TPD Insurance Tax Deductible - What Constitutes Tax Deductibility?

Different insurance providers offer total and permanent disability insurance in various forms. You can take out TPD insurance through your superannuation fund, or you can do it as a standalone policy. The Australian Taxation Office usually provides guidelines to educate taxpayers on what part of a premium for TPD insurance is tax deductible.

Claiming Tax Deductions

A self-managed super fund can claim for tax deduction for TPD insurance premiums that the fund pays for. However, this can only be done if there is a link between the premium payment and a current liability of the fund to avail disability superannuation benefits to members. Part of the premium or the entire premium amount may be linked to the disability superannuation benefit.

To check the extent to which a premium is linked to the fund's liability to provide the benefit, you can refer to the event insured against, and whether once the event occurs, the trustee has an obligation to payout a disability superannuation benefit to the member.

Deductibility Conditions

Whether the event insured against has a likelihood of occurring does not in any way affect the deductibility of the premiums which the fund pays. Tax deductibility of premiums can still be applicable even when the event insured against has a very high probability of not occurring such that a payout for that policy may never happen.

When an insured event occurs, the definition of disability superannuation benefit has to be met. The extent to which the requirements of meeting this definition can be met is significant in helping to determine to what extent a TPD premium paid for by the superannuation fund will be tax deductible.

If your insurance policy allows you to get additional benefits that are linked to a section of income tax laws, this situation does not affect your TPD insurance. Tax deductible premiums for your insurance will not be affected by these additional options.

Any Or Own Occupation

If you have a TPD insurance cover in a superannuation fund under the any occupation definition, the premiums for your TPD insurance cover will be 100 per cent tax deductible. However, only 67 per cent of your premiums will be tax deductible if your TPD insurance is held in a super fund under the own occupation definition. If on the other hand you have your TPD insurance bundled with a life insurance policy, then you stand to gain the most because you will have the highest tax deductibility of your insurance premiums at 80 per cent.

TPD Super Benefits

When deciding whether or not to take out your insurance cover within or outside a super fund, there are a few aspects you need to consider, more so for TPD insurance. Tax deductible premiums should not be the only factor you should look at. Whereas the TPD cover has tax deductible premiums making it more affordable, a standalone policy will offer you a more comprehensive cover and a wider range of benefits.

It is always a good idea to bundle your TPD insurance cover with your life insurance policy. This is because instead of managing two policies, you will only have to manage one, and when the two are bundled together, the premiums are much lower than when the two policies are separate.

Kerrie Peacock is an insurance enthusiast who spends a lot of time researching on various insurance options available in Australia. For more information on life insurance premiums, visit

This article was published on 11 Aug 2014 and has been viewed 481 times
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