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.