Loan Protection Insurance, deductible?

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

Join Australia's most dynamic and respected property investment community
  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?
     
    bonanzawealth, 28th Aug, 2015
    #1
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    42,136
    Location:
    Australia wide
    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.
     
    Terry_w, 28th Aug, 2015
    #2
  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?
     
    bonanzawealth, 28th Aug, 2015
    #3
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    42,136
    Location:
    Australia wide
    No.
     
    Terry_w, 28th Aug, 2015
    #4
  5. HD_ACE

    HD_ACE Game-Changer

    Joined:
    18th Jun, 2015
    Posts:
    491
    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.
     
    HD_ACE, 28th Aug, 2015
    #5
  6. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    Mike A, 28th Aug, 2015
    #6
  7. Brady

    Brady Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    2,570
    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.
     
    Brady, 28th Aug, 2015
    #7
  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
     
    bonanzawealth, 28th Aug, 2015
    #8
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,643
    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.
     
    Paul@PAS, 28th Aug, 2015
    #9
Build Passive Income WITHOUT Buyers Agents!

Build Passive Income WITHOUT Dropping $15K On Buyers Agents Each Time! Helping People Achieve PASSIVE INCOME Using Our Unique Data-Driven System, So You Can Confidently Buy Top 5% Growth & Cashflow Property, Anywhere In Australia