What is premium drag — and why does your retirement care?
Your insurance premiums are deducted from your super balance every month. Compounded over decades, the cost is far larger than the sum of the premiums.
Death, TPD, and Income Protection — what each cover type actually does
Three very different products sold under the same super insurance umbrella. Here’s what each covers, when it pays, and the key exclusions.
The DIME method: how to estimate how much insurance you need
Debt, Income, Mortgage, Education — the actuarial framework behind independent insurance needs analysis, and why fund calculators aren’t the same thing.
Occupation categories and premium loading
Why a heavy blue-collar worker pays 3× more than a professional for the same cover — and what counts as each category in your fund’s PDS.
How the Age Pension is calculated in FY2025-26
Assets test, income test, deeming rates, taper rules — the full mechanics of Australia’s Age Pension entitlement, explained step by step.
Deeming explained — why Centrelink ignores what you actually earn
Centrelink applies a fixed notional return to your financial assets regardless of what they actually earn. Here’s what the rates are and how they affect your pension.
Transition to Retirement (TTR) — the strategy and its limits
Between preservation age and 60, a TTR pension lets you draw income from super while still working. Here’s when it helps and when it doesn’t.
The transfer balance cap — what the $2.0M limit means
There’s a cap on how much super can be moved into tax-free retirement phase. Understanding it matters for high-balance accounts and estate planning.
How salary sacrifice to super works (and when it doesn’t)
Salary sacrifice cuts your taxable income and boosts your super at the concessional tax rate. But it doesn’t reduce HECS repayments — and Division 293 can claw back the saving for high earners.
Taxable vs. tax-free component — why your contribution history matters
Not all super is taxed the same way on the way out. The split between taxable and tax-free component affects what your beneficiaries pay and what you pay in retirement.
The $30,000 concessional cap — and what happens if you breach it
Employer SG contributions plus any salary sacrifice or personal deductible contributions must stay under $30,000. Breaching it is costly — here’s how to track it.
Binding death benefit nominations — the complete guide
Super doesn’t pass under your Will. A BDBN is the only legal mechanism to direct where it goes. Here’s how they work, who can be nominated, and the expiry trap.
Super death benefit tax — who pays and how much
Adult independent children can be taxed up to 17% on inherited super. Spouses pay nothing. Understanding the taxable component split is the key to minimising this.
Recontribution strategy — shifting taxable to tax-free
If your super is mostly taxable component, withdrawing and re-contributing can reduce the death benefit tax your adult children will pay. The rules and constraints explained.
Joint tenants vs tenants in common — estate flow explained
How an asset is owned determines whether it flows through your Will or passes automatically. The distinction matters enormously for blended families and property.
Death, TPD, and Income Protection — what each cover type actually does
Death (Life) cover
Pays a lump sum to your nominated beneficiaries (or your estate) if you die while the policy is active. The purpose is to replace your income for those who depend on it — primarily a spouse, children, or anyone with a financial obligation you currently meet.
Terminal illness: if you are diagnosed with a terminal illness with less than 12–24 months to live (definition varies by fund), you can claim the death benefit early.
TPD (Total and Permanent Disablement) cover
Pays a lump sum if you become totally and permanently disabled and cannot return to work. The definition matters enormously:
- Any occupation: you must be unable to work in any occupation for which you are reasonably suited by education, training or experience. Harder to claim.
- Own occupation: you must be unable to return to your specific occupation. More generous — but many default super policies use “any occupation” after a transition period.
Income Protection (IP)
Pays a monthly benefit — typically up to 75% of your pre-disability income — if you are temporarily unable to work due to illness or injury.
- Benefit period: how long the benefit continues. Common options: 2 years, 5 years, or to age 65. Longer is more expensive but far more valuable for serious conditions.
- Waiting period: how long you must be off work before the benefit starts — typically 30, 60, or 90 days. Longer waiting periods mean lower premiums.
- Agreed value vs. indemnity: agreed value policies pay the stated benefit regardless of your income at claim time. Indemnity policies pay based on your actual income at the time. Most default super IP is indemnity-based.
The DIME method: how to estimate how much insurance you need
DIME stands for Debt, Income, Mortgage, Education. It is the standard actuarial framework for calculating life insurance needs — and it is the methodology behind YourSuperHealth’s independent gap analysis.
The four components
- Debt: all outstanding personal debt excluding the mortgage. These would need to be cleared immediately on death.
- Income: your income replacement need — typically modelled as 70% of your gross income for up to 20 years (the years remaining until retirement, capped at 20).
- Mortgage: the outstanding balance on your home loan. In many cases this is the single largest component of the death cover need.
- Education: an allowance for the cost of raising and educating dependent children — typically $40,000–$60,000 per child.
How YourSuperHealth applies DIME
Death cover need = (income − ½ partner income) × min(years to retirement, 20) × 70% + outstanding debt + $50,000 per dependant + $15,000 final expenses
TPD cover need = income × min(years to retirement, 25) × 70% + outstanding debt + $100,000 rehabilitation allowance
IP cover need = 75% of monthly income (the standard industry maximum benefit rate)
Why your fund’s calculator isn’t the same
Super funds offer their own insurance calculators — but these are built to sell insurance products from that fund. They typically assume you need to replace 100% of income, do not account for partner income, and do not cross-reference what you already hold.
How the Age Pension is calculated in FY2025-26
The Age Pension is means-tested under two separate tests. Centrelink applies whichever gives you the lower pension.
Step 1 — Eligibility
You must be at least 67 years old (for anyone born after 1 January 1957) and satisfy Australian residence requirements. Your super does not count as an asset until you reach pension age — it remains in accumulation phase and is unseen by Centrelink.
Step 2 — Assets test
All assets are assessed except your family home. Key FY2025-26 thresholds:
- Single homeowner: full pension below $314,000 / zero pension above $695,500
- Couple homeowner (combined): full pension below $470,000 / zero pension above $1,045,000
- Non-homeowners: thresholds are approximately $252,000 higher
Between the thresholds, the pension reduces by $3 per fortnight per $1,000 of assets over the lower threshold.
Step 3 — Income test and deeming
Centrelink applies deeming rates to your financial assets: 0.25% on the first $62,600 (single) or $103,800 (couple combined), and 2.25% above. Above the income free area ($204/fn single, $360/fn couple), the pension reduces by 50 cents per dollar.
Maximum FY2025-26 rates
- Single: $1,149.50 per fortnight ($29,887/year)
- Each member of a couple: $866.10 per fortnight ($22,519/year)
Deeming explained — why Centrelink ignores what you actually earn
Deeming is the method Centrelink uses to assess income from your financial assets for the Age Pension income test. Instead of measuring what your investments actually earn, Centrelink assumes a fixed notional return — called the deemed rate — regardless of reality.
Current deeming rates (FY2025-26)
- Lower rate: 0.25% per annum — applies to the first $62,600 of financial assets for singles ($103,800 for couples combined)
- Upper rate: 2.25% per annum — applies to financial assets above those thresholds
Example: a single retiree with $400,000 in super would have deemed income of: ($62,600 × 0.25%) + ($337,400 × 2.25%) = $157 + $7,592 = $7,749/year ($298/fortnight).
What is subject to deeming?
Deeming applies to most financial investments: super account balances (post-pension age), bank accounts, shares, and managed funds. It does not apply to real property or the family home.
How salary sacrifice to super works (and when it doesn’t)
Salary sacrifice to super means directing part of your pre-tax salary into your super fund instead of receiving it as take-home pay. The redirected amount is taxed at 15% (contributions tax inside super) instead of your marginal income tax rate.
The tax saving per dollar (FY2025-26)
- $45,001–$135,000 income (30% marginal rate): save 15¢ per dollar sacrificed
- $135,001–$190,000 (37% marginal): save 22¢ per dollar
- Over $190,000 (45% marginal): save 30¢ per dollar — but Division 293 applies (see below)
The concessional contributions cap
Your salary sacrifice contributions plus your employer’s SG contributions (12% of salary) must not exceed $30,000 per year. Contributions above the cap are taxed at your marginal rate less a 15% offset — effectively eliminating the benefit.
Division 293 — the high-earner catch
If your income plus concessional contributions exceeds $250,000, the ATO levies an additional 15% tax on the contributions that take you over the threshold. Those contributions are taxed at 30% total, not 15%.
What salary sacrifice does NOT do
Binding death benefit nominations — the complete guide
Your superannuation is not an asset of your estate. It sits outside your Will and is governed by superannuation law. When you die, your fund trustee decides who receives your super unless you have a binding death benefit nomination (BDBN) in place.
Who can be nominated
- Your spouse or de facto partner
- Your children (of any age, including adopted children and step-children)
- Anyone in an interdependency relationship with you
- Anyone who is financially dependent on you at the date of death
- Your legal personal representative (LPR) — your estate
You cannot directly nominate a sibling, parent, friend, or adult child unless they qualify as a financial dependant or interdependant.
The 3-year expiry trap
Most BDBNs expire after three years and must be renewed — otherwise they lapse and the trustee reverts to discretion. This is the most common mistake: people set a BDBN when they join a fund, never renew it, and their instructions are void when they die. Some funds offer non-lapsing BDBNs that remain valid until revoked.
Super death benefit tax — who pays and how much
When super is paid to a beneficiary on death, the tax treatment depends on the relationship between the deceased and the recipient, and on whether the super had a taxable or tax-free component.
Tax dependants vs. non-tax dependants
Tax dependants (spouse, de facto partner, children under 18, financially dependent, interdependants) receive super completely tax-free.
Non-tax dependants — primarily adult independent children — pay tax on the taxable component:
- 15% tax + 2% Medicare levy = up to 17% total
- The tax-free component is always received tax-free
A concrete example
A member dies with $600,000 in super (all taxable component) and a $400,000 death insurance benefit. Total = $1,000,000.
- Paid to spouse: $0 tax
- Paid to adult independent child: $170,000 tax (17% × $1,000,000)