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Re: Reporting income protection payments if tax is already withheld?

Newbie

Views 817

Replies 2

Hi,

 

Do I need to report my income protection payments on my tax return if tax is already withheld? I tried to do this through 'other income' via the online portal, but there is no option to give both total and tax withheld amounts. If I were to just provide the total amount without the withheld amount, I would significantly effect my tax return (have to pay back a few $$$ rather than get some back!)

 

According to the ATO website:

 

You don't include payments made to you under an income protection, sickness or accident insurance policy (where the premiums are deductible and the payments replaced income) if:

 

- tax has already been withheld

- you've already included them on your tax return.

 

You must check whether tax has been withheld from payments made to you under an income protection, sickness or accident insurance policy that you own as a policyholder. Tax is not withheld from payments made by an insurer directly to the owner of a relevant policy. If tax has not already been withheld, you will need to declare these payments as 'other income' on your tax return.

 

I am confused, as tax has already been withheld, but the 'other income' option doesn't allow me to report this. According to the PAYG summary from my insurer, I do need to report it on the tax return.

 

Can anyone answer? The live chat and hotline were unable to answer my question and disconnected me.

 

Thanks.

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 1

Hi @Soupherb

 

Thank you for your question. See our webpage: Income Protection Insurance.

 

If you satisfy the conditions to allow you to claim premiums you have paid,  you can claim the cost of premiums you pay for insurance against the loss of your income at D15 Other Deductions.

 

Conditions to claim the premiums are:

  • If the policy provides benefits of an income and capital nature, only that part of the premium that relates to the income benefit is deductible.

However, you can't claim a deduction for a premium or any part of a premium:

  •  for a policy that compensates you for such things as physical injury
  •  if the policy taken out is through your superannuation and insurance premiums are deducted from your super contributions.

 

On the other hand, if you receive a payment from the Insurance company, then

You must include any payment you received under the policy for loss of your income at items at Item 24 on your tax return for payments made to you under an income protection, sickness or accident insurance policy where the premiums were deductible (so if you were eligible to claim the premiums as a deduction, as discussed above) and the payments replaced income except payments from which tax has been withheld and which you have already shown at item 1, or payments shown on a payment summary or income statement and which you have already shown at item 2. For example:

  • Income Protection Insurance payments shown on a payment summary or income statement from which tax has been withheld are shown at item 1, or
  • Income Protection Insurance payments where there is a payment summary or income statement and from which tax was not withheld are shown at item 2, or
  • Payments made to you under an income protection, sickness or accident insurance policy where there is no payment summary or income statement, the premiums were deductible and the payments replaced income are shown at item 24

I hope this assists

2 REPLIES 2

Most helpful response

Former Community Support

Replies 1

Hi @Soupherb

 

Thank you for your question. See our webpage: Income Protection Insurance.

 

If you satisfy the conditions to allow you to claim premiums you have paid,  you can claim the cost of premiums you pay for insurance against the loss of your income at D15 Other Deductions.

 

Conditions to claim the premiums are:

  • If the policy provides benefits of an income and capital nature, only that part of the premium that relates to the income benefit is deductible.

However, you can't claim a deduction for a premium or any part of a premium:

  •  for a policy that compensates you for such things as physical injury
  •  if the policy taken out is through your superannuation and insurance premiums are deducted from your super contributions.

 

On the other hand, if you receive a payment from the Insurance company, then

You must include any payment you received under the policy for loss of your income at items at Item 24 on your tax return for payments made to you under an income protection, sickness or accident insurance policy where the premiums were deductible (so if you were eligible to claim the premiums as a deduction, as discussed above) and the payments replaced income except payments from which tax has been withheld and which you have already shown at item 1, or payments shown on a payment summary or income statement and which you have already shown at item 2. For example:

  • Income Protection Insurance payments shown on a payment summary or income statement from which tax has been withheld are shown at item 1, or
  • Income Protection Insurance payments where there is a payment summary or income statement and from which tax was not withheld are shown at item 2, or
  • Payments made to you under an income protection, sickness or accident insurance policy where there is no payment summary or income statement, the premiums were deductible and the payments replaced income are shown at item 24

I hope this assists

Newbie

Replies 0

Really helpful, thanks so much!