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Stand alone Trauma Insurance and income tax

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Newbie

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Hi ATO,

 

I have recently been diagnosed with a serious illness. I am a PAYE tax payer as a full time employee.

 

I was maintaining a stand alone trauma insurance policy for such an eventuality to cover medical expenses etc. (not attached to any income protection or employment/superannuation policy). Nor have I ever claimed any premium or cost associated as a tax deduction.

 

I have claimed on the policy and been paid a lump sum accordingly. From what I and my insurer understand this sum is not subject to income tax as it was neither expected or relied upon income, nor was it in any way income protection.

 

  1. Can I confirm this is the understanding of the ATO?
  2. Do I need to declare this in any way on my 18/19 return?

 

Thank you for your time and I wish you a great day.

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Taxicorn

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From what I understand via TD 95/41:

 

1. The premium payable under a trauma insurance policy is not an allowable deduction to an employee or self-employed person.

 

2. The purpose of trauma insurance is to provide a capital amount to the insured if the insured suffers a specified medical condition. The policy does not replace earnings lost by the taxpayer.

 

3. The benefits payable under this type of policy do not constitute assessable income under section 6-5 of the Income Tax Assessment Act 1997 ('the 1997 Act') (formerly section 25(1) of the 1936 Act).

 

 

TD 95/41

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Best answer

Taxicorn

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From what I understand via TD 95/41:

 

1. The premium payable under a trauma insurance policy is not an allowable deduction to an employee or self-employed person.

 

2. The purpose of trauma insurance is to provide a capital amount to the insured if the insured suffers a specified medical condition. The policy does not replace earnings lost by the taxpayer.

 

3. The benefits payable under this type of policy do not constitute assessable income under section 6-5 of the Income Tax Assessment Act 1997 ('the 1997 Act') (formerly section 25(1) of the 1936 Act).

 

 

TD 95/41

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Newbie

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Thanks Macfanboy,

That’s exactly the information I was after.

Warmest regards