Proposals to The Tax Treatment of Individual–Based Insurance Policies to be Delayed By a Year
13 September 2013
Posted by: Author: Erich Bell
Author: Erich Bell (SAIT)
'Renegotiation of income protection policies will be administratively difficult'
On Wednesday, September 11, Treasury presented the draft response document to the draft Taxation Laws Amendment Bill, 2013 to Parliament's Standing Committee of Finance. One significant proposal which drawn a lot of attention was the tax treatment of individual-based insurance policies.
Under the current state of affairs, there are two types of disability insurance plans that are offered to individuals - capital protection and income protection with both of these disability plans being treated differently for tax purposes.
With capital protection plans, the individual takes out cover against a loss of his/her income earning capacity. This will typically provide cover in the event that an individual loses a limb or becomes mentally incapacitated which affects the individual's ability to perform his daily employment duties. The premiums paid on these policies do not qualify for a deduction and similarly the pay-outs are not taxable.
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This article first appeared in moneywebtax.co.za