New Tax Updates with regards to your Income Disability Insurance
By Franz Smit
It's official. As of the 1st of March 2015, the tax deductions we have all been receiving from our income disability will be a thing of the past.
There is a pro and con to this. Unfortunately, this means that you will no longer be able to claim this portion of your premium back as a tax deduction, but the flip side is that there is no tax involved at all. This ultimately means that the amount you are currently insured for is the full amount that you will receive, should you have a claim.
It is the ideal time to have a look at your current income disability insurance. If you elected to take the maximum amount you qualify for, then you may find that you are actually over-insured as of next month. You'll need to adjust the values so that you don't waste money on excess insurance.
The positive side of this change is that what you see is what you get, and this makes the planning process much simpler and easy to understand.
This eliminates a lot of the guess work involved in calculating the final pay-out after tax and will ultimately place you in a better position when you claim.
Example - Under the old tax rules at claim stage:
Monthly insured income: R 50,000
Tax at 40% = R 20,000
Total pay-out = R 30,000
Example - Under the new tax rules (untaxed at claim):
Monthly Income: R 50,000
Tax at 0% = R 0
Total pay-out = R 50,000
Please ensure that you speak with your financial advisor or broker and make sure that you are not over-insured after these new tax laws come in to play. I'm sure you hate wasting money as much as I do.
If you are at all unsure or would like some clarification, please don't hesitate to contact me, I am more than happy to assist where I can.
Please note that this article is the opinion and an interpretation of the South African insurance industry by the author, and is not intended to malign any company or individual. Views may differ from other parties such as insurers or brokers. This article is meant as introductory information only and in no way constitutes advice. For tailored financial advice to suit your personal needs, please contact an independent financial advisor that specialises in aviation (just like pilotinsure). All content is subject to copyright and may not be reproduced in any form without the express written consent of the author.
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