The insurance you can claim on tax

Anthony Keane explains how the rules work when claiming a tax deduction for insurance premiums

TAX and insurance are two confusing topics in the finance world, but they go together more than many people think.

If you’re among the 13 million Australians completing their income tax returns, it’s worth knowing what insurance premiums can be claimed as a tax deduction.

The minefield of information has prompted insurance company Budget Direct to examine Australian Taxation Office rules around insurance deductions in an effort to cut the confusion.

“We know how tricky it can be to understand just what insurance can and can’t be claimed,” said Jonathan Kerr, Budget Direct’s marketing and digital director.

Tax experts say that for some insurance premiums, the payment – and deductions – must be split between business and personal use. You might be surprised about what is and isn’t deductible among these five common insurance types.

1INCOME

PROTECTION The only type of life insurance that gives you a tax deduction is income protection cover, which pays an agreed income if you can’t work through illness or injury.

Life insurer NobleOak’s chief executive officer, Anthony Brown, said the premiums were deductible because income protection benefits paid in the event of a claim were treated as taxable income, unlike death cover or trauma insurance payouts.

“If the policy is outside super, the policyholder gets the tax deduction against their personal income,” Mr Brown said. However, there was no deduction for income protection policies held inside superannuation funds, he said.

2LANDLORD

INSURANCE Property investors can claim a full tax deduction on their landlord insurance cover because it is a direct expense related to an income-earning asset. Investors often prepay the next year’s landlord insurance in May or June to bring forward their tax deduction.

3HOME

INSURANCE Home insurance premiums are only tax deductible if part of your home is a place of business, and then the expense would have to be apportioned between private and business use.

The ATO says employees generally “can’t claim a deduction for occupancy expenses, including rent, mortgage interest, council rates and house insurance premiums”.

4CAR

INSURANCE Insurance premiums for your car can be tax deductible if the vehicle is used for business purposes such as ride-sharing services, visiting clients, carrying bulky work items or travelling between workplaces.

However, if it’s also used for personal travel a logbook will be needed to show the split.

Daily travel between work and home is seen as private by the ATO, and not tax deductible.

5TRAVEL

INSURANCE Sorry, jetsetters, you can’t claim travel insurance premiums even if you are travelling for work.

That’s because the items covered by travel insurance – such as illness, theft or losing your bags – are private in nature and not tax deductible.