insured and 85% of pre-disability income | HESTA's make a claim page |
| Cbus | No, you apply | 30 or 90 days | 2 or 5 years | You can apply from 15 to 65 | 87% of pre-disability income from all sources | Cbus's make a claim page |
Offsets: why two policies rarely pay twice
Income protection replaces lost income; it isn't a bonus on top of it. Policies commonly reduce payments by other income you receive for the same period, such as sick leave, workers compensation, or another income protection policy. APRA's rules for new policies issued since 1 October 2021 also cap total benefits at 90% of your income at the time of claim for the first six months and 70% after that, counting all benefits under the policy.
Moneysmart points out that if you hold cover in more than one super fund, you may be paying twice for cover you can't fully claim. Check the offset clause in each policy before paying for a second one, and consolidate cover rather than stacking it.
Tax on premiums and payments
You can't claim a personal tax deduction for income protection premiums paid through super. The ATO says so directly: there is no deduction where the policy is through your super fund and the premiums are deducted from your contributions. The fund itself generally claims the deduction for the premiums it pays, which is one reason cover can cost less in super.
Payments are taxable either way. Any payment you receive to replace salary or wages must be included in your tax return, and depending on who pays it, tax may be withheld before it reaches you.
Some retail insurers offer a split or super-linked arrangement: the core cover sits in super and optional extras sit in a linked policy outside it. Only the part you pay for personally outside super is deductible to you.
Lump sums from super are taxed differently again. A TPD payout from super is a disability super benefit, taxed at up to 22% under 60 after a tax-free uplift; the TPD payout calculator shows what you'd receive. To compare life and TPD cover inside and outside super, see life insurance in Australia.
How to check your fund's income protection
Log in to your fund's website or app, or check your latest statement and the fund's insurance guide. These are the details that decide whether the cover is enough.
- The monthly benefit, and how the fund works out the income it is based on.
- The waiting period before payments start. Moneysmart says most policies offer between 14 days and two years.
- The benefit period: how long payments last if you stay unable to work.
- Whether the cover stops at a certain age, and whether it lapses if you stop contributing.
- Any minimum working hours to be covered. Moneysmart gives 15 hours a week as an example of a minimum some policies set.
- The claim process. Under the Life Insurance Code of Practice, insurers commit to deciding income-related claims within two months of receiving them or of the end of the waiting period, unless circumstances beyond their control apply.
How to claim income protection through your super fund
Start with your super fund: Moneysmart says to claim on insurance you hold through super, you contact the fund. Tell it as soon as you know you'll be off work for longer than your waiting period. The fund or the insurer will tell you who's handling the claim and what forms to complete.
Expect to provide medical reports and test results, details of your work duties and hours, and payslips and tax returns, or financial statements if you're self-employed. Payments start once the waiting period ends, and you must still be unable to work at that point to be eligible. AustralianSuper, Australian Retirement Trust and Cbus, for example, pay monthly in arrears.
Insurers that follow the Life Insurance Code of Practice commit to deciding income-related claims within two months of receiving them, or of the end of the waiting period if that's later. The fund then pays the benefit under the temporary incapacity rules, and the payments are taxable income. If you disagree with a decision, complain to the fund first, then to the Australian Financial Complaints Authority (AFCA), which is free.
When cover outside super makes more sense
A policy you own can make sense if you need a longer benefit period than your fund offers, want features the group policy lacks, want the tax deduction, or work in a job where your fund's occupation rating makes default cover expensive. It can also suit people whose super balance is small, because premiums in super come straight out of retirement savings that have less time to recover. Many people keep default cover in super as a base and add a personal policy with a longer waiting period on top, which keeps the combined premium down. Check how the two policies offset each other before you do.
General advice only. This information doesn't take into account your objectives, financial situation or needs. Consider whether the product is right for you and read the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you decide. We don't compare every product in the market, and we may earn a commission if you take up a product through our links.
What to watch for
- Check your cover before rolling over or closing a super account. Leaving a fund can end its insurance.
- If you change jobs or have a break from work, your fund's cover may change. Confirm it is still in place.
- A short benefit period in super can leave a long illness uncovered. Look at what happens after two years.
- Make sure the fund has your occupation right. A misclassified job can mean paying a loading you shouldn't.
Common questions
Is it better to get income protection through super?
It is usually cheaper and easier, because default cover needs no medical checks and premiums come from your super balance. Cover outside super usually offers longer benefit periods, more features and a tax deduction on the premiums. Many people use both.
Can I claim income protection paid through super on tax?
No. The ATO says you can't claim a deduction where the policy is through your super fund and the premiums are deducted from your super. Only premiums you pay personally outside super are deductible.
How do I know if my super has income protection?
Log in to your super fund's website or app, check your annual statement, or call the fund. It will show whether you have income protection, the monthly benefit, the waiting period, the benefit period and the premium.
Is income protection from super taxed?
Yes. Income protection payments replace salary or wages, so they are taxable income whether they come through super or from a personal policy. Depending on who pays it, tax may be withheld before you receive it.
Can I claim income protection from super and a personal policy at the same time?
You can hold both, but most policies reduce what they pay by other income you receive for the same period, including other income protection. Check the offset clauses in both before you rely on getting both payments.
What happens to my insurance if I switch funds after APRA's performance test?
Your insurance usually stays with the old fund's account, so it can end when that account closes. APRA tests MySuper products every year (the 2026 test assessed 50) and publishes the results on its website. Before you switch, check what cover the new fund will give you and when it starts: Moneysmart warns cover may stop if you change fund, and if you're over 60 or have a pre-existing condition you may not get the same cover again.
General information only
Every super fund sets its own income protection terms within these rules. Your fund's insurance guide is the final word, and a licensed financial adviser can help you decide how to split cover between super and a personal policy.
The lump-sum covers beside it
Income protection replaces part of your pay. Life, TPD and trauma cover pay lump sums for the costs a monthly benefit can't reach.