Simplified tax deductions for TPD insurance inside Superannuation
From 1 July 2011 changes have been made that will affect how superannuation funds claim tax deductions for TPD insurance.
The new process for claiming tax deductions will allow funds to automatically claim TPD insurance using pre-set ranges based on definitions.
Australian superannuation funds have welcomed the change which is set to simplify tax deductions on TPD insurance inside superannuation.
This now means that many super funds may not need to engage an actuary to determine the deductible portion of TPD insurance.
How much can I claim from TPD Insurance inside super?
Amendments were made to the Tax Amendment Bill (2011) which will allow a percentage of certain TPD Insurance premiums to be claimed as a deduction, based on TPD definitions; this will come into effect as of 1 July 2011.
These apportioned percentages are as follows:
- Any occupation - 100% tax deduction
- Any occupation with loss of limb add-on - 90% tax deduction
- Own occupation - 60% tax deduction
- Own occupation with loss of limb add-on - 50% tax deduction
- Inability to perform daily living activities - 60% tax deduction
- Inability to perform daily living activities with loss of limb add-on - 50% tax deduction
Life insurance companies respond
In response to these changes some Australian life insurance companies are evolving to ensure that their TPD insurance policies accommodate the proposed changes.
Select insurers are now offering one single TPD insurance policy, splitting the TPD cover both inside and outside of superannuation.
These flexible policies take advantage of the tax deductions available by having 'any occupation' TPD inside superannuation, and 'own occupation' TPD outside superannuation.