Tax Deductibility of Personal Insurance

Personal insurance is an important aspect of financial planning, providing protection and security for you and your family in case of unexpected events such as accidents, illnesses, or death. However, personal insurance can also be costly, and many people are unaware of the tax deductibility of personal insurance premiums.

Here are some examples of personal insurance policies that may be tax-deductible:

· Income Protection Insurance

If you pay for personal insurance premiums with after-tax dollars, you may be able to deduct them from your income. This will provide you with a tax deduction equivalent to your marginal tax rate (up to 47%). The downside of this deduction is that if you were to receive an income protection benefit as a result of a claim, the benefit you receive is taxable income. If these insurance premiums are funded from your superannuation fund the deduction is limited to the superannuation tax rate (15%).

· Life Insurance

In general, life insurance premiums are not tax-deductible. However, if you have a life insurance policy inside superannuation then the premiums can be deductible at the superannuation tax rate (15%).

· Total and Permanent Disability (TPD) Insurance

TPD insurance is not tax-deductible if funded personally. However, if you have a life insurance policy inside superannuation then the premiums can be deductible at the superannuation tax rate (15%). Key watch-outs with TPD funded through superannuation is that it may have undesired tax consequence on the benefit, and it can be harder to claim on than TPD funded personally.

It's important to note that tax rules regarding personal insurance deductibility can be complex and subject to change.

In conclusion, there are some scenarios that can allow you to deduct premiums on your tax return or benefit through superannuation tax savings. It's important to consult with a tax professional or financial advisor to determine which insurance premiums you can deduct and take advantage of other cost-saving strategies to make sure you are getting the most out of your insurance coverage.