Are insurance policies tax deductible in New Zealand?
“So, are any of my insurance policies tax deductible?” It’s a question that our clients ask us from time to time. Our answer? “Sometimes, but it depends…”
Like many things tax related – the answer is not a simple one!
In this blog, we’ll give an overview of which insurance policies generally are tax deductible – and which aren’t. Please note that this article shouldn’t be taken as tax advice. Anyone researching for the purposes of making a financial decision should speak with a qualified accountant or tax specialist before doing so.
Most personal insurance policies aren’t tax deductible – with the odd exception.
When you take out an insurance policy in your personal capacity, the cost of the policy will generally not be tax deductible in New Zealand. This includes health and life insurance, house and contents insurance, cover for vehicles and so on.
One exception to this rule is income protection insurance – a type of policy that provides financial support if you find yourself unable to work due to illness or injury. In New Zealand, income protection is tax deductible for both employed and self-employed people – however it should be noted that, in the event that you make a claim, the insurance payout you receive will be subject to income tax.
What about if you’re a business owner?
For businesses, there are a number of insurance policies that are tax deductible – these are generally insurances that are required operating costs. For example:
- Key person insurance policies – a type of policy that provides your business with financial support to cover lost revenue if a key member of your team can’t work due to illness or injury. Similarly to personal income protection, any payout is treated as taxable income by the IRD.
- Professional indemnity insurance & professional liability insurance – both of these are necessary operating costs, required by prudent business owners and are therefore tax deductible.
- Life insurance premiums paid on behalf of employees – if you’re an employer that pays for your employees’ life insurance then you are entitled to claim a deduction for that expense.
Need help with how to navigate the complexities of insurance? We can help.
Figuring out the right insurance set up for your family and business is often more complicated than you might think. Working out which policies are best, how much cover is really necessary and who has the most appropriate policy for your needs… there’s a lot to think about!
Working with a registered financial adviser who specialises in insurance will give you the peace of mind that you’ve gotten the best policy, for the best value. At Plus4, we have a network of registered financial advisers throughout the country, all dedicated to ensuring that their clients are well covered. We work with both individuals and businesses, so whatever your needs they can assist.
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