Superannuation funds will be able to streamline the way they claim tax deductions for the cost of total and permanent disability (TPD) insurance provided to fund members, following legislation introduced by the Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, today.
The amendments (contained in the Tax Laws Amendment (2011 Measures No. 4) Bill 2011) allow the percentage of certain TPD insurance premiums that can be claimed as deductions by superannuation funds to be specified in regulations. These changes will apply from the 2011-12 income year.
"The provision of insurance through superannuation has ensured many Australians now have insurance cover in the event of a total and permanent disability. These changes will give many superannuation funds the option of using a simpler method to determine the deductible portion of TPD insurance premiums without having to engage an actuary," Mr Shorten said
The cost of TPD insurance provided through superannuation is deductible to the extent the policies provide cover that is consistent with the definition of ‘disability superannuation benefit'in the Income Tax Assessment Act 1997 (ITAA 1997). Where broader insurance cover is provided, superannuation funds must obtain an actuary's certificate to determine the deductible portion of the premium, unless that portion is specified in the insurance policy.
The Government introduced transitional provisions in 2010 designed to provide time for the industry practice of claiming the full cost of broader disability insurance, provided through superannuation to fund members, to be brought into alignment with the operation of the ITAA 1997. These transitional provisions expire on 30 June 2011.
"The Government has responded to industry's concerns about the difficulties it will face in complying with the law once the current transitional relief expires," Mr Shorten said.
The deductible percentages of TPD insurance premiums to be prescribed in regulations will be finalised following consultation with industry.
Amendments contained in the Bill also extend the current transitional relief for deductibility of TPD insurance premiums to funds that self-insure their liability to provide disability benefits. This transitional relief will apply to the income years 2004-05 to 2010-11.
The legislation is available at http://parlinfo.aph.gov.au/