Is Trauma Insurance tax deductible?

Trauma Insurance can help protect you financially against a wide range of critical medical conditions – including cancer, heart attack and stroke.

While premiums for Trauma Insurance are generally not tax-deductible, any benefits paid from Trauma Insurance are generally tax-free.

Why is Trauma Insurance not tax-deductible?

Trauma insurance pays a lump sum upon confirmation of the diagnosis of one of the listed medical conditions. The primary purpose of this benefit is to cover the costs of any expensive medical treatment and allow you to make lifestyle changes to reduce stress – not replace your income.

Because Trauma Insurance is not considered income replacement, the premiums for Trauma Insurance are generally not tax-deductible according to the Australian Taxation Office (ATO).

Payment of Trauma Insurance benefits

While the premiums for Trauma Insurance are not tax-deductible, any lump sum benefit that is paid will generally be tax-free. The Trauma benefit payment is also exempt from capital gains tax if it is paid to the policy holder or a specified relative.

This favourable tax treatment helps ensure Trauma Insurance can deliver maximum financial relief if you are diagnosed with a critical medical condition.

Trauma Insurance and superannuation

It is no longer possible under Australian law to take out a new Trauma Insurance policy through an industry, retail or self-managed superannuation fund (SMSF).

However, those people who had Trauma Insurance in place through their super fund before 1 July 2014 potentially remain fully covered under their policy, as long as this cover has been continuous. It is also possible for anyone with a ‘grandfathered’ Trauma Insurance policy to vary their level of cover according to their changing needs.

Trauma Insurance premiums are not tax-deductible for the Trustees of the fund. Any concessional contributions that are made to pay for the cost of premiums are taxed within the fund. In addition, while a benefit payment to a policy holder is not generally taxed within the fund, it may be taxed when the benefits are actually paid out to the policy owner.

Please note that the information we provide is not advice but general information only.

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If you know what type(s) and level of cover you need, get a quote now to see how our prices compare. If you still have questions, request a call back and one of our helpful insurance specialists will contact you, or call us on 1300 041 494.

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