SMSF TPD Insurance
Purchasing your Total Permanent Disability insurance through your SMSF can make it much more affordable, especially if you pay a high rate of tax.
Generally Total and Permanent Disability insurance premiums are not tax deductable. This means if you hold your policy directly outside of super, you will need to pay premiums with after-tax income. A $1000 annual premium could be costing you up to $1869 in pre-tax income depending on your marginal tax rate.
If you held the TPD policy through your SMSF, you could fund your insurance premiums from contributions or an existing balance making the cost much more tax effective.
While holding TPD Insurance directly generally does not allow for a tax deduction, your SMSF may be able to claim a tax deduction on your TPD premiums if you have an 'any occupation' policy, or a partial deduction if you have 'own occupation' cover.
A lump sum payment made under a TPD insurance claim will usually be tax free, whether you hold your policy direct or through your SMSF. However, your SMSF may be able to take advantage of extra tax benefits if it ever receives a TPD or death benefit payment by application of a one-off special deduction generally not available to retail funds.
Permanent incapacity is one of the release conditions set by the Australian Tax Office allowing you to access money from your superfund before retirement. The medical certificates you have to provide to your insurance fund to support your TPD claim may also give your SMSF grounds to pass on the funds to you.