Well, it’s nearly that time of year again. Time to pull out the receipts, give the 'ol' accountant a buzz and start thinking about all the ways you can spend your tax refund!
There are hundreds of articles and ATO guidance1 explaining all the things you can and can’t claim and lots of tips and tricks to make sure you get the most back, but we bet you haven’t heard that your income protection insurance could be tax deductible?
Disclaimer: Before we get started we need to make it clear that we aren’t tax specialists, nor should you take this article as financial advice. After reading, we recommend speaking to a professional tax advisor who can help you to ascertain whether or not the premiums are tax deductible in your personal circumstances. Links to other websites should not be seen as endorsement, but an offer of further learning.
Is Income Protection Insurance Tax Deductible?
According to ATO guidance2, you may be able claim the cost of the premiums that you pay for your insurance against the loss of your income. There are conditions around this, so you should consider your personal circumstances before making a claim on your tax return.
What Isn’t Tax Deductible?
The ATO guidance2 outlines the following instances where you’re unable to claim a deduction. Meeting any of these criteria means you cannot claim a deduction for a premium or any part of a premium:
- If you are compensated by the policy for instances similar to physical injury
- If your policy is included in your superannuation (and your premiums are deducted from your super contributions)
While income protection insurance could be viewed as a type of life insurance, it’s important to note that premiums (or a portion of a premium) that relate to life, total and permanent disability, and similar insurances are not tax deductible as they are not purely to protect you against loss of income as defined by the ATO, but are designed to cover you in the event of personal injury.
How Do I Start?
While we’re not taxation experts, we are certainly insurance experts. In fact, we’ve just been awarded for Outstanding Value in Direct Income Protection from Canstar3 for our Tailored cover. That's three years in a row! You can learn more about Virgin Income Protection insurance, what it covers, and even get an easy quote online.
With Virgin Income Protection, when you choose to pay your premiums annually, you’ll get 12 months of cover for the price of 11. Plus if you take out cover before 30 June 2019, you may be able to claim a deduction for the income protection premiums you paid this year, on this year's tax return.
Once you’ve got your insurance organised, we recommend speaking to your tax accountant/specialist about claiming a tax deduction for the income protection insurance premiums.
Virgin Money can help
Find out what makes Virgin Money’s Income Protection Insurance award-winning today.
How Do You Spend Your Tax Return?
The Australian Securities and Investments Commission (ASIC) released an infographic last year that shows how Australians spend their tax refunds4.
A sample from the infographic:
- 29% used the refund to pay bills
- 21% saved the money
- 16% did not get a refund!
- 13% repay their credit card
- 9% repaid their home loan a little faster
How do you plan to spend the extra bit of cash you might be able to save from claiming your income protection insurance premiums?
Virgin Income Protection
Protect your family with Virgin Money’s award-winning Income Protection Insurance today.
Footnotes and references
1. “Deductions you can claim", Australian Taxation Office, 10 May 2019, available online from https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/, accessed 13 May 2019.
2. “Income Protection Insurance” Australia Taxation Office, 9 May 2019, available online at https://www.ato.gov.au/Individuals/Income-and-deductions/Deductions-you-can-claim/other-work-related-deductions/Income-protection-insurance/
4. “How Australians spend their tax refunds” Money Smart, 21 Jun 2018, available online at https://www.moneysmart.gov.au/managing-your-money/income-tax/how-australians-spend-their-tax-refunds
This information is of a general nature only and does not take into account your personal financial situation, needs or objectives. For this reason, you should consider the appropriateness of this information, having regard to your personal financial situation, needs and objectives as well as the Product Disclosure Statement and Financial Services Guide before deciding whether to buy or to continue to hold this product.