Is Income Protection a Tax Deduction?
Income protection insurance offers security in the face of an unexpected illness or injury. It helps you cover your bills, mortgage and other living expenses if you’re unable to work due to an illness or injury, so you can maintain your lifestyle and focus on what’s most important: recovery.
While it comes at a cost, the good news is that income protection insurance can generally be claimed as a tax deduction. Depending on your situation, this might make it an appealing back-up plan for securing your financial future.
When can I make my claim?
At the end of each financial year your insurer will send you out a statement for your tax return. It’s important to check whether you are paying for a future period or the current year, as you will generally claim the deduction for the financial year that you are covered for by the policy.
The amount of money you will receive back from your tax claim will depend on your marginal tax rate.
When can’t I claim income protection?
You can’t claim a deduction for income protection insurance premiums when the policy has been taken out through your superannuation and the insurance premiums are deducted from your superannuation contributions.
Should you end up claiming from your income protection insurance, the benefit payable is treated as a gross income by the ATO and therefore the income you receive is taxable.
Find out more about income Protection:
Income protection insurance provides a financial back-up plan in case you are unable to work due to illness or injury. If you’ve been considering income protection, iSelect can help you find a suitable policy. Compare Income Protection online or speak to one of our qualified insurance advisers on 1300 887 299.
For further information regarding tax deductibility of income protection premiums, please refer to the Australian Tax Office.
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