Gaius Whiffin providing Q & A on the 2GB Chris Smith Afternoon Show discussing “Royal Commission into the way super/TPD claims are handled”
Tuesday, 12 February 2019
CS– Chris Smith /Gaius Whiffin– C1,2,3, etc – Callers
CS Remind us exactly what is super TPD for those that may not have caught this segment before.
GW Plenty of superannuation policies have an insurance component and if you are totally and permanently disabled within the definition of that superannuation policy which basically means that in most cases that you are unable to do the career that you are trained for or your old job then you are entitled to a lump sum generally under that superannuation policy.
CS You said plenty, so doesn’t everyone with superannuation have TPD cover.
GW No, no you have to pay. Generally unless you opt out you will be covered.
CS So you will be covered but you can decide not to be covered and not pay the extra.
CS Under what circumstances can someone make a TPD claim?
GW Well as I said it is generally the circumstances where you are unable to work in the job that you were doing for some reason, it doesn’t need to be a work accident or a motor vehicle accident, it can just be a congenital problem that you have, a heart attack or something like that. But you are unable to go back to work and you are unable to do further work for which you are reasonably trained.
CS How do the payments work, are they progressive payments or are they lump sums?
GW It is a lump sum payment in a lot of cases and it is something that you can rollover as part of your superannuation and if you do take the lump sum payment there can be some taxation consequences so if you are classified as totally and permanently disabled and you are accepted by the insurer and by the fund as that then you really should get some financial advice.
CS Gaius Whiffin from Turner Freeman Lawyers happy to take your calls and we will try and get some answers for you.
CS Mark, go right ahead. You’re the first cab off the rank. Go ahead Mark.
C1 My partner got robbed in 2013 and she obviously couldn’t work after that and she made a TPD claim and we went through the solicitor and all that and then suddenly in 2015 the company claimed that they had sent us a letter with an exclusion for mental health. So what happened then was basically the units were dropped to instead of 5 units being paid it was only 2 units being paid. Now we never received any letter in regards to any exclusions so I’m just wondering if in this Royal Commission if anything has come up as far as that sort of behaviour.
GW Well there has been a lot of talk about various behaviours of insurers in superannuation especially TPD claims, the fact that you didn’t get the letter I mean I think that is something you will need to sort of probably get some legal advice on because there is a specific situation there where as I understand it your wife was covered and then they changed the coverage two years later and I’m not entirely sure I can do that but the facts you know depend very much on the facts as to your wife’s rights there and the ongoing entitlement. Once you have accepted an insurance situation, once the insurer has accepted a position they can’t change it after the event that causes the disability.
C1 The other question I had was that it was actually after the events as well.
GW I mean that’s the point I mean it is after the disability arose that they are trying to change the goal posts so to speak.
C1 I’ve seen a copy of this letter and I’m sure we never received it. The first thing we heard about it was when the lawyer because we did go through lawyers and they sort of seem to think that you know.
CS Is it strange though that something like post traumatic stress would be excluded from a TPD schedule.
GW Generally not no.
CS It seems strange that it would have been excluded Mark and you must have thought that when they mentioned this.
C1 We were gobsmacked. We are still fuming about it and it was a couple of years ago. We just don’t know what to do.
GW I’m not sure what has happened in relation to the payments and the payments that have been made at the moment but it certainly seems to me that firstly you didn’t get the letter but secondly the letter was sent to you two years after the disability arose and your wife hasn’t worked since 2013. That sounds to me as if it is something that you should probably take up.
CS With whom? Where does he go?
C1 I heard you last week you were talking about a mob called AFCA.
GW AFCA is the new complaints body.
CS Like an ombudsman.
GW The Australian Financial Complaints Authority. The problem with AFCA is that most of their decisions, in fact it might be all of their decisions in relation to superannuation complaints are not appealable to a court if you don’t like their decision. If they get the law wrong then you can appeal to the Federal Court but if they simply say well we prefer the opinion of Dr So and So who says that you are not totally and permanently disabled then that is not something you can take further. In your situation I would think that a complaint would be one where if you didn’t like what AFCA do you could probably take that further.
C1 Yeah ok. So do you think at this point it is better to just get different legal advice from another firm?
GW I think perhaps get some legal advice and AFCA is another thing where you can look at and again what you are looking at is really a legal issue here because it is a question as to whether they can change the goal posts and whether they can change the goal posts in a situation where you didn’t get the letter, you would have to look into how the letter was sent and so forth.
C1 The letter we have seen is dated in 2015.
GW Yeah well that sounds very strange and I haven’t seen much like that.
CS Mark, thank you very much for calling in. Very strange, you’ve still got some recourse there and maybe that is the organisation you should make contact with. Turner Freeman Legal matters segment. You can call Turner Freeman by the way 13 4363 or come back with Gaius Whiffin and talk further on this subject right after the break.
CS Go ahead Robert.
C2 Hi, listen, the problem with having TPD within a super fund is that if you do claim then the money is owned by the fund that you get and therefore you have to wait until the right age, your retirement age to get it out without paying all the tax on it. So you know you get a $500,000 lump sum but you have to pay tax on it if you are trying to take it out of the fund.
CS So what you are saying Robert, I’ll get some kind of explanation from Gaius on this, it goes straight into the super fund.
C2 If you do it under super it is owned by your super fund.
GW If you are successful in making a TPD claim before retirement age and you want to take the full amount out then there are taxation consequences and I think I said a bit earlier that you should really get some advice in those circumstances as to the best method of what the tax will be. I have plenty of clients that will still take that lump sum out and pay the consequent tax because it is in their interests.
C2 But going….
GW But you’re right.
C2 But going backwards the deductibility of the premium is so much smaller than the possible tax, why would you bother taking it in the super to start with.
GW There are tax issues with the superannuation scheme there is no doubt about that and that affects the TPD scheme.
CS I know you’re not an accountant Gaius but does it make sense to take out a TPD in your name separate to your superannuation policy.
C2 Well Chris I am an accountant.
CS Right, you’re the accountant, well you’re the one we want to hear from.
C2 That’s what I did because I’ve actually claimed on my TPD because I got sick and I always owned it outside of the fund, I had my life insurance through the fund but my TPD was outside of the fund.
CS Sounds smart.
C2 Non deductible ok it might have been $200 a month that I couldn’t get as a tax deduction but hey I’ve got a lump sum that is over half a million dollars.
CS The other point about this those super managers don’t have to touch it.
C2 And they don’t tell you this when you buy the product.
CS I bet they don’t.
GW Of course they don’t.
C2 They try to sell it as attractive saying it is tax deductible but don’t tell you that you have to pay all the tax if you ever claim on it and of course most people claiming on TPD are just claiming on the policy that they’ve got through their work over the years and again it’s unless you’ve got that sort of financial advice from the accountant, not just when you make the claim but when obviously when you set up your superannuation then you miss out on some of these aspects.
CS Thank you for your intelligence Robert.
C2 No problem. Thanks
CS Good stuff. Interesting. You’ve probably heard that before though haven’t you?
GW We see a fair bit of tax being taken out of it for those people that want to get their lump sum and move on and get their superannuation payment when they are TPD.
CS Karyn hi, my granddaughter lives with me, her father passed away a number of years ago quite young and he had some superannuation and some TPD with Cbus. He had a de facto of about 6 months their relationship was and they were classified as a de facto and my granddaughter who was a dependent who is now only 6 years of age, they have firstly awarded 50% to the de facto and 50% to my granddaughter. We obviously complained about that and they came back to say 25% and 75% and they are not changing their minds now. We have asked for documentation from Cbus to say why this is being awarded to the de facto so much when we have such a young dependent and they won’t tell us why – they won’t give us any evidence, just said that the evidence supports the de facto relationship included that limited to financial and independent information so we don’t know what to do whether we go back and fight them again otherwise is going to end up costing us a huge amount of money in legal bills or whether we just suck it up and accept this but in fairness it doesn’t sound fair.
GW It doesn’t sound it. At this stage you have just gone through Cbus and you have asked them to review and they initially said 50/50 and they have now reviewed and it has gone back to 75/25. It can get expensive if you take something like that through the Court process. A lot depends upon the amount that we are looking at here. I won’t specifically ask you that.
C3 I’m happy to tell you that, it is about 230K. It’s not a lot but that means that my granddaughter only gets 75% of that small amount of money anyway.
GW It is really something that you should think twice about going through the Court process but it is something which perhaps you can go through the AFCA. That’s a free service. You can get representation if you want
CS And I’ve had listeners on the open line board only a week or so ago Karyn praising the speed at which they operate.
C3 Ok great. So it’s AFCA
CS Australian Financial Complaints Authority. Can I give you the $100 Westfield voucher as well Karyn?
C3 Thank you, that is so kind of you.
CS Good stuff. $100 Westfield voucher courtesy of Turner Freeman but contact the Australian Financial Complaints Authority and see whether you can take it further. Guys we have run out of time unfortunately.
GW Pleasure Chris.
CS Thank you very much for being here. A partner at Turner Freeman Sydney office.