Super funds want death and TPD tax equivalence

Superannuation funds want death and total and permanent disablement (TPD) insurance within superannuation to carry the same benefits as insurance sold outside of superannuation.

The Association of Superannuation Funds of Australia (ASFA) has used a submission to the Parliament Committee Inquiry into the Life Insurance industry to urge equal treatment, claiming the current regulatory settings are "distortive".

It said there were opportunities to reform what represented tax impediment and argued that the Government needed to "consider the distortive effect of the regulatory settings with respect to the taxation of insured benefits inside and outside superannuation".

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"While it is more cost efficient to provide death and TPD lump sum insurance through superannuation, the differing tax treatment of benefits paid out can lead to significant differences in the amount of the net benefit received by the member/beneficiaries," the submission said.

It pointed out that part of lump sum TPD benefits (before age 60) and all of death benefits (to non-dependants) paid from superannuation funds were subject to tax at a rate up to 32 per cent, whereas death and TPD insurance payouts made outside superannuation are generally tax free in the hands of the recipient.

"The benefits of insurance in superannuation could be improved by providing tax treatment more equivalent to non-superannuation arrangements," the submission said.

However the submission argued strongly for the benefits of providing insurance within superannuation, pointing out that for most Australians the insurance they have in their superannuation is the only life insurance they hold.

"The provision of group insurance in superannuation is therefore a crucial part of the system supporting Australians who suffer a health-related misfortune," it said.




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My hobby horse for years, particularly with TPD. How anyone can say that some poor bugger who is classified as TPD has suddenly hit the equivalent of winning the lottery of life, is beyond me. Here's a person who will never work again and who may need the lump sum to pay off debts etc. and they are paying part of the winning pot to the ATO. Hey, if you do win the real lottery then it's tax free.

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