Unlike most personal insurance premiums, income protection insurance premiums are generally tax deductible.
The Australian Tax Office takes the view that any payment under an income protection insurance (or sickness and accident) policy in lieu of your regular income is assessable for tax purposes. As such, the income protection policy premium (being the cost of obtaining that benefit), qualifies as a tax deduction.
Generally tax deductions are not available for individuals where premiums are paid for insurance policies which provide a lump sum benefit for, say, death or traumatic events. Therefore, care needs to be taken to ensure that any tax deduction claimed is only for the amount of premium directly related to the income protection cover portion of a combined policy.
If you are not sure how your premium is made up, contact your life insurance company or insurance agent and ask for a schedule detailing the policy number and the amount of premium payable on each respective portion of the insurance policy. If you have been considering taking out an income insurance policy, then now is the time to act. Payment of your premium before 30th June will generally entitle you to a tax deduction in this year’s tax return. If you wait until July, you will have to wait another year to gain your tax break.
For specific taxation advise please consult a tax accountant.
For more information about income protection insurance, contact an xLife consultant today or request income protection quotes!