Download Insurance through super

SUPERANNUATION
Insurance through super
Fact Sheet
July 2016
Purchase insurance through your super.
Insurance through super
Who can this strategy work for?
When you hold your insurance inside super, you may be
able to save money by using your before-tax income to pay
your premiums.
Insurance through super is suitable if you:
This strategy is particularly attractive because Death and
TPD insurance premiums may be tax-deductible to the super
fund. As a result, the usual 15% super contributions tax
(which is deducted from your before tax super contributions)
may be offset and rebated back into your account through
any tax deduction claimed by the super fund.
Outside super, you have to pay your insurance premiums using
your after-tax (take-home) income. While you can generally
claim Income Protection premiums as a tax deduction
(i.e. benefits will be treated as assessable income), Death and
TPD cover are not generally tax-deductible outside super
(i.e. benefits are generally not treated as assessable income).
• want the convenience of paying insurance premiums
straight from your super account without worrying about
receiving bills
• have restricted cash flow and want to use your accumulated
super balance to pay for premiums
• want to access the tax effectiveness of insurance
in superannuation.
Insurance through super may be a cost effective way of paying
for your life insurance premiums, however your retirement
savings will be reduced as a result of paying for these premiums
with your super fund.
How does it work?
• In some cases you can effectively pay premiums from your
pre-tax income.
Insurance cover is provided through an insurance policy which
is issued by a life insurance company. The trustee of the super
fund is the owner of the insurance policy and therefore claims
are paid into the super fund.
• Premiums via group super plans are often cheaper because
the super fund tax is buying the insurance ‘in bulk’.
Depending on your circumstances, you can purchase insurance
through a super fund with:
• Your qualifying dependants can receive tax-free lump sum
payments if you, the insured, pass away.
• your existing super savings
What’s in it for me?
• You may be able to obtain cover without having
a medical examination.
• You may qualify for a government co-contribution if you
fund the cover by making after-tax contributions.
• You may be able to top up your stand-alone insurance
policies (those you hold outside super) using the savings.
• Most importantly, you and your family will be looked after
if the unexpected occurred.
• super contributions, such as:
– your employer’s Super Guarantee contributions
– personal contributions
– contributions made by your spouse
– salary sacrifice contributions using your pre-tax income.
Case study 1 – Meet Tim
Case study 2 – Meet Natalie
Tim earns $100,000 p.a. and is currently paying $2,000
in insurance premiums for Death and TPD Cover outside
super. To pay this premium out of his own pocket,
Tim needs to earn $3,279 before tax to fund the premium
outside super.
Natalie is 49 years of age. She has a casual job and earns
$25,000 p.a. She is looking to provide financial security
for her family and would like to acquire life insurance
cover within her super fund. The premium for her desired
level of cover is $1,000.
Inside super, a $2,000 insurance premium can be funded
using Tim’s super contributions. And because the tax on
his super contributions is offset by a tax deduction for the
premium, every cent can go towards paying for his cover.
Natalie can have the premium deducted from her
employer Super Guarantee contributions reducing her
future super entitlements. However she could make
a personal contribution from after-tax money and claim
the government co-contribution. This will not only
help fund the premium and provide the required level
of insurance cover, but may also increase her future
super entitlements.
In this case, holding cover in super results in a pre-tax saving
of $1,279.
Outside super
Inside super
Premiums owed
$2,000
$2,000
Amount of pre-tax
income required
$3,279
$2,000
Tax paid
$1,279
$0
Savings
$0
$1,279
For example, if Natalie made an after-tax contribution
of $1,000, she would be eligible for the maximum
government co-contribution payment of $500 (2016/17).
This means Natalie has ended up with her required life
insurance cover, with the Government effectively paying
half ($500) of the premium ($1,000).
This example is for illustrative purposes only and does not constitute financial
advice. It assumes $100,000pa is the only source of income based on 2016/17
tax rates, and that the effective tax rate is 39% including any additional levies.
Please see your tax adviser on how this impacts your individual circumstances.
Need more
information? Contact your financial adviser
to discuss if this strategy is right for you.
This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting
on this information you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances and objectives.
You should read the relevant Product Disclosure Statement available by calling 133 665 or visiting onepath.com.au and consider if this product is right for you.
This information is current at July 2016 but may be subject to change. Updated information will be available free of charge by calling 133 665.
The case study and effective tax rates are hypothetical and are not meant to illustrate the circumstances of any particular individual. Before acting on this information,
you should consider the appropriateness of the information, having regard to your needs, financial circumstances and objectives.
Some of this information may have tax implications. We recommend that you seek specialist tax advice on how it may impact your tax obligations, liabilities or entitlements.
onepath.com.au
334056_L6359/0716
Corporate Super, Integra Super and OneAnswer Personal Super is issued by OnePath Custodians Pty Limited (ABN 12 008 508 496, RSE L0000673).