Protect your income and you may save at tax time

What would happen if you couldn’t work and your income suddenly stopped?
Parents and daughter playing on couch
It’s almost the end of financial year, which means it’s the best time to take out income protection insurance if you want to save. Your premiums may be tax deductible.

Why do I need income protection?

Your income is your biggest asset and income protection is an essential component of your financial plan, replacing up to 70% of your income if you can’t work due to illness or injury. Check to see if you have income protection (also known as salary continuance) as part of your superannuation. This premium is not tax deductible and you should check the amount of cover it provides.

Who is income protection suitable for?

Income protection insurance is important for anyone who would need their income to continue if they were sick or injured and couldn’t work.

It’s even more important if:

  • If you are self-employed and don’t have employer-provided extended sick leave benefits.
  • If you have debt, such as a mortgage that would need to be paid if you weren’t earning an income.
  • If you have a partner and/or children that would need supporting if you couldn’t work.

There are no medicals or blood tests and you’re covered as soon as your application is accepted. You can even apply online.

How much does it cost?

Insuring yourself may cost less than insuring your car or your daily cup of coffee.

Expense   Average monthly cost
 Daily coffee  $120
 Car insurance  $119.95*
 Income protection   $56.04 (before tax deduction)**

Here’s another example, Michael is a 39-year-old employed public relations consultant who earns $120,000 per year. He decides to take out an RACQ Income Protection Insurance policy with an annual premium of $883.03, which replaces up to 70% of his income (up to $10,000 per month for his chosen benefit period).

This entitles him to receive $7,000 a month if he becomes ill or injured and unable to work. Up to 100% of his premium may also be claimed as a tax deduction in the current financial year. Assuming that Michael is on a marginal tax rate of 37% (excluding the Medicare levy), this would result in a tax deduction of $340.40 This represents a net cost to Michael of just $538.60.

How can I save at tax time?

If you pay your premium as an annual amount before 30 June 2022 and you may be able to claim it on tax in this financial year. If you prefer, you can pay fortnightly or monthly and claim in next year’s financial year. You’ll receive a tax statement to help you with claiming.

Get a quote

Quote criteria:

*The RACQ comprehensive car insurance premium is for a 35-year-old male, living in Brisbane QLD. He drives a 2019 Toyota Camry Ascent, automatic, market value, $650 excess. He has held his licence for 15 years and his car is on the street during the day and garaged at night and there is no finance on the vehicle. Monthly premiums include the policy fee, government taxes and charges. Quoted 12 May 2022. Insurance products (excluding Travel Insurance and the Life and Income Protection Insurance suite of products) are issued by RACQ Insurance Limited ABN 50 009 704 152 (RACQ). Conditions, limits and exclusions apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the PDS and any applicable Supplementary PDS before making a purchase decision on the product. You can also access our Target Market Determinations on this website.

**The RACQ Income Protection policies assume a 35-year-old male, living in QLD, non-smoker, degree-qualified tax accountant, annual income $100,000, $5,833 monthly Income Protect benefit, 90 day waiting period, benefit period 2 years. Quoted 12 May 2022.

Copyright © 2022 AIA Financial Services Pty Limited (ABN 68 008 540 252, AFSL 231109). All rights reserved. This information is current at the date of this publication and is subject to change.

RACQ’s Life and Income Protection Insurance suite of products described on this website is distributed by RACQ Operations Pty Ltd ABN 80 009 663 414, Authorised Representative Number 234978 (RACQO), an authorised representative of AIA Financial Services Pty Limited ABN 68 008 540 252, AFSL 231109 (AIAFS) and is issued by AIA Australia Limited ABN 79 004 837 861, AFSL 230043 (AIAA). RACQO is a distributor only; it does not sell, issue or guarantee these products. AIAFS and other authorised representatives of AIAFS are also involved in distributing these products. Descriptions of product benefits and features are a summary only.

This provides general information only, without taking into account factors like the objectives, financial situations, needs or personal circumstances of any individual and is not intended to be financial, legal, tax, health, medical, nutritional or other advice. Before acting on the information in this publication, individuals should consider its appropriateness having regard to such factors. The case studies provided are for illustrative purposes only.

You should read the relevant Product Disclosure Statement (PDS), any applicable Supplementary PDS and Target Market Determinations available on this website before deciding to acquire or continuing to hold any of these products. Cover is subject to terms, conditions, limitations and exclusions.

AIA Australia has adopted the FSC Life Insurance Code of Practice, which contains minimum standards of service that customers can expect from insurers. The code can be found at

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Things to note

The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice or professional advice and does not take into account any person’s particular circumstances. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives and needs.