Powered by MOMENTUM MEDIA

Gearing up for partial TPD deductions

Columnist
— 1 minute read
From 1 July 2011, the rules for deductibility of TPD insurance premiums will change and trustees may require an actuarial certificate to determine the deductible portion.
The transitional relief that allowed complying super funds to claim a full tax deduction for total and permanent disability (TPD) insurance premiums will end on 30 June 2011.

After 1 July 2011, the premium will only be partially deductible and the trustees may require an actuarial certificate to determine the deductible portion.

The relief was required to address concerns that changes to the wording of the fund deduction provisions that were introduced with effect from 1 July 2007 may have meant that many TPD premiums were not fully deductible.

In December 2010, the Australian Taxation Office issued a draft taxation ruling (TR 2010/D9) that explained the Commissioner's preliminary view on TPD premium deductibility from 1 July 2011.

The impact off this is that from 1 July 2011, a superannuation fund trustee can only claim a deduction for the component of a TPD premium that would result in the fund being liable to provide a 'disability superannuation benefit' as defined in the tax act. 

This definition effectively requires that a person must be unlikely to be gainfully employed in any occupation for which they are reasonably qualified.

Where a TPD insurance policy has an "own occupation" definition there is the potential that a portion of the premium may not be deductible.

Super funds that have full service advisers will need to understand the implications of these changes and how they apply to the insurers and superannuation funds to ensure that the advice they provide to clients is accurate.

Craig Meldrum is head of financial advice at Australian Unity

 

Gearing up for partial TPD deductions
investordaily image
ID logo

related articles

  • The virus isn’t the main event

    While much of the market has been focused on the short-term impacts of COVID-19 on the economy and share prices, attention is now turning to...

  • Payments have moved online for good

    There are stark differences between the current downturn and the 2008 global recession. But the resilience of the payments industry has been...

  • Is value making a comeback?

    After years of being out of favour, the recent market sell-off is providing strong opportunities for active value investors. ...

promoted stories

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.