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My question is around Income Protection premiums tax deductibility in SMSF. 1. Where premiums are paid from salary sacrifice or personal deductible contributions, how 15% tax credit is claimed ? 2. Whether standard Income Protection premiums are 100% tax deductible in SMSF, where A. premiums was paid directly by SMSF B. paid as Salary Sacrifice or personal contributions ?
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Hi Shiv
If the income protection insurance policy is owned by the Fund then the Fund normally would get a tax deduction for the premiums paid. The Fund in effect gets a tax credit of 15% for the premiums by including the amount as a deduction in the Fund's annual return.
If it was not paid by the Fund (but policy owned by Fund) normal approach is to journal it as:
Dr Insurance expenses (income protection)
Cr Contribution
Per the annual return instructions:
"Temporary disability
A complying SMSF may also deduct premiums on insurance policies to replace members' income during periods of their temporary disability."
Thanks
SMSF AAA