This Ruling, released on Wed 7.7.2012, sets out the Commissioner’s views on the deductibility of premiums paid by complying superannuation funds for insurance policies which provide total and permanent disability (TPD) cover for members. The Ruling was previously released as Draft Ruling TR 2011/D6.
For a TPD insurance premium to be deductible, s 295-465(1) of the ITAA 1997 requires a connection between that payment and a current or contingent liability of the fund to provide a “disability superannuation benefit” (s 995-1) to its members. The extent to which a premium paid for the TPD insurance policy will be in respect of the fund’s liability to provide a “disability superannuation benefit” is determined by reference to the nature and scope of the insured events. The Commissioner says a critical variable to take into account is the degree of certainty of the requirements of the “disability superannuation benefit” definition being met as a consequence of an insured event happening.
Where it is unclear whether the occurrence of an insured event will result in a fund liability to provide a “disability superannuation benefit”, the Tax Office says it will be necessary to apportion premiums. From the 2011-12 income year, specified deductible proportions for TPD insurance policies are set out in reg 295-465.01 of the ITA Regs. Alternatively, the fund may choose to deduct a proportion based on an actuary’s certificate.
DATE OF EFFECT: The Ruling applies from 1 July 2011.
[LTN 127, 4/7]