• F Death or disability premiums

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    Show at F deductions for insurance premiums paid by a complying superannuation fund to provide superannuation benefits upon the death, existence of a terminal medical condition or temporary or permanent disability of the member (as described in section 295-460 of the ITAA 1997).

    A fund may use a variety of life insurance policies to provide these benefits.

    There are regulatory changes concerning insurance provided by regulated superannuation funds. See What’s new?

    The fund can deduct the following:

    • 30% of the premium for a whole-of-life policy if all the individuals whose lives are insured are members of the fund; for more information on what a 'whole-of-life policy' is for these purposes see ATO Interpretative Decision ATO ID 2009/100External Link Complying superannuation fund: deductibility of premiums on 'whole-of-life policy' - subsection 295-465(1) of the ITAA 1997
    • 10% of the premium for an endowment policy if all the individuals whose lives are insured are members of the fund
    • for a policy that is not a whole-of-life or endowment policy    
      • 30% of the part of an insurance policy premium that is specified in the policy as being for a distinct part of the policy that would have been a whole-of-life policy if it had been a separate policy
      • 10% of the part of an insurance policy premium that is specified in the policy as being for a distinct part of the policy that would have been an endowment policy if it had been a separate policy
       
    • the part of a premium that is specified in an insurance policy as being wholly for the liability to provide certain death, terminal medical condition or disability benefits for fund members
    • the proportion of the premium that is specified in Table 4 as being attributable to the liability to provide death or disability superannuation benefits for fund members.

    Table 4: Proportions of insurance premiums that are deductible under item 6, of the table in subsection 295-465(1) of the ITAA 1997

    For an insurance policy that provides…

    the fund can deduct…

    Total and Permanent Disability (TPD) any occupation cover

    100%

    TPD any occupation cover with one or more of the following inclusions:

    • activities of daily living
    • cognitive loss
    • loss of limb
    • domestic (home) duties

     

    100%

    TPD own occupation cover

    67%

    TPD own occupation cover with one of more of the following inclusions:

    • activities of daily living
    • cognitive loss
    • loss of limb
    • domestic (home) duties

     

    67%

    TPD own occupation cover bundled with death (life) cover

    80%

    TPD own occupation cover bundled with death (life) cover with one or more of the following inclusions:

    • activities of daily living
    • cognitive loss
    • loss of limb
    • domestic (home) duties.

     

    80%

    TPD any occupation means insurance against the member suffering an illness or injury that is likely to result in the member’s permanent inability to work in a job for which the member is reasonably qualified by education, training or experience.

    TPD own occupation means insurance against the member suffering an illness or injury that is likely to result in the member’s permanent inability to work in the member’s own occupation (other than in a substantially reduced capacity).

    An actuarial certificate is not required to deduct the premium, or a proportion of the premium, as specified in Table 4.

    The fund may deduct a proportion other than that specified in the Income Tax Assessment Regulations 1997, as contained in Table 4 for the premium, but must obtain an actuary’s certificate to do so.

    For any other insurance policy premium that is not deductible in accordance with the above circumstances, an actuarial certificate is also required to deduct all or a proportion of the premium for a policy that is to provide superannuation benefits upon the death, existence of a terminal medical condition or disability of the member.

    Find out more

    See Taxation Ruling TR 2012/6 Income tax: deductibility under subsection 295-465(1) of the Income Tax Assessment Act 1997 of premiums paid by a complying superannuation fund for an insurance policy providing Total and Permanent Disability cover in respect of its members.

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    A complying fund may also deduct premiums on insurance policies to replace income during periods of temporary disability.

    Find out more

    See Taxation Determination TD 2007/3 Income tax: is a deduction allowable to complying superannuation funds, under section 279 of the Income Tax Assessment Act 1936, for insurance premiums attributable to the provision of benefits for members in the event of temporary disability longer than two year?

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    If a fund has current or contingent liabilities to provide superannuation benefits upon the death, existence of a terminal medical condition or temporary or permanent disability of a member but does not have insurance coverage (that is, it self-insures), then a deduction is allowable. The deduction is allowable for an amount equal to what the fund could expect to pay in an arm’s length transaction to obtain an insurance policy to cover these liabilities. An actuarial certificate is required for the amount to be deductible. However, there are regulatory changes to self insurance for regulated superannuation funds. See the What’s new section.

    If an actuary certifies the amount a fund could reasonably expect to pay in an arm’s length transaction to obtain an insurance policy, and that policy covers liabilities of the fund that are broader than those covered in section 295-460 of the ITAA 1997 and the insurance policy is specified in the regulations (see Table 4) then the fund may deduct so much of that certified amount as is specified in Table 4.

    Rather than claiming a deduction for insurance premiums paid or an amount under the self-insurance provisions, a complying fund may choose to deduct (under section 295-470 of the ITAA 1997) an amount based on a formula for payments for the income year for death, terminal medical condition or disability superannuation benefits. Deductions for this amount should be included at F.

    Last modified: 05 Nov 2014QC 40267