With 30 June 2025 quickly approaching it is good to have a reminder of the common situations where your clients with life insurance may be able to claim a tax deduction for the 2024-2025 financial year.
- Advice Fees - New for 2024-2025 financial year (ATO TD 2024/7) – Insurance advice may be tax deductible! Advice fees on income protection are fully tax deductible (s8-1 ITAA1997). Advice fees in relation to death, TPD & trauma may be tax deductible (s25-5 ITAA1997), for the portion of the fee that is for tax (financial) advice in relation to managing tax affairs, provided by a recognised tax adviser, for the advice relating to the taxation implications of the insurance policies recommended. As the advice is normally provided for multiple purposes, taxpayers will need to apportion the total amount of the fee between the different components of the advice on a fair and reasonable basis.
- Income protection premiums - Policyholders who pay their income protection premiums by 30 June 2025 are eligible to claim a tax deduction for the premiums in the 2024-2025 financial year, where the income protection policy is owned outside of superannuation.
- Future Liability to Pay Insurance Benefits (SMSF) - Where an insurance benefit has been paid from a superannuation fund (SMSF) in a particular financial year, the trustee has two options available to them: 1) Claim a tax deduction for the life insurance premiums paid on behalf of members or 2) Make an election for a deduction for future liability to pay benefits, where the life insured has ceased work and is under 65 when the benefit is paid. A trustee of a SMSF is unable to claim both tax deductions in the same financial year, and specific rules and provisions apply to each deduction.
- Concessional contribution caps and “Notice of intent to claim or vary a deduction for personal super contributions” - Personal super contributions are generally able to receive a tax deduction, provided particular procedures are followed, up to the concessional contribution cap of $30,000 for 2024-25.
- Government Co-Contributions - For individuals under age 71 at the end of the financial year, who have income of less than $60,400 for the 2024-2025 financial year, may be illegible for a Government Co-Contribution of up to $500 for non-concessional contributions of up to $1,000 (maximum if income less than $45,400).
- Instant Asset Write Off - Small businesses (with an aggregated annual turnover of less than $10 million) will continue to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use on or before 30 June 2025.
- Spouse Super Contributions - The tax offset of up to $540 for superannuation contributions of up to $3,000 made to a spouse’s super account (subject to spouse being under age 75, less than $1.9 million, and earning less than $40,000 for the year).
As the end of the financial year approaches, it is essential to be aware of these strategies to maximise your clients’ tax benefits. From tax-deductible advice fees to concessional contribution caps, each strategy can provide significant advantages and ensure a more favourable financial outcome for your clients for the 2024-2025 year.
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