Thinking about income protection insurance in Australia? Here's the lowdown on the tax side of things.
If you buy income protection insurance directly (not through superannuation), you can usually claim tax deductions on the premiums. The amount you can deduct depends on the cost of the premium and your tax rate. However, if you need to claim and get a lump sum payout for critical illness or injury, you can't deduct it. Plus, any benefits you receive need to be declared as taxable income.
With bundled policies, only the income protection portion is eligible for tax deduction. Also, income protection insurance is not subject to GST when issues by a life insurance company. As for superannuation premiums for income protection, they're generally not tax deductible.
For example:
If your income protection insurance is bundled with other policies, like life insurance, only the part representing the income protection premium can get a tax deduction. And example of this would be if, your total premium is $250 per month and the income protection part is $95 per month, only $95 per month is tax deductible.
One more thing, it's a good idea to compare policies to make sure you can protect up to 70% of your pre-tax income if you're hit with illness or injury.
In summary:
This information includes an interpretation of the taxation law as at 1 July 2024 and does not represent tax advice. Laws and their interpretation may also change in the future. You should seek independent advice specific to your individual circumstances from an appropriate professional.
This information does not take into account your personal objectives, financial situation or needs. You should consider these factors and the appropriateness of the information to you. You should consider the Product Disclosure Statement (PDS) for the product and any applicable Target Market Determination (TMD) in deciding whether to acquire or continue to hold the product. .