CompareAll Business InsuranceCompare Business InsuranceOverseas Visitor CoverAll LoansCompare Loans
Yes. Income protection premiums are tax deductible when you pay them yourself, outside super, for a policy that insures your salary or wages against loss. The ATO calls this income protection or continuing salary cover.
Three things change the answer. You can't claim premiums your super fund pays from your super balance. You can't claim the part of a premium that buys a lump sum for injury, or premiums for life, TPD or trauma cover. And because the premiums are deductible, the monthly payments you receive in a claim are taxable income.
By Better Rate Mate Editorial Team ยท Last reviewed
The ATO's rule is simple: only premiums paid to protect your income are deductible. Here is how that applies to the policies people commonly hold.
| Premium | Deductible? | Why |
|---|---|---|
| Income protection held outside super, paid by you | Yes | It insures loss of salary or wages |
| Income protection inside super, paid from your super balance | No | The ATO excludes policies through super where premiums come from your contributions |
| Part of a policy that pays a lump sum for injury | No, only the income part | Capital in nature; apportion the premium |
| Life insurance (death cover) | No | Listed by the ATO as not deductible |
| Trauma or critical illness insurance | No | Listed by the ATO as not deductible |
| TPD insurance | No | Pays a capital lump sum, not income |
If one premium buys both income protection and something that isn't deductible, you claim only the income protection part. The ATO's example is Deanne, who pays $250 a month for a policy made up of $175 of income protection and $75 of personal injury cover. She can claim $175 a month; the $75 is capital in nature and not deductible.
Insurers' annual premium statements often split the premium by benefit, which gives you the figure to claim. If it doesn't, ask the insurer for the breakdown rather than estimating it.
In myTax, income protection, sickness and accident insurance premiums are claimed under Other deductions. On a paper return it is the Other deductions question (D15). The ATO's myTax instructions note that expenses relating to income from carrying on a business as a sole trader are reported elsewhere, so if you are self-employed, check with your registered tax agent where your premium belongs.
Keep your records. The ATO says you generally need to keep them for five years from the date you lodge the return.
The trade for the deduction is that benefits are taxable. The ATO says any payment you receive to replace salary or wages under an income protection policy must be included in your tax return, whether it arrives as regular payments or a lump sum.
Where you declare it depends on whether tax was withheld. If the insurer or fund withheld tax, the payment goes in the same place as salary and wages. If no tax was withheld and the premiums were deductible, it goes in other income. A lump sum paid for personal injury or TPD under the policy is capital, not income, and the ATO notes it might be assessable as a capital gain in some circumstances.
Holding income protection in super means the premium comes from your super balance, and you can't deduct it. Holding it outside super costs you cash now but gives you a deduction at your marginal tax rate, and usually a policy with more options. Which works out cheaper depends on your tax rate, how much your super balance can spare, and the benefit period you need. Compare the cover first and the tax second: a deduction on a policy that won't pay for long enough is poor value.
In myTax, claim it under Other deductions as income protection, sickness and accident insurance premiums. On a paper return it is question D15 Other deductions. Sole traders should ask their tax agent where it belongs.
For individuals, income protection premiums paid outside super are the main deductible personal insurance. The ATO says life, trauma and critical care insurance premiums are not deductible, and neither is income protection paid through super.
Yes. Payments that replace your salary or wages must be included in your tax return, whether they are paid regularly or as a lump sum. Lump sums for personal injury or TPD under the policy are treated as capital instead.
No, not for you personally. The ATO says you can't claim a deduction where the policy is through your super fund and the premiums are deducted from your contributions.
Not when you hold it personally. The ATO lists life insurance, trauma and critical care insurance premiums as not deductible because they pay a capital sum rather than replacing income.
This page summarises the ATO's published guidance as at September 2026. Your own position depends on how the policy is owned and paid for. Confirm it with the ATO or a registered tax agent.
Income protection replaces part of your pay. Life, TPD and trauma cover pay lump sums for the costs a monthly benefit can't reach.
