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Thread: Deduction of personal income protection

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    just me duncan drennan's Avatar
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    Deduction of personal income protection

    I found out yesterday from my accountant that insurance against loss of income is a tax deductible expense (in terms of personal taxes). Here is the relevant piece of the Income Tax Act, which also covers other deductions which may be made by an employer,

    Quote Originally Posted by Income Tax Act
    Schedule 4. (2)(4)

    4) The amount required to be deducted or withheld from any remuneration under this Schedule by way of employees’ tax must be calculated on the balance of the remuneration remaining after deducting therefrom--

    1. any contribution by the employee concerned to any pension fund or retirement annuity fund which the employer is entitled or required to deduct from that remuneration, but limited to the deduction to which the employee is entitled under section 11(k) or (n), as the case may be, having regard to the remuneration and the period in respect of which it is payable;

    2. at the option of the employer, any contribution to a retirement annuity fund by the employee in respect of which proof of payment has been furnished to the employer, but limited to the deduction to which the employee is entitled under section 11(n) having regard to the remuneration and the period in respect of which it is payable;

    3. at the option of the employer, any premium paid by the employee in respect of which proof of payment has been furnished to the employer, in terms of an insurance policy—
      1. to the extent that it covers that employee against the loss of income as a result of illness, injury, disability or unemployment; and
      2. in respect of which all amounts payable in terms of that policy constitute or will constitute income as defined, but limited to the deduction to which the employee is entitled under section 11(a); and

    4. at the option of the employer, any contribution by the employee to a medical scheme as contemplated in section 18(1)(a) [and] in respect of which proof of payment has been furnished to the employer, if the employee is entitled to a rebate under section 6(2)(b),

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    Hi Duncan (and all)

    Please remember that this does not apply to PPS (The Professional Provident Society).

    Their "income protector" differs from that of other assurers and insurers in the sense that even though their product is "seen" to replace lost income, it actually pays because of an "inability to work" and thus "earn an income".

    No loss of income needs to be proven with PPS while life assurers require (contractually) proof of actual loss of income.

    Example: Assume the following to be true: a vet became ill and could not work for, say, two weeks. He appointed a locum (good client service and all that, you know) and did not loose a single cent in turnover - not even after having paid the locum (That is so because the handsome young bloke had ladies streaming in with their poodles, increasing the turnover).

    Life assurers will not entertain claims such as the aforementioned because no loss of income will have been suffered. PPS will pay such claims simply because the guy could not perform his duties.

    See? Different ideas, different way the Income Tax Act needs to respond.

    So they refused PPS policyholders the right to deduct premiums under said section of The Act.

    Harry

    Edit note from admin: The advice contained in this post is no longer appropriate due to changes in legislation. Please read the entire thread to ensure you have the latest applicable information available on this topic.
    Last edited by Dave A; 11-May-12 at 04:17 PM. Reason: inserted out-of-date content warning

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    just me duncan drennan's Avatar
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    Quote Originally Posted by Harryf View Post
    See? Different ideas, different way the Income Tax Act needs to respond.

    So they refused PPS policyholders the right to deduct premiums under said section of The Act.
    Thanks so much for that Harry! It is particularly relevant to me, as I am using PPS. Good thing to find out about that now, rather than during a tax assessment/audit

    Welcome to the forum, it is good to have you as a member, and I'm glad that the regular browsing has led to you posting

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    Thanks Duncan!

    I'll see if I can get the relevant info in writing and PM it to you (as an attachment (.pdf) - may I?)

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    just me duncan drennan's Avatar
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    Quote Originally Posted by Harryf View Post
    I'll see if I can get the relevant info in writing and PM it to you (as an attachment (.pdf) - may I?)
    Sure, go for it. Thanks

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    The size of the .pdf file exceeds the maximum allowed so I'll fax it. OK?

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    Silver Member Eugene's Avatar
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    Great post and info Harry! I'm also using PPS and is quite relevant to me - thanks!

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    Dave kindly uploaded the PDF to the server. You can read it here.

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    income protection tax

    Hello people,

    Just wondering, SARS says you can get "Income Protection Insurance" payments off your taxable income, but does anyone know which companies provide this insurance?
    It's kinda difficult to find info about this online.

    Any hints on who you use or know of would be helpful!

    Cheers,


    David

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    I think it is all the usual suspects - Liberty Life, Mutual & Federal, Santam...
    The trouble with opportunity is it normally comes dressed up as work.

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