What Do You Know About Tax Deductions

Is Insurance Tax Deductible in Australia? What Do You Know About Tax Deductions

In Australia, life insurance is offered either as a retail policy or a superannuation fund. If you go for the superannuation fund, premium payments will be tax deductible while benefit payments will not. If you don’t go for superannuation, benefit payments will be tax deductible while premium payments will be taxed.

Concessional Contribution

If you really want to take advantage of tax deductibles on the expense life insurance which is part of the superannuation policy, all the premiums must be paid from the fund as concessional contribution. All this stands for is a contribution before tax is deducted. After you reach the age of 65, there are many conditions to this. It is important that you educate yourself on how much amount you are allowed to contribute to superannuation. This is done so that you are better able to comply with the rules while also knowing the tax deductible you can claim.

Usually, you cannot claim tax deductions off taxation liabilities of life insurance premiums that you paid for in the last financial year. Same rule also applies to critical care and trauma insurance. Income protection plans are always fully claimable, where the benefits are taxed and part of your income.

Life Insurance in Superannuation

When you are buying a life insurance plan through a superannuation fund, you can opt for having the entire premium cost to be paid from the fund savings as non-concessional contributions. This makes it tax deductable. Click here in case you want to buy extra insurance; it would be a good idea if you buy the additional insurance through the fund through an income sacrifice agreement. Self-employed people can easily get the same amount tax deductible outcome through the concessional contributions. In other words you will not need to pay taxes on premiums that are paid for life insurance under such circumstances; all that matters is you making sure it is within the concessional contribution limit. Also, the benefits that will be paid from this superannuation will be taxed.

You can also take advantage of government concessions when you apply for insurance in a superannuation fund, especially the low income worker contributions and the spouse government co-contribution. These incentives are not available if you take out your term life insurance outside the superannuation fund. Concessional contributions within the superannuation fund encompass:

  • Contributions of superannuation guarantee
  • The extra contributions your employer makes
  • Contributions that are considered salary sacrifice
  • Contributions by friends
  • Contributions before tax (only when you are self-employed)

These contributions are treated as part of your fund’s assessable income. Because of this, they are regarded as a taxable component of what you earn. You must remember that non-concessional contributions are those which are not included in a fund’s assessable income. As a result, they are also tax deductible. Some of these are:

  • Co-contributions by government
  • Transfer of overseas pension
  • Proceeds from small business
  • Extra concessional contributions
  • Personal contributions that you have not claimed a tax deduction on

About Karren Haller

I am a +70 Blogger that loves connecting with other women through blogging. A new recipe always intrigues, finding a new craft, creating bracelets occasionally and gardening is a favorite and writing brand reviews is a favorite for my readers. But most of all the connection to other bloggers. Creativity, simple life and getting things done