In a submission regarding the 2016-17 federal budget, the FPA made recommendations that it says address the “anomalies and complexities” in life insurance tax treatment and, in turn, encourage more Australians to take out coverage.
One of those recommendations includes making insurance premiums for non-super policies tax deductible and applying the same tax-free status to policies paid inside superannuation.
“Allowing tax deductibility of insurance premiums for non-super policies will add incentive for Australians to take out life insurances, reducing our documented under-insurance problem in Australia and consequently reducing reliance on government benefits when insurable events occur,” the FPA said.
“Determining the taxation consequences of receiving death or TPD benefits from superannuation or an employer is a highly complex task. It is unlikely that any person who is not a tax specialist or financial planner would be able to calculate potential tax payable, or the strategic consequences of decisions they make in relation to where they hold these insurances, how benefits are drawn down in the event of death or TPD and to whom those benefits may be payable.
“The proceeds of a death or TPD policy held outside superannuation is generally paid tax free, so the same tax-free status should apply to policies paid inside superannuation.”
At the same time, the FPA reignited its campaign to make financial planning fees tax deductible, arguing that it will result in more Australians seeking financial advice.
“The inability to claim a tax deduction for the fees associated with an initial financial plan acts as a disincentive for people to take the first step towards organising their finances on a strategic basis,” the submission states.
“The federal government can help by including budget measures, which improve affordability and access to financial advice – particularly for the young, those of modest means, and others who are at greater risk of financial exclusion.”
Other recommendations in the submission include a more consistent definition of the word “dependent” for tax and superannuation purposes as well as funding a financial literacy strategy for women.
Why on earth is the FPA wasting valuable resources on tax lobbying? As if the govt is going to listen to the FPA on tax issues if they completely ignored them on financial planner regulation and life insurance remuneration issues.
FPA, how about focusing your efforts on more urgent and practical matters, such as:
– resolving the ongoing devaluation of the CFP designation caused by unsustainable grandfathering
– explaining to members why they still don’t have any exemption from Opt In, in spite of the FPA’s wonderful Code of Practice
C’mon Katherine…
I posted a link 4 you and
We all know there are ways around that…
Well the educated ones do..
And if you claim a deduction for the input the ATO will nearly always tax the proceeds.
[quote name=”Self Interest Group.”]”The proceeds of a death or TPD policy held outside superannuation is generally paid tax free, so the same tax-free status should apply to policies paid inside superannuation.”
Umm so are most Super policies unless the are paid to a non tax/ SIS dependant..
Geez, our peak body of education might wanna get a grip on the basics..[/quote]
Actually you may want to rethink that statement. Your comments apply to Life insurance only, not TPD which is often paired with life cover within super. TPD is rarely tax free if held within super and claimed upon.
Someone should send this simple explanation to the Lead educator…. hahaha
http://moneygeek.com.au/supera…
“The proceeds of a death or TPD policy held outside superannuation is generally paid tax free, so the same tax-free status should apply to policies paid inside superannuation.”
Umm so are most Super policies unless the are paid to a non tax/ SIS dependant..
Geez, our peak body of education might wanna get a grip on the basics..