You can get a double tax deduction when you pay for Life Insurance through Superannuation.
How does it work?
Your business contributes your premiums to your Super Fund, and the business gets the tax deduction. On top of that, the Super Fund gets the tax deductions for the Life Insurance premiums it pays.
Option 1 – Pay $5,000 premium outside of Super.
No tax deduction.
Option 2 – Pay $5,000 Life Insurance premium inside Super.
Your business pays the Life Insurance to the Super Fund as a contribution. You receive a tax deduction; at 47% tax rate, that is a $2,350 tax saving.
Contribution is income in the Fund @ 15% = $750 tax payable
Life Insurance premium is a deduction in the Fund @15% = $750 tax refund.
NET TAX SAVINGS $2,350
What do you need to make sure of in order to get this tax deduction:
– A business, or an employer that allows you to salary sacrifice to Super.
– A chat with one of our team
– To take action before 30th June 2018
Why are Life Insurance premiums not tax deductible outside of Super?
You are not allowed to claim the premiums outside of Super because you don’t pay tax on the money that you receive.
How much would I have to earn pre-tax outside of Super for that premium?
If you are on the highest marginal tax rate of 47%, you would have to earn $9,434.
Even if you are on the 34.5% tax bracket, you would have to earn $7,634.
Does this strategy apply to other insurances?
This strategy can apply to TPD (any Occupation) and Income Protection Insurance as well. Income Protection insurance is tax deductible outside of Superannuation also. Other insurances such as Home, Car & Pet insurances are not able to be paid through Superannuation.