Disclaimer – This article contains general information and education only and should not be relied upon as financial or legal advice. The treatment of a TPD payout during divorce or in property settlements depends on the individual circumstances, the Family Law Act 1975 (Cth) and relevant case law. For tailored advice specific to your situation if you are separating or divorcing and have (or expect) a TPD payout, please seek advice from a family lawyer and/or superannuation/insurance-claims lawyer.
If your family’s financial position changes significantly, it is often relevant to the division of property on divorce or de facto separation. This can include inheritances, property purchases, family gifts – and importantly, disability insurance payouts.
For Queenslanders going through separation or divorce, a common question is:
“Will my TPD payout be part of the property settlement?”
The answer is usually yes. A TPD insurance payout can be treated as property by the Court or as a financial resource when property is divided in divorce or de facto separation.
This guide explains:
- How TPD payouts are classified in family law
- When they are treated as property vs financial resources
- How payouts affect property division
- Common mistakes and how to protect yourself
Property settlements and the family law process
Property division in divorce or de facto separation falls under the Family Law Act 1975 (Cth). Courts follow four key steps:
- Identify and value the property pool.
- Assess each party’s contributions.
- Consider future needs factors (such as health and earning capacity).
- Determine a division that is “just and equitable.”
Where does a TPD payout fit?
- If withdrawn, a payout is usually included in the property pool (e.g. cash, lump sum).
- If preserved in super, it is often treated as a superannuation interest subject to splitting laws.
- In some cases, it may be considered a financial resource, particularly where funds are clearly earmarked for disability-related expenses.
How courts classify TPD payouts
| Situation | Treatment | Impact on property division |
|---|---|---|
| Payout withdrawn and in bank account | Counted as property | Added to the asset pool for division |
| Payout credited to super but not withdrawn | Treated as superannuation interest | Considered in superannuation splitting orders |
| Retail (non-super) TPD lump sum | Counted as property | Added to property pool unless preserved for medical costs |
| Payout earmarked for disability care | May be excluded as property but treated as a resource | Can justify reducing the other party’s entitlement |
✅ The need for funds by the injured party is a key consideration – if the payout is required for ongoing medical and living costs, this will be factored into the Court’s decision.
Timing is important
| Timing of payout | Effect |
|---|---|
| Received before separation | More likely to be treated as part of the joint property pool |
| Received after separation | May still be considered, but weighted more towards the injured party as a “future needs” factor |
Case examples
| Example | Facts | Outcome |
|---|---|---|
| Back injury payout before separation | Michael received $400,000 TPD payout two years before separating. | Counted as property in the asset pool. Split 60/40 in his favour due to disability. |
| Payout after separation | Sarah received $250,000 after separation for PTSD. | Treated as her financial resource. Her ongoing medical needs justified a greater share of the remaining assets. |
| Retail policy payout | John, a de facto partner, received $600,000 directly into his bank account. | Lump sum included in property pool. Ex-partner received 30% after contributions were assessed. |
Common mistakes
❌ Assuming payouts are automatically excluded – Courts often include TPD payouts.
❌ Failing to disclose – non-disclosure breaches legal duties and risks penalties.
❌ Ignoring superannuation splitting rules – TPD benefits preserved in super are subject to splitting laws.
❌ Not evidencing disability expenses – if your payout is needed for care, detailed evidence is critical to protect it.
How to protect yourself
| Step | Why it matters |
|---|---|
| ✅ Disclose payouts fully | Non-disclosure risks penalties and adverse findings |
| ✅ Document medical/disability needs | Helps justify preserving your payout for care |
| ✅ Clarify whether payout is in super or withdrawn | Different rules apply under family law |
| ✅ Seek legal advice early | Family law and insurance law overlap; advice is critical |
| ✅ Negotiate settlements | Mediation can avoid costly litigation and deliver fairer results |
FAQs
Will my TPD payout always be split in divorce?
Not always. It may be treated as a financial resource rather than property, depending on timing and needs.
What if my payout is only for medical care?
Courts generally protect funds earmarked for treatment, but you must provide evidence.
Does it matter if the payout is inside or outside super?
Yes. Inside super, it falls under super splitting rules. Outside super, it is usually treated as cash/property.
If I received my payout after separation, can I keep it?
Possibly. Courts usually give greater weight to your needs as the injured party when considering post-separation payouts.
Key takeaways
- TPD payouts can be treated as property or as financial resources in divorce/separation.
- Timing (before or after separation) significantly influences treatment.
- Courts consider ongoing medical needs when dividing property.
- Full disclosure and strong evidence are critical.
- Legal advice ensures fair outcomes and protects your entitlements.
A TPD payout can have a significant impact on divorce property settlements in Queensland. Whether it is included as property or treated as a financial resource depends on when it was received, how it is held, and the needs of both parties. Courts balance fairness, often allowing the injured party to retain more if funds are needed for care.
At TPD Claims Lawyers, we help Queenslanders secure their entitlements and protect their payouts in family law disputes. Contact us today for a free, no-obligation consultation about your rights.
Last updated: 8 September 2025