Draft Taxation Determination

TD 94/D51

Income tax: is a premium payable on a trauma insurance policy by a self employed person or an employee an allowable deduction to the self employed person or employee?

• Please note that the PDF version is the authorised version of this draft ruling.
  This document has been finalised by TD 95/41.

FOI status:

Preamble

1. No. The premium payable under a trauma insurance policy is not an allowable deduction to an employee or self employed person.

2. The purpose of trauma insurance is to provide a capital amount to the insured if the insured suffers a specified medical condition. The policy does not replace earnings lost by the taxpayer.

3. The benefits payable under this type of trauma policy do not constitute assessable income under subsection 25(1) of the Income Tax Assessment Act 1936. In these circumstances, a deduction is not allowable under subsection 51(1) as there is no connection between the payment of premiums and the production of income. See FC of T v. D P Smith 81 ATC 4114; (1981) 11 ATR 538.

Commissioner of Taxation
19 May 1994

References

ATO references:
NO
BO Insurance Industry Cell

Related Rulings/Determinations:

TD 94/D49
TD 94/D50
TD 94/D52
TD 94/D53

Subject References:
life assurance company
trauma insurance policy
accident & disability insurance policy

Legislative References:
ITAA 25(1)
ITAA 51(1)

Case References:
FC of T v. D P Smith
81 ATC 4114
(1981) 11 ATR 538