Income protection policies are essential in a sound financial plan. They cover you in the event of a disability by providing a monthly income when you cannot work. They are offered by most assurers as free-standing policies and through pension and provident funds as employee benefits.
Up to now the contributions made to income protection policies are tax deductible on your individual tax return.
However if and when the policy pays you the income it will be taxable in your hands… no free lunches with SARS.
From March, the tax treatment changes for everyone. You no longer will be able to get the deduction, however, the income provided should you claim will tax free.
If you have income protection provided on a scheme paid on your behalf by your employer, you will have the contributions added to your payslip as a fringe benefit which results in you no longer receiving a tax break. So expect your take-home pay to be less from March.
SARS recoups the tax now and you only benefit if you claim.
Read more from Paul Roelofse at www.investforlife.co.za
This article first appeared on 702 : The implications of Income Protection no longer being tax deductable