Income protection - can I claim a tax deduction for my premiums?

The Australian Taxation Office allows tax deductions for insurance premiums where it can be proven that those premiums relate to the earning of assessable income.

One type of insurance premium which is allowable as a tax deduction is that paid for Income Protection Insurance (also known as Sickness and Accident Insurance). The Tax Office’s view is that the premium paid results in the benefit of income, and as such allows a deduction for it. However, if there is a component in the premium that goes towards a lump-sum cover for death, injury or disablement, then that part of the premium is not an allowable deduction. If you have a combined Income Protection Insurance and Death/Disability policy, your insurance company should advise you how much of your insurance premium you can claim as a tax deduction. If you are unable to obtain the split, then you should not claim a deduction at all.

For further information on income protection and tax, or about claiming a tax deduction for your insurance premiums, contact the Australian Tax Office or your tax accountant. And remember, if you do make a claim under your Income Protection Insurance, you must declare the income in your tax return.

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December 2009