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This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law.

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Edited version of your written advice

Authorisation Number: 1051253147904

Date of advice: 28 July 2017

Ruling

Subject: Deductions

Question 1

Are you entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for premiums paid on an Income Protection Insurance policy?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 2011 to 30 June 2017.

The scheme commences on:

5 January 2011.

Relevant facts and circumstances

This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling.

You are an employee. You purchased an investment/rental property in 2011.

You took out an Income Protection Insurance Policy to ensure the mortgage on the investment/rental property is paid in the case of, loss of income.

The Income Protection Insurance Policy was initiated on January 2011.

The Income Protection Insurance Policy is solely in your name.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 8-1

ATO Interpretative Decision ATOID 2010/178

Reasons for decision

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income.

A deduction is only allowable if an expense:

ATO Interpretative Decision (ATO ID) 2010/178 state that income protection premiums paid is relevant and incidental to the operations and activities carried out to produce assessable income. Therefore the premiums paid have a sufficient connection to the assessable income of the taxpayer, and that they are not of a capital, private or domestic nature.

For these reasons, you are entitled to a deduction under section 8-1 of the ITAA 1997 for premiums paid under an income protection policy that provides for periodic benefits to protect you against loss of income, even if it does not actually produce such income.

Please note the deduction for income protection premiums are claimed at item D15 on your income tax return and not as a rental deduction.

Your income tax returns show you have claimed a deduction for your income protection insurance in each year from 2011-2015.

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