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CLIENT UPDATE October 2009

Deductibility of Disability Benefit Premiums for Complying Superannuation Funds In the view of the Australian Taxation Office (ATO), disability benefit insurance premiums are deductible only to the extent that the applicable insurance policy has a necessary connection to a liability of a complying superannuation fund to provide permanent incapacity benefits. The deductibility does not, in the view of the ATO, apply to other types of disability benefits. However, industry practice has been that a premium insuring against any form of permanent disability is fully deductible. Today the Government announced that the Income Tax Assessment Act 1997 (ITAA97) will be amended to provide transitional relief to complying superannuation funds, for the deduction of insurance premiums for disability superannuation benefits. The amendments will defer the application of the provisions in ITAA97 governing deductibility of insurance premiums for superannuation disability benefits to 1 July 2011. Industry practice for deducting disability benefit insurance premiums may therefore continue until 30 June 2011. On 1 July 2011, insurance premiums will only be deductible to the extent the policies have the necessary connection to a liability of the fund to provide disability superannuation benefits. This means that deductibility will not apply to other types of disability benefits. The Government is deferring the application of the provisions to 1 July 2011 to minimise the disruption to the superannuation industry and to provide funds with enough lead time to make the necessary administrative changes. The Government will consult with industry in preparing legislation to give effect to its announcement. Paul Cleary has considerable experience in the provision of specialist financial services and would be pleased to offer strategic superannuation legal advice.

For more information, please contact: Paul Cleary Partner Insurance & Financial Services TurksLegal T: 02 8257 5760 M: 0407 052 170 paul.cleary@turkslegal.com.au

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CLIEN T U P D A T E

Deductibility of Disability Benefit Premiums for Complying Superannuation Funds  

In the view of the Australian Taxation Office (ATO), disability benefit insurance premiums are deductible only to the extent that the applic...