Join Australia's most dynamic and respected property investment community

Loan Protection Insurance, deductible?

Discussion in 'Accounting & Tax' started by bonanzawealth, 28th Aug, 2015.

  1. bonanzawealth

    bonanzawealth Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    58
    Location:
    Sydney NSW
    I've been offered loan protection insurance, it seems like a good product to have. Just wondering if the monthly premium cost is deductible as IP expenses? Because it seems it protects the borrower more than the IP itself. Hope @Terry_w or @Paul@PFI can shed some light?
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,970
    Location:
    Sydney
    I would think that the premiums would be deductible if they related to the protection of loan repayments. Sometimes these policies have other components such as life insurance and this part wouldn't be deductible.

    But you have to ask yourself if these sorts of policies would be a good idea. WOuld income protection insurance be cheaper.
     
  3. bonanzawealth

    bonanzawealth Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    58
    Location:
    Sydney NSW
    If I get a $500,000 loan, Monthly insurance premium cost $200. here's what they offer:

    So can this still be applied to IP expenses?
     
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,970
    Location:
    Sydney
    No.
     
  5. HD_ACE

    HD_ACE Game-Changer Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    449
    Location:
    Perth
    For that sort of price aor a bit more you can get other insurances which would be

    -10k pm Income Protection payment until 65 ( tax deductible premium)
    - 1 million death cover
    - 1 million TPD insurance
    - 150k trauma cover.

    So shop around before you decide or see an insurance broker. well worth the time.
     
  6. MikeLivingTheDream

    MikeLivingTheDream BCOM MCOM MTAX CPA CTA Registered Tax Agent

    Joined:
    24th Jun, 2015
    Posts:
    227
    Location:
    Philippines
  7. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    452
    Location:
    Adelaide, SA
    These 'loan protection' insurances are alright to set up if you have a loan settling soon, in most cases this is not the best product long term. They are quick to set up, but don't are the most tailored cover.

    I'd suggest setting it up if loan settling soon so at least you have something in place, then look at reviewing. Should cost anything to cancel.
     
  8. bonanzawealth

    bonanzawealth Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    58
    Location:
    Sydney NSW
    it's not mandatory to get it. I just thought it's a good idea. They name it as Loan Protection Plan by ALI Group.

    Thanks for the link @MikeLivingTheDream. On the second link it says:
    So it seems nothing is deductible then as all the benefit do mention 'death' in it
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,363
    Location:
    Sydney
    The loan protection insurance is a scam that amounts to a limited life / income cover. Its not deductible. The receipt of the policy proceeds would be exempt also.

    Same sort of insurance as credit card insurance and a myriad of scams that car dealers run.