Generally, direct life insurance premiums are not tax-deductible in Australia. This means that you can’t request a reimbursement of your premiums when lodging a tax return. However, if you have life insurance through your superannuation, your premiums will be funded by your superannuation fund, which could include pre-tax contributions. This is organised through your employer or superannuation fund.

Here’s a brief overview of the tax implications you should consider around life insurance and other related products, especially as you get older. However, keep in mind that this is general information only and should not be taken as financial or tax advice. You should seek guidance from a tax advisor to ensure your circumstances are taken into account.

When is life insurance tax deductible?

The Australian Taxation Office (ATO) advises that personal life insurance premiums are not tax deductible. However, if you have a group life insurance policy (cover held through a superannuation fund), the rules are slightly different. In this case, your fund pays a third-party provider for life insurance on your behalf. Your fund can claim their payments on tax and, depending on how your contributions are funded, this may come from your pre-tax income. 

However, it’s important to remember that life insurance through super doesn’t always offer as much cover as a direct policy, which means you could end up being under-insured. Payouts or benefits from this type of cover could also be taxed in some cases, so keep this in mind when setting your plans.

Is any type of life insurance tax deductible?

According to the ATO, any form of insurance that covers you for personal physical injuries is not tax-deductible. This means that benefits such as Total and Permanent Disability (TPD) cannot be claimed on your tax. The same rules apply as mentioned above. However, the downside is that any payouts or benefits received from your group life insurance policy may be taxed in some cases, particularly if you have not yet reached your preservation age under superannuation law.  

The only exception to the ATO’s rules is income protection insurance, which is designed to temporarily replace your income if you can’t work for a set period of time. This type of cover can be useful if you are still working and your family relies on a steady income.

The ATO states that you can claim your income protection insurance premiums on tax. This is an incentive by the Australian government to promote self-sufficiency in case you couldn’t work as it reduces the need for Centrelink or other taxpayer funded programs. Consistent with this, any benefits claimed under income protection will generally be considered as income and will need to be declared as such in your tax return.

Is funeral insurance tax deductible?

Funeral insurance covers you for a limited benefit (usually up to $15,000) to help your loved ones with the cost of your funeral if you pass away. Premiums paid for this type of cover are not generally tax deductible.    

Do tax rules change when I retire?

No, there are usually no changes to the tax rules around life insurance when you retire. However, other forms of insurance, as well as your income and super, may be subject to specific taxation laws if you are retired. Tax rules for obtaining benefits through your superannuation, including insurance benefits that you are eligible for, may change as you age and retire. If you have any concerns, you should contact the ATO for further advice.

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Who can make deductible contributions to my life insurance premiums?

Tax-deductible contributions are generally not possible for life insurance policies held directly in your name. You may be able to use your pre-tax income to fund life insurance policies held through your superannuation fund. Contributions to your super fund can be made by:

  • yourself (if you are self-employed) or;
  • your employer.

This is either done by transferring your own money into your super fund or having your employer do so by withholding part of your wages.

Are life insurance benefits taxed?

Once again, the tax rules around life insurance benefits are slightly different depending on the type of policy you have. You won’t pay any tax on the benefits or payouts you receive from your direct (personal) life insurance policy. This is the upside; while you can’t gain any tax-incentives from these premiums (except in the case of income protection insurance), the government won’t ask you to pay tax on your payout either.

If you have group life insurance through your superannuation, then the benefit or payout may be tax-free, depending on whom is receiving it and what your age is at the time the benefit is paid. If tax is required to be paid, it will depend on the situation that arises and you should seek financial or tax advice on your circumstances.   

How Australian Seniors can help

Seniors Term Life Insurance helps put you back in control of your family’s financial future, with up to $100,000 in cover right when it’s needed most.

Benefits of choosing Seniors Term Life Insurance

A flexible cover amount that suits you – choose how much you or your family will receive if you pass away or become terminally ill. You can set a benefit amount from $10,000 up to $100,000.

Cover for when you need it most. We know that the older you get, the more you have to protect. That’s why our cover is designed for people aged 45 to 79, protecting you for up to 20 years or until age 85, whichever comes first.

Immediate cover. Once your policy is set up, you’ll be covered straight away for death by any cause, and for terminal illness (excluding suicide for the first 13 months).

20% advance payout to cover funeral costs. When your family makes a claim, we’ll give them 20% of the benefit amount in advance, so they won’t have to worry about the cost of your funeral or other immediate expenses.

Triple payout for Accidental Death. Your family’s benefit amount will be tripled if you pass away from an accident, helping with any last-minute expenses they might face.

Easy to apply with no medicals. Simply answer eight questions about your medical history over the phone. Once approved, you can get covered in minutes.

We’ll keep your premiums manageable. Unlike some life insurance policies, your annual premium increase won’t be based on your age which will help with budgeting later in life. Plus, we offer lower starting premiums for non-smokers.

Your own Australia-based personal claims specialist. If you or your family need to make a claim, we’ll assign one of our local claims specialists to look after everything. No need to explain things to multiple people.

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