Income protection cover + net premium.
Max monthly benefit (70%)
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Net premium after deduction
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The 70 percent ceiling and why it exists
Income protection replaces a slice of your salary if illness or injury stops you working. Australian insurers cap the monthly benefit at roughly 70 percent of your pre disability income, and this calculator applies that cap directly. The reasoning is deliberate. An insurer that paid 100 percent would remove any financial incentive to recover and return to work, so the 70 percent figure is the long standing industry norm that regulators and reinsurers expect. It is enough to keep a household running while leaving a real reason to get back on your feet.
The tool takes your annual income and a premium you have been quoted, and returns two numbers: the maximum monthly benefit at 70 percent, and what that premium really costs after the tax deduction. Both matter, because the headline premium is almost never the true cost when the policy sits outside super.
Premiums are deductible outside super
This is the detail most people miss. The ATO allows you to claim a deduction for income protection premiums when the policy is held in your own name outside superannuation, because the benefit would itself be taxable as income if you ever claimed. Inside super the fund pays the premium from your balance and you get no personal deduction. So the real cost of an outside super policy is the premium reduced by your marginal tax rate, and the calculator uses your marginal rate to show that net figure.
A $100,000 salary, worked through
Using the defaults, a $100,000 salary with an $1,800 annual premium and a 37 percent marginal rate produces the figures below. The 37 percent rate is the resident bracket that applies to income between $135,000 and $190,000 in 2025-26, and you can drop it to match your own band.
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So the policy that looked like $1,800 actually costs $1,134 once the deduction is counted. For a higher earner on the 45 percent top rate, the same premium would net out even lower. That deductibility is the single strongest argument for holding cover outside super rather than inside it.
Waiting periods, benefit periods, and a real tip
Two levers move the premium more than almost anything else. The waiting period is how long you must be off work before benefits start, commonly 30, 60, or 90 days. The benefit period is how long payments continue, often two years, five years, or to age 65. A longer waiting period and a shorter benefit period both cut the premium sharply. My practical tip: if you hold a solid emergency fund, lengthening the waiting period to 90 days is usually the cheapest way to bring the premium down without gutting the cover, because your savings bridge the gap that the insurer would otherwise pay for at a premium.
Stepped premiums quietly outgrow level ones
One decision the headline premium hides is whether it is stepped or level. Stepped premiums start cheaper but climb every year as you age, because your risk of a claim rises, so a policy that looks affordable at 35 can become punishing by 55. Level premiums cost more at the outset but are designed to stay flatter over the long run. If you expect to hold the cover for many years, a level premium often wins in total cost, even though the calculator's net premium figure only reflects the single year you enter. Run the tool again with the quote for each option before you choose.
Are the benefit payments taxable when I claim?
Yes. Because you claimed a deduction for the premiums, the ATO treats income protection benefits as assessable income, and they are taxed at your marginal rate in the year you receive them. Your insurer will usually withhold PAYG from the payments. This symmetry, a deduction going in and tax coming out, is exactly why the net premium matters more than the gross.
Does the 70 percent cap include my super guarantee?
Generally the benefit is calculated on your salary, and many policies can include an extra component to keep super contributions flowing while you are disabled, often around 10 percent on top, paid into your fund. Read the product disclosure statement, because definitions of insured income vary between insurers and a packaged salary that bundles super can be measured differently.