Income tax: is a premium payable on a trauma insurance policy by a self employed person or an employee an allowable deduction to the self employed person or employee?
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FOI status: may be released
This Determination, to the extent that it is capable of being a 'public ruling' in terms of Part IVAAA of the Taxation Administration Act 1953, is a public ruling for the purposes of that Part. Taxation Ruling TR 92/1 explains when a Determination is a public ruling and how it is binding on the Commissioner. Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue. However, this Determination does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination (see paragraphs 21 and 22 of Taxation Ruling TR 92/20).
[Note: This is a consolidated version of this document. Refer to the Tax Office Legal Database (http://law.ato.gov.au) to check its currency and to view the details of all changes.]
1. No. The premium payable under a trauma insurance policy is not an allowable deduction to an employee or self employed person.
2. The purpose of trauma insurance is to provide a capital amount to the insured if the insured suffers a specified medical condition. The policy does not replace earnings lost by the taxpayer.
3. The benefits payable under this type of policy do not constitute assessable income under section 6-5 of the Income Tax Assessment Act 1997 ('the 1997 Act') (formerly section 25(1) of the 1936 Act). In these circumstances, a deduction is not allowable under section 8-1 of the 1997 Act (formerly section 51(1) of the 1936 Act) as there is no connection between the payment of premiums and the production of assessable income (see FC of T v. D P Smith 81 ATC 4114; (1981) 11 ATR 538).
Note: The Addendum to this Determination that issued on 18 August 1999 applies in relation to the 1997-98 or a later income year.
Commissioner of Taxation
9 August 1995
Previously issued as Draft TD 94/D51
NO Insurance Industry Cell; NAT 95/5952-3
ISSN 1038 - 8982
accident and disability insurance policies
life assurance companies
trauma insurance policies
ITAA 1997 6-5
ITAA 1997 8-1
FC of T v. D P Smith
81 ATC 4114
(1981) 11 ATR 538