Is Income Protection Insurance Tax Deductible?

Yes! Income protection insurance can help cover up to 75% of your income if you're unable to work due to illness or injury, and the premiums you pay are tax-deductible. This means you can protect your future self while enjoying some tax benefits along the way.

Can You Claim a Tax Deduction?

If you buy income protection insurance directly (not through your super), you can usually claim a tax deduction on the premiums you pay in that financial year. The amount you get back depends on how much you pay and your tax rate. However, you can’t claim a deduction if the policy pays a lump sum for critical illness or injury.

Will You Pay Tax on Income Protection Benefits?

Yes, any benefits you receive must be declared to the ATO and are likely to be treated as taxable income. Your insurer won’t deduct the tax, so you’ll need to pay any tax owed when you file your return.

What About Bundling Income Protection with Other Insurance?

If your income protection is bundled with other policies (like life insurance), only the portion of the premium that covers income protection is tax-deductible. For example, if your total premium is $250 and income protection is $95, you can only claim the $95.

Does Income Protection Insurance Include GST?

Nope! Income protection insurance is exempt from GST in Australia because it’s considered a financial service.

Can You Claim Through Super?

Premiums for income protection bought through your super are generally not tax-deductible. But if you buy directly from an insurer, the premiums are usually deductible.

Why Consider Income Protection Insurance?

Income protection gives you peace of mind by covering up to 75% of your pre-tax income if you can’t work due to illness or injury. Plus, the premiums may be tax-deductible, so it’s a smart way to protect both yourself and your finances.