Tax on income protection insurance benefit

Tax on Income Protection insurance benefit

As ESSSuper’s Income Protection insurance cover is a benefit paid through a super fund, you can’t claim a tax deduction for the premiums you pay.

If you are eligible to receive an Income Protection benefit, the maximum benefit payable is 85% of your pre-disablement income, with 75% paid to you and up to 10% paid as a super contribution to your Accumulation Plan account. The portion of the benefit paid to you is treated as taxable income and attracts pay as you go (PAYG) withholding tax, in the same way as other income and wages. PAYG withholding tax is deducted from the benefit before it is paid and is forwarded to the ATO. You will be asked to provide your TFN to the Insurer before any benefit is paid. If you do not provide your TFN, the Insurer will be required to deduct tax from your benefit at the top marginal rate of 47% including Medicare levy. 

The portion of any benefit paid as a super contribution will be paid to your Accumulation Plan account and taxed as if it were an employer (concessional) contribution. For more information about how super is taxed, visit www.ato.gov.au or contact the ATO.