Many insurances may be claimed as a tax deduction where deemed to be a claimable business expense by the ATO. Always speak to your financial advisor and accountant for advice but below are a few common deductions to consider for your next tax return.
Income protection insurance
You may be able to claim the cost of the insurance premium you pay for income protection and capital benefits cover. You must include any payment you receive under such a policy on your tax return.
You cannot however typically claim for:
- life insurance premiums
- trauma insurance premiums
- critical care insurance premiums
If you use your own car in performing your work-related duties (including a car you lease or hire), you may be able to claim a deduction for car expenses – including insurance expenses.
There are two ways to claim car expenses – either a cents per kilometre method (at a rate set by the ATO) or with a LogBook method where you keep a record of all car expenses (including insurance, registration, maintenance, fuel) and claim a work-related portion.
You can’t claim the cost of car insurance separately to the cents per kilometre method and you won’t be able to claim the full premium if the car is also used for private uses (ie you can’t claim the cost of travel between home and work because this travel is private). Companies that provide employees with vehicles may be able to claim the full premium.
You also can’t claim a deduction for car expenses that have been salary sacrificed or where you have been reimbursed for these expenses.
Rental property insurance (landlords insurance)
According to the Australian Tax Office, you can claim a deduction for your rental property-related expenses for the period your property is rented or is genuinely available for rent”.
Insurance (including building, contents, public liability) is an expense that you can claim an immediate deduction for each year.
For more information about rental-related deductions visit the ATO website and consult a tax professional.
“Insurance premiums, including accident or disability, fire, burglary, professional indemnity, public risk, motor vehicle, loss of profits insurance, or workers compensation” are classified by the ATO as a general business operating expense and you can generally claim them as a tax deduction.
But beware – you can only claim the business-related portion of an insurance policy. For example, if your business is a home-based business, you will not be able to claim your home and contents insurance.
*IMPORTANT: if you have a home-based business, you must inform your insurance broker or insurer when applying for a home and contents insurance policy. A standard residential home and contents policy does not include cover for business-related activities.
Did you know insurance payouts may also have tax implications?
According to the ATO, “insurance payouts for damaged or destroyed personal items are not taxed. For example, any insurance payout you receive for your family home is not taxed”.
However, insurance payouts for businesses or income-producing assets may be taxed and you should seek advice from a tax professional and/or your accountant before lodging your tax return if you have had an insurance payout.
This post offers general advice and does not take into account your personal circumstances. We recommend that you consult a tax insurance professional and/or accountant before claiming any insurance tax deductions.