Income Protection : Tax Changes

Impact of tax changes on income protection policies
Recent changes to the Income Tax Act mean that, with effect from 1 March 2015, income protection premiums will no longer be tax-deductible. Importantly, income protection benefits will also no longer be taxed. This means your level of cover will effectively increase by the amount of tax previously payable on these benefits.
What do these changes mean for income protection policies?
While tax deductibility of premiums may have been lost, we believe income protection benefits have been enhanced by these changes:
• Consistent tax treatment across life insurance benefits means financial planning is simpler
• Insuring only after-tax income means comprehensive income protection is more affordable
If you haven’t previously covered your full income, now’s the time! After all, your ability to earn an income is your most important asset and we’d like to make sure you’re fully covered.
Please note that, from 1 March 2015, tax certificates will no longer be issued for premiums and tax will no longer be deducted or payable on any income protection claims paid.
What’s the next step?
If you’ve already insured 100% of your income, you might find yourself over-insured and should contact us to understand the impact of changes on your own unique situation. We have contracts with all the major Insurers and can assist you to make sure that you are not over insured and thus pay more than you should. If you are over insured you will not receive the insured amount when you have a claim. It will be restricted to the maximum allowable amount according to your income. So, why pay more, if your income is going to be restricted when you have a claim.

We would love to hear your comments on these changes, so leave us a note and say what is on your mind.