Last week we discussed concessional contributions. This week we will address two insurance strategies to reduce tax.

Income protection premiums are fully tax deductible at your marginal rate. Due to cash flow a lot of people pay their income protection premiums on a monthly basis. However, one key strategy is to prepay 12 months premiums before 30 June. This will enable you to claim the tax deduction earlier and pay less tax this financial year.

The next key strategy is applying for Life and Disability (TPD) Cover inside super. The premiums are tax deductible inside super where no tax relief is offered if these policies are held outside super.

From 1 July this year, the types of insurance you can hold inside super are changing. From 1 July all new insurance policies must meet the superannuation regulations and definitions of death, terminal illness, permanent incapacity or temporary incapacity.

This means you will no longer be able to hold ‘own occupation’ TPD insurance, trauma or income protection policies with additional benefits in super.  People with this cover in place before 30 June will most likely have their policies grandfathered, which means there is now only a limited amount of time to put this cover in place.

Under the superannuation regulations you can’t be both temporary and permanently incapacitated. Therefore if you hold Income Protection and TPD Cover inside super and you meet

Next week – Non-Concessional Contributions (NCC) cap strategies

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Thomas Jacks BCom (Acc), SMSF SpecialistTM, Adv. Dip F.S. (FP)
“I want to be able to assist clients with their investment and retirement planning by providing real strategy advice. It’s my aim to not only help my clients but to educate them by addressing the entire picture” Google Plus

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