Govt to extend tax deductions for TPD super premiums
The Government has announced it will temporarily extend tax deductions for insurance premiums for total and permanent disablement (TPD) cover in superannuation. The new amendment will apply until July 2011.
Minister for Financial Services Chris Bowen said the deferral would minimise the disruption to the superannuation industry and provide the funds with enough time to make administrative changes.
In 2011 the law will revert to insurance premiums only being tax deductible to the extent that insurance policies are connected to a liability of the fund to provide TPD super benefits and not other types of insurance.
However, Macquarie Adviser Services said in light of the incoming super tax reform, advisers and clients needed to rethink long-term strategies of owning TPD insurance cover inside super.
Some in the industry had downplayed the risk of TPD benefits being trapped inside super as a result of uncertainty as to the nature of the disability should a claim be made, Macquarie head of technical David Shirlow said. However, the level of risk of the benefits being trapped was reflected in the high premiums of TPD super insurance.
The removal of full deductibility would provide a disincentive to holding TPD inside super, he added.
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