GST on Income Protection Insurance
Many New Zealanders do not know that they can claim back GST on their existing income protection policies. If you are one of them let your accountant know that “Income Protection Insurance” has GST component.
GST on Income Protection Insurance is refundable
For instance you are paying $115 monthly premiums for your income protection insurance policy that means that yearly you have a GSTable return of $180. You could say – well that’s not much – I see this a payment for a tank of petrol to take you from Auckland to Rotorua and return.
Since we are talking about accounting practices, if you are a self-employed person you would want to treat your income protection insurance premiums as business expense. Keep in mind if you one day happen to be on income protection claim, you are going to pay tax from benefits received.
Some accountants say that Income Protection benefit can be tax free – even I am not an accountant – I cannot see a good reason to explain it. This is my logic for it: All income is taxable in New Zealand – benefit received by you from your insurance company is treated as income due to the fact that this is exactly what it was designed to do – to replace your income once you are on claim. If you receive benefit your policy provides the benefit is taxable.
If you are an accountant and you think I am wrong – please let me know – perhaps there are lots of people in New Zealand who need your tax advice and you do not even know about it. My opinion on the discussed both matter above as follows:
- Income Protection Insurance has GST component in it and if you are a self-employed person – GST on Income Protection Insurance is refundable.
- Income Protection Insurance should be treated as your business expense.
If you want to receive comparable Income Protection quotes please use this form. In order for me to provide you with a few quotes from different insurance companies I need to know:
Your name, your full date of birth, your occupation and level of your income, in one business day you are going to get quotes from major four New Zealand insurance companies.