Private ruling: Deductions
Date of advice: 28 July 2017
Published: November 2017
Ruling period: Year ended 30 June 2011 to 30 June 2017.
Date scheme commenced: 5 January 2011.

Ruling: Q1: Are you entitled to a deduction under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) for premiums paid on an Income Protection Insurance policy? | A1: Yes.

Relevant facts and circumstances: This ruling is based on the facts stated in the description of the scheme that is set out below. If your circumstances are materially different from these facts, this ruling has no effect and you cannot rely on it. The fact sheet has more information about relying on your private ruling. You are an employee. You purchased an investment/rental property in 2011. You took out an Income Protection Insurance Policy to ensure the mortgage on the investment/rental property is paid in the case of, loss of income. The Income Protection Insurance Policy was initiated on January 2011. The Income Protection Insurance Policy is solely in your name.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 8-1 ATO Interpretative Decision ATOID 2010/178

Reasons for decision: Summary: Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all losses and outgoings to the extent to which they are incurred in gaining or producing assessable income except where the outgoings are of a capital, private or domestic nature, or relate to the earning of exempt income. A deduction is only allowable if an expense: ● is actually incurred, ● meets the deductibility tests, and ● satisfies the substantiation rules. ATO Interpretative Decision (ATO ID) 2010/178 state that income protection premiums paid is relevant and incidental to the operations and activities carried out to produce assessable income. Therefore the premiums paid have a sufficient connection to the assessable income of the taxpayer, and that they are not of a capital, private or domestic nature. For these reasons, you are entitled to a deduction under section 8-1 of the ITAA 1997 for premiums paid under an income protection policy that provides for periodic benefits to protect you against loss of income, even if it does not actually produce such income. Please note the deduction for income protection premiums are claimed at item D15 on your income tax return and not as a rental deduction. Your income tax returns show you have claimed a deduction for your income protection insurance in each year from 2011-2015.