Remember, disability income policies provide your clients with an income should they become disabled, so tax changes can have a significant impact on benefit payments.
This is how the new law affects these policies:
| Until 28 February 2015 | From 1 March 2015 onwards |
| The policy premiums your clients pay each month are tax deductible. | Policy premiums are no longer tax deductible. |
| Any claims paid on these policies are taxed. | Any claims paid on these policies are no longer taxed. Claims are paid in full. |
What are the implications of these changes?
- You will receive a tax certificate for the premiums paid for any disability income benefits between 1 March 2014 and 28 February 2015. The premiums paid as stated on this certificate can be claimed as a deduction from their taxable income on your 2014/2015 income tax return (IT12). This will be the last tax certificate you will receive for disability income benefits.
- If a client is in the process of claiming on their disability income benefit, then any benefit payment made in the 2014/2015 tax year will be taxed on the basis of the tax directives issued or standard personal income tax rates. Any disability income benefit payments made and the subsequent tax deducted (as recorded on their IRP5, which will be issued later in 2015) must be declared on their 2014/2015 income tax return (IT12).
- Any disability income benefit claim payments made from 1 March 2015 onwards will be tax free, and as such no IRP5s will be issued for the tax year starting on or after this date.
Kind regards,
Tersia van Nieuwenhuizen
Independent Contractor to Discovery Life
Direct: +27 21 975 3199
Fax: +27 21 975 3995
Email: tersiav@ic.discovery.co.za
URL: www.discovery.co.za
An authorised financial services provider - FSP No. 18147
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