How does Income Protection treatment of bonuses and irregular earnings work?

Insurable income usually includes base salary plus regular bonuses, commissions, and overtime, averaged over the 12 months before the waiting period started, but one-off bonuses are excluded by most panel PDSs. Self-employed claimants are usually assessed on net business income, not gross drawings.

The definition matters at claim time, because the monthly benefit is calculated on the insured portion of your earnings, not your gross paycheque. Variable earners often discover at claim time that the benefit is lower than they expected.

How each panel insurer defines insurable earnings

| Insurer | Lookback period | What is included | PDS reference | |---------|-----------------|------------------|---------------| | AIA | Stated lookback under Pre-disablement Income | Base salary plus regular bonuses, commissions, overtime | Priority Protection PDS v32 (9 Nov 2025), Section 12.1 General Definitions | | TAL | 12 months immediately before the Waiting Period started | Pre-Claim Earnings include regular variable components; for self-employed, earnings from business or occupation | Accelerated Protection PDS (12 Dec 2024), Section 2.6 | | Zurich | Defined-term lookback | Gross sales, earnings, or billings for self-employed, with allowable business expenses deducted | Zurich Wealth Protection PDS (1 Nov 2025), defined terms section | | OnePath | Annual equivalent of pre-claim earnings | Capped at 70% of the first $300,000 plus tiered above | OneCare PDS (1 Oct 2025), Section: Income Secure | | ClearView | Defined lookback, 12 months typical | Pre-disability earnings, worked example shown in PDS | ClearChoice PDS (13 May 2024, Update 5 June 2025), Section: Income Protection | | NEOS | Defined lookback under pre-disability income | Tiered: rate changes for income exceeding $25,000 per month | NEOS Protection PDS (6 Dec 2024), Income Support Cover | | Encompass | 12 months standard | Pre-disability earnings | Encompass Protection PDS (26 Sep 2025), Income Protection section | | Acenda | Defined Earnings Before Disability | Tier table: first $240,000 to 70%, then 20% for 6 months | Acenda Insurance PDS (27 Sep 2025), Income Replacement Ratio | | Futura | Standard lookback | Pre-disability earnings | Futura Protection PDS (1 Oct 2025), Income Protection Cover definitions |

How each earnings component is treated

Base salary

Included fully, up to the APRA 70% cap and the insurer's tier (see FAQ on the 70% cap for the tier table). Base salary is the simplest and least disputed component.

Regular bonuses and commissions

Included if they have been received consistently, usually with a 12 to 24 month rolling average to smooth volatility. Commission-only roles use a rolling 12-month average as the common benchmark across the panel.

Overtime

Usually included if it forms a regular part of your earnings (for example, scheduled shift loadings or routinely worked overtime). Discretionary overtime tied to ad-hoc projects may be excluded.

One-off and exceptional bonuses

Most panel PDSs exclude single, exceptional bonuses such as one-off retention payments, sign-on bonuses, or unusual performance awards. These are typically not part of the assessed pre-disability income.

Salary packaging and fringe benefits

Futura's Future Increases Benefit explicitly excludes overtime, bonuses, commissions, share of profits, and other fringe benefits from its 15% base-salary-increase trigger test (Futura Protection PDS, 1 Oct 2025). The same exclusions often apply to insurable income calculation for variable earners.

Self-employed earners

Net business income

Most panel insurers assess net business income (gross revenue less allowable business expenses, before personal income tax). This can be materially lower than gross drawings, particularly for sole traders who reinvest profit.

Allowable business expenses

Zurich's PDS expressly notes pre-disability earnings include gross sales, earnings, or billings with allowable expenses deducted (Zurich Wealth Protection PDS, 1 Nov 2025, defined terms section).

What is not insurable

Investment income, rental income, partner income, government payments, and dividends from non-active business interests are generally not insurable. Income protection insures personal exertion income only.

What to do at quote time

• Provide payslips, BAS, and tax returns for the 12 to 24 month lookback to set a realistic insured benefit.
• Ask the insurer to confirm in writing whether your variable components qualify as insurable income.
• Consider whether income-link cover (offered by several panel insurers) reduces the variability risk by re-anchoring the insured amount to current income at claim time.
• Discuss with a licensed adviser whether the policy you are quoting accurately captures your earnings profile.

This is general information, not personal advice.