Worried about your cash flow? What if you’re too ill or injured to work? You’re not alone. Every year Australians take out income protection policies to keep their bank balance topped up in this scenario.
But it’s also the only type of life insurance you may be able to claim as a taxable income deduction.
It’s surprisingly affordable too – and in just a few minutes Life Insurance Comparison can help you find an affordable policy that protects your cash flow and could also cut your tax.
Can I really claim income protection insurance premiums on my tax return?
Yes, but before we go any further, make sure you speak to your tax accountant.
They’ll be able to advise you on the ins and outs of using income protection as a tax deduction, but here’s a broad look at how it works.
You may be eligible for a tax deduction each year if you hold an income protection insurance policy.
The ATO has strict rules around what you can and can’t claim. Here’s a simple breakdown of the most important information:
- The ATO says: “If the policy provides benefits of an income and capital nature, only that part of the premium that relates to the income benefit is deductible.” That means you can’t claim on other policies such as life cover, trauma cover and Total and Permanent Disability cover.
- You can only make a tax claim on premiums you have paid during the financial year that you’re filing for.
- You can’t make a claim on premiums if the policy is taken out through your superannuation.
- You can’t claim if you’ve had a pay out for a physical injury.
Interested in income protection? Compare now.
But why should I get income protection in the first place?
Income Protection is known as a type of living life insurance – it helps cover the cost of unexpected and unpleasant life events.
In this case, it helps cover up to 70% of your salary if you’re temporarily unable to work due to illness or injury (Note: Income protection does not cover redundancy).
It’s peace of mind for anybody who thinks they might struggle day-to-day if they suffered an illness or injury and their wage suddenly disappeared, such as freelancers or contractors.
The good news is there’s no need to spend hours comparing policies or wondering if you’re paying too much for your policy.
Our specialists at Life Insurance Comparison compare policies from 10 of Australia’s leading life insurers to find an affordable income protection policy for you.
And when it comes to tax time, make sure you speak to your tax accountant about what tax deduction you are eligible for.
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This article is our opinion only and should not be taken as medical or financial advice. Check with a financial professional before making any decisions.
ATO, Income Protection Insurance, May 2021