Are you shrinking your tax refund by skipping these simple insurance deductions?
It’s the start of a new financial year, which means that more than 12 million Australian taxpayers will be busy rustling up receipts and refreshing their inboxes waiting for their PAYG payment summaries to come in.
But while most Aussie taxpayers will be familiar with the standard expenses they can claim come tax time, such as work-related clothing and travel expenses, they might not be aware of the insurance deductions they could be missing out on.
Chief among these is the ability for taxpayers claim to claim income protection insurance as a deduction, with Etax.com.au Senior Tax Agent, Liz Russell, stating that many Australians are completely unaware of this benefit.
“Awareness is improving, but each year we still see many taxpayers who don’t know that income protection insurance (paid for out of your own pocket) is tax deductible,” she said.
“Sometimes, they’ve been paying it for years and missing out on this handy little refund boosting deduction.”
Just how much can I claim back on income protection insurance?
According to Russell, if you’ve paid for an income protection policy yourself, and it hasn’t come as part of your superannuation scheme, you should have little problem claiming a deduction.
“As long as the premium is paid for out of your own pocket it can be claimed as a tax deduction,” she said.
“Your insurer should provide you with a yearly statement of premiums paid. If not, just check your bank or credit card statement, or give them a call to make sure you’re claiming the full (and correct) amount.”
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While you may be reluctant to go through the effort of making a claim if your monthly premium is on the lower side, Russell stated that even a small premium could make a sizeable impact to the amount of tax you pay.
For instance, take a look at this deduction calculation example provided by Etax.com.au.
Taxpayer Julie pays a monthly premium of $62 for her income protection insurance policy and is earning the average Australian wage of of $78,832. By adding her income protection insurance to her tax return, her taxable income would drop to $78,088.
That means Julie would only need to pay tax on $78,088, so her refund would improve by an impressive $256.68!
Can I claim tax back on any other types of insurance?
Aside from income protection insurance, there are a number of other insurance deductions that taxpayers could be missing out on when they lodge their tax this year:
- Car Insurance: If you claim your car expenses using the logbook method, Russell encouraged taxpayers to include their car insurance costs to help improve their claims.
- Home and Contents Insurance: Run your business out of a home office? Well if you have furniture or your computer listed on your insurance policy (and covered specifically) you may be able to claim a portion of your home and contents insurance as a tax deduction.
- Landlord Insurance: If you’re a rental or investment property owner, you may be able to claim your landlord insurance as part of your tax deductions.
Interested in some more tax tips? Make sure you know the answer to these five questions if the ATO calls, or to kick start your new financial year the right way, head over to the Mozo insurance hub to see if you can save yourself money by switching to a better value policy.