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Income protection insurance

Deductions for the premiums you pay for insurance against the loss of your employment income.

Last updated 25 April 2023

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.
Start of example

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