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Tax Benefits When Buying Insurance
Tax benefits can be a tricky area which can vary depending on the individual requirements it is therefore best to consult a tax professional. However when buying insurance tax benefits usually considered for 3 situations.
Tax Benefits for Individuals
The following types of Insurance premiums are not tax deductible, and payouts are usually not taxed:
Income Protection Insurance premiums are fully tax deductible and benefits are treated as taxable income.
Tax Benefits for Businesses
Premiums taken out for businesses to protect income in the event of a key person dying (key person insurance) is tax deductible and will generally be assessed as income.
If the insurance is taken out for a capital purpose, to buy out a share of the partnership there will most likely be no tax deduction and no tax payable on the benefit.
Depending on the structure of the business in some cases a capital gains tax obligation may occur.
Tax Benefits in Super funds
By being a member of a Super fund entitles you to make a contribution into the fund to purchase an insurance policy.
If you are self employed you can claim tax deductions for payment made after tax dollars into a super fund to obtain an insurance policy. No tax will be payable as long as the total super contributions remain within the concessional contribution cap.
Some benefits paid out by super funds may require tax to be paid on them.
For more detailed advice on tax benefits when buying insurance please consult your accountant.
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