The Tax Benefits of Life Insurance
Last updated on March 3rd, 2022
One of the most devastating events that can happen to anyone’s life is the death of a loved one. In these times of grief, the last thing that we want our loved ones to worry about is our finances. There are actually great tax benefits of life insurance that you may not know!
Life Insurance in Australia
Based on a study done by one of Australia’s leading life insurers, only around half of Australians own some form of a life insurance. Apart from this, many Australians are actually under-insured.
While a life insurance can be beneficial to you and your loved ones, it seems like not everyone is keen on getting a policy. In fact, another study by the same company found out that only 30 percent to 37 percent of Australians who are aged 18 to 69 held life insurance in 2015.
Yes, life insurance may be complicated but the benefit will definitely outweigh the hassle in the long run. If you’re starting to get interested in finding out more about life insurance, one the most interesting facts is that there are actually tax benefits with life insurance.
Life Insurance Tax Benefits
There are a few instances when life insurance has tax benefits. In fact, your nominated beneficiary will generally not have to pay taxes on a life insurance policy that’s outside of super.
The caveat here, however, is that they might be liable for taxes if the life cover is held inside of a super and paid to a non-dependent. This is one of the reasons why, when it comes to choosing a life insurance policy for your loved ones, you must make sure that you do your research and compare as much policies as you prefer. It may get overwhelming and at times, it’s advisable that you get a professional to help you decide the right life insurance for you.
- Life insurance is tax deductible when connected to an assessable income.
It’s also good to know that life insurance premiums can only be deductible if they are connected to earning an assessable income. Life insurance can also be tax deductible if the monetary benefit is required to carrying on a business. This means that as long as your life insurance policy is impacting your income, then tax deductions will apply.
- Life insurance is tax deductible when owned by a super fund.
Another instance when life insurance premiums are deductible is when the policy is owned by and purchased through a super fund. This is because super-owned policies are usually paid with pre-tax dollars. Make sure that your policy is owned and purchased via a superannuation fund because if your insurance policy is owned by a private entity, then you can’t claim life insurance premiums on your tax return.
Super contributions usually have a 15 percent contributions tax applied to it. This percentage already includes insurance premiums. However, you have to take note that these are typically refunded back through a rebate to life-insured members because the fund can claim it as a tax deduction.
Start Comparing Life Insurance Policies Today!
Don’t be part of the statistics, make sure to get the life insurance that’s perfect for you. In order to choose the best life insurance policy that’s perfect for you, consider using a life insurance comparison website.
