The various types of personal insurances you can own within superannuation and the potential deductibility of insurance premiums. More information at http://www.superguy.com.au/is-life-insurance-tax-deductible/
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Is Life Insurance Tax Deductible in Super? By Chris Strano
Super Guy
http://www.superguy.com.au/is-life-insurance-tax-deductible/
Defining Life Insurances 3 MAIN TYPES OF INSURANCE IN SUPER
Death Cover Total and Permanent Disability (TPD) Income Protection
COLLECTIVELY REFERRED TO AS LIFE INSURANCES
Tax Deductibility Status Ability to claim a tax deduction for
the premiums payable Tax deduction is a deduction to the
superannuation fund (often passed through to member account) Not a
tax deduction for the member, personally
What is an insurance premium? A premium is an amount payable,
usually on an annual or monthly basis, to the insurance provider in
exchange for the promise of receiving insurance benefits should you
suffer an insurable event, as defined by the insurance policy in
place.
Death Insurance Death cover generally provides the
owner/beneficiary of a death insurance policy with a lump sum upon
the death of the insured. Most commonly, this will be a lump sum
paid to a husband or wife in the event their spouse was to pass
away.
Death Insurance In most circumstance, the premiums payable for
Death Cover will be tax deductible within your superannuation
account.
TPD Insurance Total and Permanent Disability (TPD) Insurance
generally provides a lump sum to the insured when they suffer a TPD
event, as defined by the insurance policy.
TPD Insurance The deductibility of TPD insurance needs a little
more explaining. However, I do not want to confuse the matter too
much, as each individuals circumstances will differ. Basically, the
portion of the premium relating to the core benefits of a TPD
policy will generally be tax deductible.
TPD Insurance The portion of the premium relating to non-core
or ancillary benefits (such as extras) will generally not be tax
deductible. It needs to be determined what portion of the benefits
of a TPD policy a trustee would be obligated to provide a
disability superannuation benefit to a member and the scope of the
insured event. Refer to Taxation Ruling TR 2012/6 for further
information.
Income Protection Income Protection insurance provides a
replacement income to the insured after a specific time period for
a predetermined time frame, or until the insured is able to return
to work. Partial benefits may continue to be received if the
insured returns to work part-time. It is unusual for an Income
Protection policy to provide a replacement income of greater than
80% of the insureds pre- illness/disability income, as they
encourage and intend the insured to return to work in some
capacity.
Income Protection Premiums are generally 100% tax deductible.
Core benefits are generally accessible, provided cover is in
accordance with your pre-disability income However accessibility to
ancillary benefits may not be possible without meeting another
condition of release. Maybe more beneficial to own in your personal
name due to a higher effective tax benefit
Conclusion Type Premiums Deductible? Conditional Potential
Accessibility Issues Life Yes No No TPD Yes Yes Yes Income
Protection Yes No Yes