The Government has released draft legislation for the tax treatment of Total and Permanent Disability (TPD) insurance within superannuation, which addresses a number of issues raised by the industry during the consultation period.
The legislation sets out the percentage of certain TPD insurance premiums (or the cost of self‑insurance) that are deductible to superannuation funds. The financial services industry was invited to provide feedback on the amendments in June this year.
Among the concerns raised by industry bodies, including the Financial Services Council and the Association of Superannuation Funds of Australia, was the omission of bundled TPD and death cover, and the separation of ‘loss of limb’ and ‘activities of daily living’ definitions as separate add-ons to TPD cover. Both these issues have been addressed by the Government in its draft policy.
The Government has also revised up the proportions for the cover, in line with industry concerns that the percentages originally proposed were too low.
The one area of the legislation which appears not to have changed significantly is the exclusion of the ‘activities of daily work’ and ‘domestic duties’ definitions, flagged by some insurers as a critical component of their current policies.
The objective of the legislation, according to Minister for Superannuation and Financial Services, Bill Shorten, is to streamline the process for trustees to claim tax deductions for the cost of TPD insurance provided through superannuation.
Submissions on the draft legislation are open until 12 August 2011.
