Are Income Protection Premiums Tax Deductible?
Are you concerned about how your household would keep ticking over if you were unable to work for a while due to a serious illness or accident?
Would you have enough savings to keep up with your regular expenses and commitments, such as mortgage or rent payments, school fees, bills, and other loan repayments?
This is where Income Protection Insurance comes in. This type of cover provides a regular payment of up to 75% of your pre-tax income to help you keep up with the payment of your household expenses while you are unable to work.
Income Protection cover is particularly important for people who are self-employed and own and run a business. However, even employees who are able to access paid sick leave could find themselves short of funds once their leave entitlements are used up.
Income Protection Insurance – premium tax deductibility
The other good news regarding Income Protection cover is that the premiums are generally tax deductible. You can claim the cost of your premiums against your income when doing your tax return.
As Income Protection payments are classified as actual income, any benefits received due to a claim situation must also be declared on your tax return, as they will be subject to income tax.
Rules and exclusions
There are a few guidelines and exceptions to be aware of when it comes to claiming the cost of premiums, such as:
- Income Protection policy premiums inside an industry superannuation fund are not deductible, as the cost of the premiums is usually deducted from your super contributions. However, in the case of a self-managed fund (SMSF), the premiums may be deductible.
- The premiums payable for policies that provide a lump-sum payment – such as Life Insurance, Trauma or TPD cover, are not tax deductible.
- In a combined policy which includes Life and Income Protection cover, only the Income Protection portion of the premiums is deductible.
Noble Oak’s Income Protection Insurance
Noble Oak’s Income Protection cover pays up to 75% of pre-tax income up to a maximum benefit of $25,000 per month ($300,000 per annum). Other features include:
- a spousal benefit where your spouse’s income (up to $2,000 per month), will be paid if they need to stop work due to your disablement,
- a rehabilitation and/or nursing care benefit,
- a choice of waiting periods, and
- guaranteed renewability of cover up to age 65.
Noble Oak is able to keep the costs down on our insurance policies as we do not do expensive advertising campaigns and we don’t pay any adviser commissions. We pass these cost-savings on to our clients and this makes our premiums much more affordable.
If you have not previously taken out Income Protection cover then give us a call. As long as this cover is purchased before the end of the financial year, you will then be able to claim the premiums as a tax deduction in your June 2017 tax return.
Want more information?
If you would like to know more about Noble Oak’s Income Protection cover, contact us to discuss your needs and request a quote.
Please note that the information we provide is not advice but general information only and consult your taxation adviser or accountant for your personal circumstances.
ASIC Money Smart, Income Protection, viewed 25 May 2017
Australian Taxation Office, Income Protection Insurance, viewed 25 May 2017
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