Life Insurance is money your family will receive in the event of you kicking the bucket.
Interestingly the premiums you pay for Life Insurance are not tax deductible, unless they’re paid from your superannuation.
Let’s say the premiums for your Life Insurance are $5,000 per year.
No tax deduction applies. Sad Face.
First of all we need money into your super fund to pay the premium.
Business contributes $5,000 into Super.
This alone saves $2,350 tax, when compared to paying 47% tax in your own name.
Super fund pays 15% tax on $5,000 in super = $750 due.
Super fund pays $5,000 Life Insurance premium.
Super fund get 15% tax deduction for premium expense = $750 refund.
What do you need to implement this strategy?
You cannot claim life insurance as a deduction (outside of super), because you don’t pay tax on the money received when you die.
Because no tax is payable when your family receives that money, it would be unfair to be able to claim a deduction for the premiums along the way.
The ATO has special rules, and allows a deduction in superannuation.
If you pay a rate of 47% in tax, you’d have to earn $10,638 BEFORE tax, then pay $5,638 in tax.
Leaving the $5,000 after tax to pay your life insurance policy.
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