When considering life insurance cover there are many questions to consider; how much cover do I need, how much will it cost, are the premiums sustainable, who are the reputable insurers 1Z0-466 exams etc. A consideration often overlooked is how to tax effectively structure your life cover.
The cost of a life insurance premium owned personally is generally not eligible to be claimed as a tax deduction. However if your life cover is owned by your Super Fund, it can claim a tax deduction on your behalf.
It is important to note that when your Super Fund holds your life cover – the premiums 1Z0-474 exams are funded from your super account. This has the impact of reducing the amount of money you will have in Super at retirement. To overcome this, a strategy worth considering is salary sacrificing to Super to fund the cost of the insurance.
To illustrate the tax benefits that may be applicable we will work through the following example. Let’s say you earn $100,000. This means any income earned over $80,000 is taxed at 37%. The annual cost of your life cover is $1,000. If you hold the policy personally you will pay the $1,000 premium with after-tax dollars. Given your 37% tax rate this means you need to earn approx. $1,550 before-tax to fund the $1,000 premium. You will not be able to claim the expense as a tax deduction. You could consider having your Super Fund own the policy and implement a salary sacrifice strategy to fund the premium.
Because the super contribution tax rate is 15% as opposed to the personal rate of 37% the before-tax cost is approx. $1,190. That is tax saving of $360. Additionally your Super Fund will be able to claim a tax deduction for the premium. Given the Super Fund’s tax rate is 15% this reduces the after-tax cost by $150. Combined this generates an overall tax benefit of $500.
You should speak to a Certified Financial Planner® to review your personal insurance cover and investigate if this strategy can benefit you.