Transitional relief for superannuation funds - deductibility of disability benefit premiums
13 Oct 2009
In a media release issued on 13 October 2009, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, announced an amendment to the tax law to provide transitional relief to complying superannuation funds for the deduction of insurance premiums for disability superannuation benefits (TPD benefits).
As part of the 2007 Better Super reforms, the provisions regarding deductibility of TPD insurance premiums paid by superannuation funds were rewritten and transferred from ITAA 1936 to Division 295 of ITAA 1997.
The Minister said that the ATO's view of the law is that TPD insurance premiums are deductible only to the extent the policies have the necessary connection to a liability of a fund to provide permanent incapacity benefits and not other types of disability benefits. This interpretation did not change with the Better Super changes, however, industry practice considered that under the ITAA 1936, a premium insuring against any form of permanent disability was fully deductible.
The proposed amendments will defer the application of the provisions in the tax law governing deductibility of insurance premiums for superannuation disability benefits to 1 July 2011. This will ensure that the current industry practice for deducting TPD premiums will apply from 1 July 2004 until 30 June 2011.
The Minister said that legislation giving effect to this announcement will be introduced as soon as practicable, following consultation with the industry.
For a copy of the Minister's media release, No 2009/027, 13 October 2009, go here