Life & Income Protection Insurance Tax Deductions Explained

Want to know if you can claim tax deductions on your insurance premiums? It depends on the type of coverage and whether it’s through your super fund. Here's a quick guide to break it down for you!

Types of Insurance

• Life Insurance: Pays a lump sum to your beneficiaries if you pass away or are diagnosed with a terminal illness.

  
  

• Income Protection Insurance: Pays up to 70% of your income (up to $30,000/month) if you're temporarily unable to work due to illness or injury.

  
  

• Total Permanent Disability (TPD) Insurance: Pays a lump sum if you're permanently disabled and can’t work.

  
  

• Critical Illness Insurance: Covers major illnesses like heart attacks or strokes.

  
  

Tax Deductions for Insurance Premiums

• Life Insurance & Critical Illness: Generally, premiums for life, trauma, and critical illness insurance aren’t tax-deductible.

  
  

• Income Protection: You can claim a tax deduction for premiums on income protection insurance, as it’s linked to your income. Just declare it on your tax return!

  
  

• TPD Insurance: Premiums are typically not tax-deductible, but benefits may be tax-free.

  
  

Life Insurance Payouts

• Income Protection Payouts: These are taxed, so be sure to report them in your tax return.

  
  

• Life Insurance Payouts: These are usually tax-free, but always check with your financial adviser.

  
  

Insurance Through Super

• Super Fund Insurance: If your premiums are paid through super, you can’t claim a tax deduction.

  
  

• Self-Managed Super Fund (SMSF): Rules may differ, so check with your adviser.

  
  

Bundled Insurance Policies

If you bundle insurance products, you can only claim tax deductions for the income protection portion. For example, if your $200/month premium includes life insurance and income protection, and $125 covers income protection, you can only claim a deduction for that $125.

To sum it up, tax deductions for insurance can be tricky, so if you’re unsure about your specific situation, it’s always a good idea to chat with your financial adviser!