Income Protection Insurance Premiums Tax Deductible – What You Should Know
Salary protection is a way of ensuring you have a source of income when you are not in employment as a result of illness or injury.
It works much like any other insurance cover – you pay premiums for a given period of time to receive cover.
In case you become ill or sustain injuries that hinder you from working, you will receive a monthly benefit from the insurance company to help you meet your financial obligations so you can focus on your recovery. Some more good news is that income protection insurance premiums tax deductible.
Qualification for tax deduction
In order to claim your tax exemption, there are certain things that you should know. Tax deductions are allowed in Australia for valid premiums paid for insurance that is intended to provide an income. Insurance companies may offer various arrangements for income protection. First, the policy you have taken may be purely for income protection. In such a situation, you will qualify for tax exemption since you can easily prove to the Australian Taxation Office that the premiums you pay are purely for income purposes.
Secondly, your policy could include both salary protection and another cover such as disability or death. In such a case, you would need to get information from your insurer concerning the tax deductible portion of your premiums. Note that this will be the portion of your premiums that is for income protection alone. The premium will have to be split accordingly since other covers are not intended for income purposes and are therefore not tax deductible.
A third situation is when you have an income protection insurance cover for which your employer makes all the premium payments. Although the premiums are still considered exempt income, it is your employer that will be in a position to claim tax deductions. In addition, you will still be liable for taxation in such an arrangement – the benefits you receive in case you make a claim will be taxed on your account.
Where to get help
Since the question of tax deductibility can be complicated, you can seek assistance from the Australian Taxation Office. However, make sure that you have all the necessary information concerning your policy when you contact them. You should be able to receive reliable information since the ATO is directly involved with tax exemption issues. In addition, you will receive the most up to date information so you are aware of any recent changes as far as income protection premiums are concerned.
You can also get assistance from your insurance provider or pay a visit to SUPER SA for more answers. Your insurer is in a position to give you the relevant information concerning your premiums, so you should be able to find out what portion of your premiums is tax deductible. However, if your insurer is unable to provide such information, you could also consult your accountant or an insurance expert. Ultimately, it is critical to have the right information concerning income protection insurance premiums being tax deductible before making any tax claims to avoid any problems with the ATO.