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  • Income protection insurance

    Only the premiums you pay to protect your income (salary and wages) are deductible. This is known as income protection or continuing salary cover.

    If you receive a payment to replace your salary and wages under an income protection policy, you must include it in your tax return. This is the case whether you receive a regular payment under the policy or a lump sum.

    If you receive a payment for personal injury or total and permanent disability under the policy, the payment will be capital. In these circumstances, the payment might be assessable as a capital gain.

    You can't claim a deduction if the policy:

    • is through your superannuation fund and the premiums are deducted from your contributions
    • pays you a capital sum to compensate you for injury.

    For example, you can't claim a deduction for:

    • life insurance premiums
    • trauma insurance premiums
    • critical care insurance premiums.

    Example: policy premiums for income protection and injury

    Deanne takes out an income protection and personal injury policy through her insurer.

    She pays a total of $250 a month for the policy:

    • $175 for income protection cover
    • $75 for personal injury cover.

    Deanne can claim $175 a month for the insurance policy. The remaining $75 is not deductible because it is capital in nature.

    End of example
    Last modified: 26 Apr 2023QC 72188