Not all insurance policies are taxable in Australia. Some of these policies have an exemption as a result of their nature.
Insurance policies that are taxable in Australia are intermediary services related to the provision of casualty insurance (I.e., losses other than life or health).
These casualty policies are fully subject to GST in Australia. In Australia, the GST is referred to as the “Goods and Service Tax”.
Goods and Services Tax (GST) is a broad-based tax of 10% on the sale of most goods, services, and anything else consumed in Australia.
Insurance tax refers to paid premiums in which taxes are included and which are payable at the rates applicable on the date of purchase of the Policy.
That is, tax is levied on the value of insurance premiums paid by registered and unregistered policyholders.
If GST is included in an insurance premium, this will include the price of the insurance premium less the amount of stamp duty at G11 (non-capital purchases).
Is Insurance Taxable in Australia?
According to Treasury.gov.au, the Australian GST recognizes three types of insurance that are taxed differently.
Insurance Policies That Are Taxable in Australia
- Life Insurance
- Private Health Insurance (GST-Free)
- All Other Insurance
1. Life Insurance: Life insurance is input-taxed. You can’t claim a GST credit for any part of your insurance that relates to input-taxed sales you make. This is because life insurance policies involve a significant element of saving and are like a financial service. Therefore, life insurance is treated in the same manner as other financial services under the GST.
2. Private Health Insurance: Private health insurance is GST-free. Generally, GST is charged on insurance policies other than life insurance (which is input-taxed) and health insurance policies (which are GST-free). This treatment is consistent with the general treatment of health services under the GST.
3. All Other Insurance: All other insurance which is referred to as general insurance is fully taxable at the GST rate of 10 percent.
No Exemption from Tax on The Maturity of Policies
This is the direct opposite of the tax exemption. Here, when the premium is more than 10% or 20% of the sum assured as the case may be, then the policy is fully taxable.
When is Tax Exemption Allowed in Australia
When the premium paid on the policy does not exceed 10% of the sum assured any amount received on maturity of a life insurance policy or amount received as a bonus is fully exempt from Income Tax.
There are just many insurance companies in Australia to choose from. These companies are offering hundreds of plans for various needs and age groups. It is generally encouraged that one should have a life insurance plan. And also while choosing a plan, you should consider the tax implications.
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