Most of the time, income protection premiums are tax deductible if you’re working (depending on a few individual circumstances). That means at tax time you may be able to claim your premium as a deduction and potentially save money.
Depending on your earnings and tax bracket, the table below can be used as a guide to see what you could potentially save. The examples used here are based on a payment of AAMI Income Protection premiums of $1,000 per year:
Your Annual Earnings
|
AAMI Income Protection Annual Premium
|
Marginal Tax Rate*
|
Value of tax deduction**
|
Cost of cover after tax
|
Over $180,001
|
$1,000
|
45%
|
$450
|
$550
|
Between $87,001 - $180,000
|
$1,000
|
37%
|
$370
|
$630
|
Between $37,001 - $87,000
|
$1,000
|
32.5%
|
$325
|
$675
|
Between $18,201 - $37,000
|
$1,000
|
19%
|
$190
|
$810
|
Between $0 - $18,200
|
$1,000
|
0%
|
$0
|
$1,000 |
*For the 2017/18 financial year. The above marginal tax rates do not include the:
- Medicare levy of 2%;
- Temporary Budget Repair Levy payable at a rate of 2% for taxable income over $180,000.
**The value of this tax deduction noted above will depend on a taxpayer’s individual circumstances. For the purposes of this table it is assumed that the taxpayer has only a single deduction (the annual premium for AAMI Income Protection cover) allowing the deduction to be applied at the highest marginal tax rate applicable to the taxpayer.