Is Income Protection Tax Deductible?

Income protection can pay part of your income if injury or illness stops you working, depending on the policy. But can you claim the premiums on your tax return? If so, how? And how much can you get from this policy? In this blog post, you will learn the key things to know about income protection insurance and tax. This is general information only: check your own situation with the ATO or your accountant.

Can I claim income protection insurance on my tax return?

It depends on the type of cover and how it's held. The ATO explains which income protection premiums you can claim, so check its guidance or ask your accountant before you lodge.

Some kinds of cover, and cover held through super, are treated differently. The ATO also explains how payments you receive under an income protection policy are treated at tax time.

What sets the premium

There is no fixed rate: your age, health history, occupation and the cover you choose all play a part. See what income protection costs.

Tradies365 doesn't arrange income protection or life insurance. We arrange personal accident and illness cover, which can pay a weekly benefit if an injury or illness stops you working, depending on the policy. We can get you quotes for it. Ask your accountant how the tax rules apply to that cover.

Are income protection payments taxed?

The ATO explains how income protection payments are treated at tax time. Tax rules can change over time, so check the current ATO guidance or ask your accountant before you lodge your return.

Making a claim

Your insurer sets the steps and the documents it needs; see how to claim income protection as a tradie.

When do payments start?

Benefits start after the waiting period, which you choose when you take out the policy. As a rule of thumb, a longer waiting period means a lower premium. Waiting periods vary by policy; Moneysmart explains them. When you choose a waiting period, think about your emergency funds, savings and any sick or annual leave you have.

How much does income protection pay?

Income protection usually pays part of your income before tax, not all of it. How much, and for how long, depends on the policy, so check the benefit amount and the benefit period in the product disclosure statement (PDS) before you buy.

Final words: is it worth taking income protection insurance?

For many people, income protection insurance is worth considering. It can provide a safety net if you cannot work because of illness or injury. You can't predict an injury or illness, and time off work can drain your savings fast. Income protection insurance can pay part of your income, which can help with your daily expenses until you can recover and get back to work, depending on the policy.