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Existing customers – for more information regarding recent changes to your Income Protection or TPD insurance please click here

Life Insurance

Is Life Insurance Tax Deductible?

20 Oct 2023

Life Insurance by Life Stage

The choices you make today can impact your long-term health, wealth and happiness. Understand the important role Life Insurance can play in key life events.

If you are new to Life Insurance products, you probably have several questions about the potential benefits of holding life insurance. These may include questions around tax. Two of the common questions people ask are firstly, are there any tax benefits if you purchase life insurance products? And secondly, if you and your family were to claim on your life insurance, would the payout be taxable?
While you should always discuss your specific situation with your accountant or financial adviser, some general principles are provided below. Please bear in mind that tax rules can often change.

What types of life insurance are tax-deductible?

Outside super

• Life insurance, trauma cover (also known as critical illness cover) and TPD insurance purchased outside your super are usually not tax deductible.

• The good news is that Income Protection premiums are generally tax deductible when purchased outside super. According to the Australian Taxation Office you can claim your Income Protection Insurance premiums in your annual tax return. However, any payments you receive under your cover as a monthly benefit if you have made a claim must be declared on your tax return, as they are classified as income. Also, in the case of policies which pay a lump sum to compensate you for illness or injury, premiums are not tax deductible.

Inside super

• Life insurance and TPD insurance purchased within your super is generally not personally tax deductible however if purchased through a Self-Managed Super Fund (SMSF), the SMSF may be able to claim premiums in its annual tax return under certain circumstances. You can find more information about taking out NobleOak Life Cover within an SMSF here and should consult with a tax professional or financial planner if purchasing through an SMSF.

• Income Protection policy premiums for cover provided through a superannuation fund are not deductible against your personal income if the premiums are deducted from your super contributions.

Are life insurance payouts taxable in Australia?

Life insurance payouts can be tax-free, particularly when they will be paid to someone who is dependent on you such as children under the age of eighteen. This is typically true for life insurance (in case of death) as well as trauma (critical illness) insurance and total permanent disability insurance.

However, claims payouts made under Income Protection Insurance are unlikely to be tax free.
When naming an insurance beneficiary, you will need to check your policy to establish who counts as a financial dependant. Spouses are commonly accepted, but there are more restrictions around children over the age of eighteen, who are often not regarded as financial dependants when it comes to receiving a lump sum and therefore will likely be taxed (if the payment is subject to tax). If life insurance is purchased through a super fund, the benefits will be paid to the trustee. There are special rules for superannuation trustees about who they can pay the proceeds of life insurance in super to and you should speak to your superannuation trustee about a binding death benefit nomination.

If you’re thinking of taking out cover and would like more information on NobleOak’s products, please call us on 1300 041 494 or get a quote here.


Important information – The Target Market Determinations for NobleOak’s Life Insurance products are available on our website at https://www.nobleoak.com.au/target-market-determination/ . Cover is issued by NobleOak Life Limited ABN 85 087 648 708 AFSL No. 247302. Address: 4/44 Market St, Sydney NSW 2000. Phone: 1300 108 490. Email: [email protected].

Cover is available to Australian residents and is subject to acceptance of the application and the terms and conditions set out in the PDS for the product. This information is of a general nature only and does not take into consideration your individual circumstances, objectives, financial situation or needs. Before you purchase an insurance product, you should carefully consider the PDS to decide if it is right for you. The PDS is available by calling NobleOak on 1300 108 490 or from www.nobleoak.com.au. Clients should not cancel any existing Life Insurance policy until they have been informed in writing that their replacement cover is in place. NobleOak cannot provide you with personal advice, but our staff may provide general information about NobleOak Life Insurance. By supplying your contact details, you are consenting to be contacted by NobleOak, in accordance with NobleOak’s Privacy Policy.

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