Income Protection Tax Deduction
What Is Income Protection?
Income Protection Insurance allows you to insure your ability to generate an income, in the event you are unable to work due to sickness or injury Income Protection Insurance can cover up to 75% of your Annual income and pay it to you as a monthly benefit helping you maintain your financial position while you recover.
Depending on the specific terms of your policy you may need to wait (be unable to work) for a period of 4-12 weeks before you are able to claim on your income protection policy, this is why it is important to seek advice from a reputable and experienced insurance adviser as they can assess your current financial position and circumstances and recommend the most appropriate policy and product provider to suit your needs.
What is the difference between retail Income Protection and Income Protect inside superannuation?
There are a number of key differences when it comes to Income Protection Insurance policies held inside and outside of superannuation, chief among them are the limitations on Benefit Period, Waiting periods and Tax implications.
Where benefit periods are concerned Retail Income Protection offers the consumer the widest variety of options, whereas Income Protection inside Superannuation generally offers a limited number of options, this can have a dramatic impact on the overall suitability of the policy that is held.
Waiting periods are extremely important when looking at Income Protection Insurance policies a wide variety of options is essential, generally retail Income Protection Insurance policies offer around 6 options to the consumer whereas Income Protection inside Superannuation generally only offer 2 options.
Premiums paid for Income Protection Insurance held outside of Superannuation as a standalone policy are generally tax-deductible whereas policy premiums paid for cover inside Superannuation are not considered tax deductible.
What may I be able to claim?
When purchasing Income Protection Insurance, it is worth noting that policy premium paid for a Retail Income Protection Policy. According to the ATO (Australian Tax Office) “You can claim the cost of premiums you pay for insurance against the loss of your income. You must include any payment you receive under such a policy on your tax return.”
Based on this generally, the premiums you pay for Income Protection with a retail product provider can be claimed as a tax deduction.
Where can I purchase?
One of the most effective ways of obtaining retail Income Protection Insurance and other types of personal risk Insurance is through a financial planner, when dealing with a Planner generally you will be able to compare a number of products providers at once, with an accredited and financial planner you can obtain personal recommendations based on your current circumstances and the goals you wish to achieve by obtaining cover.