Income Protection Insurance GST – Understanding Tax Deductions
The goods and services tax (GST), came into effect in Australia in July 2000.
Businesses, consumers and retailers were forced to make major adjustments.
Several processes had to be rolled out for it to be implemented. A decade later, most Australians are still confused about this tax and the type of businesses it is applicable to.
Most people taking out an income protection insurance GST cover want to find out if GST is payable on their premiums. However, this tax is not levied to income protection insurance, private health insurance and life insurance. This is because these insurance products are treated as financial services and are therefore not taxable.
Tax Deductions On Income Protection
Income protection insurance is tax deductible. The tax office in Australia clearly stipulates that benefits and payments claimed on this policy are tax deductible. These are the only provisions made for tax deductions. You need to give details of payments received on this policy when filing for tax returns.
This cover protects one of your greatest assets which your ability to earn and provide for your family. Policy holders under this claim receive 75 percent of their income. This is remitted monthly to help cover for some of the bills and financial obligations. There are policies that can provide more than this percentage if taken out under superannuation.
Exemptions On Tax Deductions
There are instances when the taxation office will not approve a deduction. If a lump sum amount is paid out in the event that you suffer an illness or injury, then this is tax deductible. This mainly applies to persons who have linked their income protection cover with death and disability insurance. Since the amount is paid out as a lump sum, you cannot make tax deduction claims on premiums.
Tax deductible allowances are only applicable to income protection policies. When applying for life insurance, it is wise to have this policy separate in order to enjoy this advantage. The premium payments made on this cover should be visible and distinguished from what you pay in other covers.
Tax Treatments On Company Owned Policies
If you have an income protection cover drawn by your company, the premiums will still be tax deductible. If the premiums are being paid by the company, then the tax is only deductible from them and not on your income. Another important fact to remember is that the benefits you receive upon such a policy will be taxable to you.
It is always advisable to understand tax concessions when taking out an income cover. It is best to discuss tax deductions on your policy when applying for the cover. Your insurance provider should be in a position to explain this in detail. You will also be informed of the requirements you need to meet and the pitfalls to avoid. To get more details and stay informed on any changes on tax treatments, you can contact the Australian Taxation Office or click here for more information. Always remember that policy features differ and it is up to you to find a cover that suits your needs and is in line with your budget.