‘Rainy day’ savings are not tax deductible – Income Protection Premiums are
We all know the importance of saving for a ‘rainy day’. Why? Because you never know when you’ll need money in an emergency due to an accident or getting sick and you can’t work.
But what if you don’t have any savings to fall back on? How would you cope financially and keep paying the mortgage, or for the kids extra activities at school, or take that holiday you’ve been dreaming of?
Income Protection insurance is a great way of ensuring you and your family are financially protected in the event of a ‘rainy day’ event. It takes all the worry away by providing a safety net if you can’t work.
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. It’s 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.
Premiums are tax deductible
The other good news is that your Income Protection premiums are generally tax deductible.
According to the Australian Taxation Office you can claim your Income Protection 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.
As long as your cover is purchased before the end of the financial year, you will be able to claim the premiums as a tax deduction in your June 2018 tax return.
When premiums are not tax deductible
There are some instances when premiums are not tax deductible:
- 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.
- In a combined policy which includes Life and Income Protection cover, only the Income Protection portion of the premiums is deductible.
- In the case of a self-managed fund (SMSF), the premiums may be deductible.
Noble Oak 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.
Not sure how much cover you need?
If you’re not sure what level of cover you need try our Life Insurance Calculator. It only takes about 5 minutes to complete and it’s free. Plus you receive a personalised report.
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. Please refer to our PDS for more information on our product terms.