As the end of the financial year nears closer, we all begin to start thinking about tax time. For some this can be an easy time of the year, while for others it can be confusing in relation to what you can claim, and what you can’t.
When it comes to personal expenses such as health and accident insurance policies for you and your family, you might be wondering if these come with any tax implications or benefits. Can you claim tax, and does this change depending on your policy?
Well, we are here to help. Whether your life insurance premium is tax deductible or not will depend on a range of variables. These include what kind of insurance it is and how you purchased it.
When discussing life insurance, the term often refers to four types of cover: life, trauma, income protection, and total and permanent disability (TPD). Each of these types of insurance are used for a different purpose, some can be purchased in joint packages but usually all can be purchased individually, depending on your needs. It is often important for you and your family to have some sort of plan if the unthinkable is to occur, and you still need to meet important financial obligations.
When purchasing life insurance, there are often three different ways you can purchase. Life insurance can be purchased through your superannuation, through an insurance broker or financial advisor, and directly through the insurance company.
So, Is My Life Insurance Tax Deductible?
If you have purchased cover through your superannuation fund, such as life, TPD and income protection, then the Australian Taxation Office (ATO) advises that the premiums for these insurance policies aren’t personally tax deductible.
If you have purchased any cover outside of your superannuation, the ATO advises that your premium or any part of a premium isn’t tax deductible if the policy compensates you for physical injuries.
This means that if you have bought life, TPD or trauma cover policy outside of your super, they are not tax deductible. However, if you have income protection cover, you can claim tax deductions on the premium you pay for insurance, against the loss of your income.
If you are purchasing or have purchased income protection insurance outside of your super fund, you can personally tax deduct this. You will be able to deduct an amount, based on how much you earn and the tax bracket you fall under.
Not only is your income protection potentially tax deductible if purchased outside of your superannuation, but there are also other benefits of purchasing insurance outside of your superannuation. Holding insurance cover through your superannuation can hold some additional risks. There is often a much stricter criteria to meet in order to get a benefit paid out through your superannuation, so often the less risky choice is to purchase your insurance through an insurance broker, or directly through an insurance company.
If you are looking for a trustworthy and bespoke boutique insurance company to purchase income protection, life, trauma or TPD insurance from, then Aspect Underwriting is the right answer for you.
Aspect Underwriting pride themselves on selling simple insurance policies, using their easy online application process. You can purchase your policy quickly and easily, without having to deal with any in-person meetings or phone calls. Check out Aspect Underwriting today to find out more.