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Is income protection tax deductible?

Did you know your income-protection premiums may be tax deductible?

Here’s how to work out what you can claim.

  • Generally, costs you incur directly related to your ability to earn an income may be tax deductible. This may include some of the premiums under income protection policies, depending on the type of benefits covered.
  • Income protection insurance is primarily designed for those with a quantifiable, regular income or who work at least 20 hours a week.
  • Unless you’ve got sufficient savings to survive for months, or possibly years, without an income after suffering an illness or injury, it’s sensible to insure your income, just as you would your house or car.

Is income protection insurance tax-deductible?

Generally, costs you incur directly related to your ability to produce income may be tax deductible. This could include some of the premiums you pay for income protection insurance, depending on the type of benefits covered under the policy.

According to the Australian Taxation Office, you can’t claim a tax deduction for a premium or any part of a premium if the insurance policy:

  • compensates you for such things as physical injury, for example life insurance, critical illness or trauma insurance
  • Is taken out through your superannuation and premiums are deducted from your super contributions.

While some of the premiums may be tax deductible, you should also be aware that any claim you are paid may be treated as taxable income. Taxation law is complex and the ability to claim tax deductions for premiums may depend on the type of policy and benefit covers you have. So we recommend you seek tax advice that is specific to your personal circumstances from a tax adviser or registered tax agent.

Why should I get income protection?

If you’re of working age you almost certainly have a range of outgoings – mortgage or rent payments, grocery and utility bills, school fees and/or car costs – that will continue even if your income ceases.

How many hours per week do I need to work to qualify for income protection insurance?

Income protection insurance is primarily designed for those with a regular income or who work at least 20 hours a week. Contractors and the self-employed are usually eligible, but special conditions may apply to them.

The following occupations/workers are not generally covered under income protection policies:

  • unpaid carers
  • part-time employees working fewer than 20 hours a week
  • Casual workers.

Also, check if your policy has any special requirements or conditions around paid or unpaid maternity leave as this may affect your eligibility for cover or the payments you may receive if you claim.

My income protection policy is ‘bundled’ with my life, trauma or total and permanent disability insurance: can I deduct the whole premium?

A deduction may only be available for the portion that pays for income protection.

So, if you’re paying an annual premium of $4000, half of which is for income protection insurance and half of which is for trauma insurance, you can only claim for half (i.e. $2000) of the premium..

Find out more about ANZ Income Protection

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This information was published on 9 October 2018 and is subject to change.

The issuer of this information is ANZ. While ANZ has taken care to ensure that this information is from reliable sources, it cannot warrant its accuracy, completeness or suitability for your intended use. To the extent permitted by law, ANZ does not accept any responsibility or liability arising from your use of this information.

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Taxation law is complex and this information has been prepared as a guide only and does not represent tax advice. Please see your tax adviser for independent taxation advice.