Terminally ill & tax

Employees who are exiting their employment by any means because they are terminally ill may be eligible to receive any lump sum component of their benefit
tax-free. In order to be considered for this tax concession, the case evidence should include medical opinions which shows they meet the ATO definition of terminally ill, which is explained below.

A terminal medical condition exists if:

  • two registered medical practitioners have certified jointly or separately that the member suffers from an illness, or has incurred an injury, that is likely to result in the member’s death within 24 months of the date of certification
  • at least one of the registered medical practitioners is a specialist practicing in an area related to the illness or injury, and the certification period has not ended for each of the certificates.

This does not alter PSS provisions for members who are suffering from a terminal medical condition to be eligible to choose the terminal lump sum option on the issue of an invalidity retirement certificate. The PSS definition of terminal medical condition is: 'A condition(s) suffered by an affected person that has been certified by two or more medical practitioners, at least one of whom is not treating the affected person, who have experience in the condition(s), as being of either a terminal nature or of such severity that within two years of the date of their certificate the affected person would need assistance with personal or nursing care on a daily basis.'

This is an alternative benefit to the invalidity pension options. It must be stressed that this benefit does not include a prospective component for prospective service
to age 60. Employees wishing to elect for this option should provide reports from two medical practitioners giving the life expectancy in days/months/years.