The cost of insurance is one of the primary deterrents to people from getting insured, without realizing just how expensive it is to be hospitalized without any policy to cover them. However, the good thing is that at least one type of insurance can be tax deductible: Income Protection.
When you suddenly become unable to work due to an illness or injury, you lose your source of income and put your finances at risk. With income protection, you could receive benefits that would help pay for your expenses while you are out of work and recovering.
Income protection insurance can be tax deductible, but it has to be determined by the Australian Tax Office (ATO). If the ATO sees that your premiums help protect your ability to generate income that is assessable, then your insurance can be considered tax deductible. However, in cases where your insurance provides a lump sum payment should you get injured, die, or become disabled, then there's a possibility that it can't be deducted from your taxes.
The amount of money you can refund from the ATO for your payments of income protection insurance premiums depends on your marginal tax rate. This can vary from year to year and your income bracket. However, to get the most out of your tax refund, it is worth noting that yearly payments will give you a bigger refund than a half-yearly one, and so on. So if you're paying monthly premiums, consider making quarterly payments instead-if your budget permits, of course.
Claiming of refunds, meanwhile, is done when you file your tax return. Your accountant or your tax agent would be able to advise you on which premiums may be eligible as tax deductions. Some insurance companies may also send you a statement showing you the deductible amount. Ask your insurance provider for more details.
Tax deductible or not, your income protection insurance can be helpful when you suddenly find yourself unable to work and without income. Thus, it helps to get insured as early as possible. Contact the professional advisors at Rate Detective today and they will help you choose the right policy based on your needs and your budget. In addition, they will also provide you a comparison of the top 9 insurance companies in Australia, giving you the power of choice when it comes to getting the best insurance deal you deserve.