Insurance in super
Salary continuance insurance comparison
The following table compares salary continuance insurance (SCI) held within superannuation to cover held outside superannuation.
|SCI with benefit period to age 65||SCI (employer owns policy)||SCI (employee owns policy)|
|Deductibility of insurance premium||Premium fully tax deductible to fund trustee provided that the benefits payable under the terms of the insurance policy comply with the requirements1 of the SIS Act.||Premium deductible to the employer as an expense incurred in the course of running a business.||Premium deductible to the employee as an expense incurred in deriving assessable income.|
|FBT on insurance premium||FBT does not apply to super contributions made by the employer to pay for the premium.||FBT does not apply provided the employee does not have rights or entitlements to benefits under the contract.||FBT does not apply (not an employment benefit)|
|Capacity to make benefit payment to beneficiary||Fund's trust deed, sole purpose test and conditions of release and cashing restrictions1||A contract, such as an employment contract, between the employer and the employee covering the circumstances in which SCI proceeds will be paid to the employee.||Part of the contract of insurance|
|Assessment of insurance proceeds to policy owner||Non-assessable to fund trustee. Assessable to member receiving the payments.||Assessable to employer||Assessable to employee - see tax assessment below|
|Deductibility of benefit payment from policy owner to beneficiary||Non-deductible to fund trustee||Deductible to employer||Not applicable|
|Taxation of SCI benefit payments||SCI benefit payments are not super benefits and are assessed as ordinary income and taxed at marginal income tax rates in the hands of the employee. No 15% tax offset is available.|
1 These requirements, expressed in the SIS conditions of release and cashing restrictions, are that the benefit must be paid as a non-commutable income stream for the purpose of continuing the gain or reward the member was receiving before the incapacity, for a period not exceeding the period of incapacity.
Last modified: Wednesday, July 24, 2019