April 21, 2024

Finance Income

Finance Blog

What you need to know about your income protection with EOFY approaching

A year’s end can be a very stressful and overwhelming time. Some people are finishing their tax paperwork from the previous year, and now it is time to start again. What can you do to simplify this process? What can a financial advisor do for you come June 30th each year to help you make the most of your money?

When it comes to tax savings, getting an early start on your annual investment portfolio is always a good idea. If you have yet to settle your investment decisions, this window is the perfect opportunity for you to do so.

Investors usually aim to create wealth by investing in products that yield good returns and allow them to maximize their retirement savings. Before the end of the financial year, investors want to maximize their returns. An investment in insurance products is one simple way to accomplish this. Investment products like these not only guarantee returns and tax deductions but also act as a safety net in unfortunate events.

The costs of insurance premiums against the loss of your employment income can be deducted from your tax return. However, only the premiums paid to protect your income are deductible. Such a plan is called an income protection plan.

A tax deduction can be claimed for income protection policies. Paying your premiums in advance before June 30th may allow you to claim deductions in this year’s return if you have a higher income.

The premium you pay for income protection insurance may qualify for a tax deduction if you own or consider it. For example, if you prepay your premiums for the next 12 months before June 30th, you can bring forward a tax deduction from next year to the current year – potentially lowering your taxable income this year. Many Australians are underinsured, so this can be a great way to protect yourself, your family, and your business while managing your taxes.

Reviewing your insurance portfolio at the end of the financial year is always a good idea. Many policyholders haven’t reviewed their coverage for several years, so the monthly income protection benefit may not match their higher income level. Wouldn’t it make sense to adjust now? By prepaying annually, you will save money on premiums, and you will be able to deduct the cost of the premiums for the current year.

For policies taken out besides superannuation, the ATO allows you to claim the premiums for income protection. Therefore, income protection included in your super package is not tax-deductible, and you are not supposed to benefit from tax in the approaching EOFY. However, you can deduct the costs when you have insurance outside of your Super package.

As EOFY approaches, income protection insurance investors have an excellent opportunity to ensure that they are strategically positioned to maximize the opportunities based on their individual circumstances. This is an opportunity you should keep in mind during your ongoing engagement to allow sufficient time for appropriate strategies to be implemented before June 30th.

Aspect Underwriting can provide you with more information about income protection and the approaching end of the year. Experts here can guide you through the best practices in income protection to save on taxes.