Insurance claims paid out as monthly instalments will continue to not be assessable as income, the Australian Tax Office has ruled.
Life, total and permanent disability (TPD) and trauma claims paid out periodically can help people who may be vulnerable to receiving large one-off payments, like children or the elderly.
ING’s OneCare range is the only insurer to offer monthly instalment benefit payments for claims.
“Advisers have been saying for a while that life insurance needs to be more accessible and flexible and OneCare instalments go some way to addressing that,” ING head of marketing and retail products Mark Vilo said.
A Tower Australia spokesman said: “The ruling clarifies a previously grey area. Tower welcomes that.”
Aviva stopped offering monthly instalment benefits in the early 1980s because there was little customer demand for it and most claimants wanted to commute to a lump sum.
Aviva marketing and public relations general manager Tim Cobb said: “I think it’s interesting, but I would hesitate to call it a landmark tax ruling.”
As lump sum insurance pay outs are non-taxable, it was common sense that benefits paid as instalments were also not taxable, Cobb said.
Policyholders could set up a trust fund with a lump sum benefit payment to pay instalments and control how their money was invested rather than leave their money with the insurer, Cobb added.
