Ownership of income protection in your superannuation fund

If you hold your income protection policy through your superannuation fund the costs of the premium will be funded from your superannuation balance, through either a contribution or a rollover.  Income protection policies held through superannuation are often referred to as “salary continuance”.

It is important to note that payments for policies under superannuation are made in accordance with the relevant superannuation laws and the rules of the fund trust deed.

Advantages

  • The premiums are paid by the super fund, which reduces the impact on your personal cash flow;
  • The cost of the premiums can be offset against your super contributions, thereby reducing the contribution tax paid on these contributions;
  • Self-employed people may be able to claim a personal income tax deduction for contributions which are in turn used to pay the premiums;
  • Group salary continuance cover is generally less expensive than a standalone policy in your own name.

Disadvantages

  • The premiums are not tax deductible to you personally;
  • Some super funds only allow you to insure for a benefit period of 2 years; and
  • In order to receive a salary continuance payment in the event of a claim, you will generally need to satisfy the super fund’s definitions of temporarily incapacitated. These may be stricter than for a standalone policy held outside of super.

When income protection is recommended to be held in your superannuation fund

  • You do not have sufficient cash flow to cover the premiums; or
  • You want to obtain cheap Group salary continuance through your superannuation fund.
The Dover Group