Is Life Insurance Tax Deductible?

It’s almost tax time again! 30 June 2022 is the tax date here in Australia. There are many tax benefits with some insurance options, but the main question is to the Australian Tax Office about life insurance requirements: Is life insurance tax deductible? Well, Billy Explores is here to help you all. The tax man is sure to review insurance again, so many Aussies will need to take heed and make sure you claim your life insurance policy correctly before you buy life insurance.

Unfortunately with our research, we have to let you know that most types of life insurance are not tax deductible. According to the ATO, insurance premiums aren’t tax deductible if the policy pays a benefit for physical injury. But there are a couple of exceptions to this rule by the ATO, such as income protection and the TPD life insurance in your super. Of course, don’t forget at any time of the year it’s a great idea to compare life insurance and get the best life cover for your needs. Of course, Billy strongly suggests you chat to your accountant to find out how much of life insurance cover you will be able to claim back.

What Types of Life Insurance Are Tax Deductible?

To make it easy for everyday Aussies to understand, here’s a brief overview of when life insurance cover is and is not tax-deductible. It should help making it easier for you to compare life insurance. ‘Premiums’ refers to the monthly (sometimes annual) fee you pay to have a policy; ‘benefits’ refers to the money you get when an insurer pays out for a claim.

Type Are premiums tax-deductible? Will I pay tax on benefits?
Life insurance (outside super)
  • No 
  • No
Life insurance (inside super)
  • Yes in some cases
        No 
Trauma (outside super)
  • No
  • No
TPD (outside super)
  • No
  • No
TPD (inside super)
  • Yes
  • Yes
Income (outside super)
  • Yes
  • Yes
Income (inside super)
  • Yes 
  • Yes 

Is Life Insurance Through Super Tax Deductible?

Unfortunately for most Aussies, the answer to whether life insurance through super is tax deductible is generally no. The Australian Taxation Office (ATO) states that premiums on insurance policies taken through super accounts are not personally tax deductible.

This is because the cost of the insurance actually comes from your superannuation balance, rather than your income.  This means that life insurance you have through your super is not tax deductible.

However, of course this can potentially vary if you have a self managed super fund. We recommend chatting with your tax accountant or financial adviser to learn more about claiming tax deductions on insurance premiums within a self-managed super fund. Of course, a great way to stay on top of your life insurance cover is to compare life insurance!

Is Life Insurance Outside of Super Tax Deductible?

Usually, unfortunately no. That’s terrible isn’t it! Life insurance cover outside of super is not tax deductible.  These include life insurance cover like death cover, TPD and trauma insurance.

However, there is some good news! The life insurance cover premiums you pay for income protection insurance are tax deductible, if you buy the life insurance policy outside of your super fund. This is because the premiums you are paying relate to your income which makes it tax deductible.

According to the ATO, insurance premiums aren’t tax deductible if the policy pays a benefit for physical injury. So that rules out everything except income protection insurance.

So Income Protection Insurance Is Tax Deductible

Yes, income protection insurance if you buy life insurance outside of your super it is tax deductible. Of course, life insurance within super is also tax deductible. Don’t forget to double check with your tax accountant regarding the full deductibility of your life insurance cover.

Compare Life Insurance Before You Buy Life Insurance

Of course, tax time is always a great time to review how much money you’ve got going out, and that includes how much you spend on life insurance cover and whether it’s the best life insurance cover for your needs. This is easy to do through Billy Explores! You can save time and effort, and explore potential savings with life insurance cover options from our panel of providers. Best beat the 30 June rush and compare life insurance through Billy Explores today.

FAQs

  • Is Life Insurance Tax Deductible ATO?

    Generally, no unfortunately not. Majority of life insurance cover is not tax deductible in Australia. The exception is generally income protection insurance, as it relates to your income earning potential.

    However, don’t let the fact that the majority of life insurance cover isn’t tax deductible stop you from looking to buy life insurance! The better question is to ask whether you have enough life insurance, and whether you have the best life insurance cover for your needs. Of course, a great way to compare life insurance is through Billy Explores. You can save time and effort, and potentially see if you can get a better value life insurance cover for your needs from our panel of providers.

  • How Can I Compare Life Insurance?

    You can safe time and effort, and explore potential savings and see if you can get a better value life insurance policy for your needs by comparing life insurance providers through Billy Explores. It’s super quick, easy and FREE to compare life insurance through Billy Explores – just click here.