Tax Treatment On Life Insurance
You can purchase life insurance though superannuation or just as a stand-alone policy.
Tax treatment is different on these two covers. It is important for consumers to understand tax deductibility so they know how to maximize the benefits of their life insurance policies. If you purchase life insurance outside of superannuation then the premiums made are not tax-deductible.
Generally, benefit payments are tax deductible on life insurance purchased outside of superannuation. If premiums are funded using superannuation, then the payments become fully tax deductible. Life insurance via superannuation benefit payments can attract tax of about 35 percent if the payments are made to non-dependents.
Premium Tax Deductibility On Life Insurance
Tax deductibility on life insurance taxable can be complicated. Your insurer should take the time to explain it to you so you can make an informed decision. There are a few basic points you should have in mind when it comes to tax deductibility. Again, you must remember that it all depends on the type of insurance. Generally, total and permanent disability and life insurance are not tax deductible if they are purchased separately. Diagnosis or trauma insurance is generally not tax deductible, while income protection premiums are tax deductible.
There is a different rule that applies to TPD and life insurance; there are instances when they may become tax deductible. If you obtain a superannuation fund via your employer then these two policies become tax deductible. A different rule applies to total and permanent disability and life insurance. There are generally two instances when these two polices become tax deductible. The first is when you obtain superannuation via your employer. The other is if you are self-employed. The premiums paid on income insurance are tax deductible regardless of whether it is through superannuation or a standalone cover. Based on these facts, you need to carefully consider the tax implications and find ways you can get tax breaks by bundling up policies.
Superannuation And Tax Implications
If you are interested in tax benefits on your life cover, the best option is through superannuation, click here to know more. Luckily, the super fund cover is not only available for employees, but also the self-employed. This is unlike several years back, when it was only offered to the public service members or senior employees. Mandatory employer superannuation benefits all employees except those on a casual status and earning less than 450 dollars each month. The super fund doubles as a retirement investment and an insurance plan. Read: How to get the cheapest car insurance
It is important to remember that there are instances when the benefit payments through superannuation may be subject to tax. This is when the beneficiaries are not financial dependents, are over the age of 18 or not a spouse. If any of this applies, then the tax can be as high as 16.5 percent. Talk to an insurance expert when taking out insurance covers. Above all, weigh the pros and cons of your insurance policy as regards tax deductibility and then make an informed decision.