The number of Australians accessing some form of income support because they are unable to work due to illness or injury has risen by two million over the past decade, according to new research commissioned by the Council of Australian Life Insurers (CALI).
Last year, 8.5 million Australians accessed some form of support, receiving a combined $78.9 billion in payments.
The report examined 11 forms of income support, including government benefits, workers’ compensation, employer-funded sick leave, insurance payouts, and early access to superannuation.
It found the system was highly fragmented, with people often transitioning between them, such as someone who may initially be on Workers’ Compensation and then move to the National Disability Insurance Scheme (NDIS).
A separate study of 790 people whose health limited their ability to work found that financial distress was common. Over half reported periods of no income lasting seven to 15 months on average, leading to reliance on savings, family, or asset sales. Despite a desire to return to work, less than half were able to do so.
Mental health conditions were driving much of the increase in claims, now accounting for around one in three claims total and permanent disability claims, and one in five income protection insurance claims, placing ongoing pressure on insurers and government support systems.
The broader disability support system is also facing mounting financial pressure.
Mental Health Driving Growth
“The surge in mental health claims is testing the income support safety net’s ability to cope because it wasn’t built with mental health in mind,” said CALI chief executive Christine Cupitt.“No single part of the safety net can tackle this challenge alone. We need a connected and coordinated approach, led by the federal government, to respond to the productivity challenge of mental ill-health in our community.”
Cupitt added that the lack of coordination across systems can leave people making difficult financial decisions, with consequences that extend beyond health into long-term financial security.
“Without clear, coordinated pathways and earlier access to support across the ecosystem, Australians risk missing out on help that could make a real difference to their recovery and their connection to work,” she said.
- 10.8 percent of employer-funded sick leave claims
- 10.5 percent of workers’ compensation claims
- 20 percent of income protection insurance claims
- 31 percent of total and permanent disability insurance claims
- 40 percent of Disability Support Pension claims
- 45.7 percent of JobSeeker claims
- 55 percent of Youth Allowance claims
- 27 percent of Department of Veterans’ Affairs compensation and pension claims
Fragmented System
Life insurers paid $8.3 billion in income protection and total and permanent disability benefits to around 55,000 Australians in 2023-24, accounting for roughly 11 percent of the country’s total income support payments.“These claims tend to be more complex and longer in duration,” Cupitt said.
Ross Iles, chief research officer at SuperFriend, which prepared the report, said many Australians struggled to navigate the system.
“This report shows that Australians don’t have a single, clear income support pathway,” he said.
Iles said maintaining a connection to work where possible remained important for both physical and psychological wellbeing.
“Participating in work has clear health benefits, both on physical and psychological levels, for individuals, and on multiple levels of society in general,” he said.“However, the longer someone is out of work, the less likely they are to return to work.”
