What to know about your Income Tax and Income Protection

Thinking about claiming your income protection insurance on your tax return? Good news: you might be able to, but there are a few rules you need to know first.

When Can You Claim Income Protection Insurance?

If you pay your income protection insurance premiums directly from your own bank account (not through your super), you can generally claim those costs as a tax deduction. This helps take the sting out of protecting your income if you ever can’t work due to illness or injury.

But here’s the catch: if your income protection is paid through your super fund, you can’t claim those premiums on your tax return. The super fund might be able to claim a deduction, but you personally miss out.

What About Other Types of Insurance?

Not all insurance policies are tax-deductible. You can’t claim premiums for:

• Life insurance
• Total and permanent disability (TPD) insurance
• Trauma or critical illness insurance

The ATO says these are off-limits because they’re not directly linked to earning your income.

If You Get a Payout

If you receive a payment from your income protection policy, you need to include it as income in your tax return. The ATO treats it just like your regular wages.

Quick Tips

• Review your income protection policy every year, whether it’s inside or outside super.
• Only claim the premiums you pay directly (not those paid by your super fund).
• Keep your receipts and policy documents handy at tax time.

Need a Hand With Your Tax?

If tax time does your head in, GoTax Online makes it easy. Our system is simple, quick, and won’t cost you an arm and a leg. First-timers can even lodge for free!

Check us out at gotax.com.au

Just remember: this is general info. For advice that fits your situation, have a chat with a tax pro.

Note that the information provided is general in nature and subject to change, please contact one of our professionals who can evaluate your circumstances and provide more accurate advice to your current situation.