Claimable Insurance

Insurance is something we get a lot of questions about so here is a list of what can be claimed as a tax expense:

 

Claimable in Personal Tax Return 

  • Income protection where any payout is based on a percentage of your actual income 

 

Claimable against Rental Income

  • Rental dwelling replacement insurance
  • Landlords insurance (loss of rent)
  • Lenders mortgage insurance (low equity insurance fees)

 

Not Claimable 

  • Income protection where any payout is an agreed value
  • Personal home & car insurance
  • Life Insurance
  • Health/Medical Insurance
  • Permanent Disability Insurance
  • Trauma Insurance (critical illness)
  • Mortgage Repayment insurance

Mortgage repayment insurance used to be claimable.  An IRD statement back in 1995 concluded that it was tax deductible regardless of whether it was a requirement of the borrowings.  

In November 2013, the IRD released their interpretation policy (IS 13/03) which reverse their earlier position.

The IRD consider mortgage repayment insurance to be a form of life insurance.  The IRD now say that any insurance policy (whether mortgage, life, income or otherwise) given as security for a loan is not tax deductible.  Firstly, the IRD say that any premium for life insurance (and therefore mortgage repayment insurance) is capital in nature (as any payout would be an asset) so not claimable.  Secondly, the IRD consider that life insurance (and therefore mortgage repayment insurance) is not an expense incurred in borrowing money, even if the lender requires the insurance as security of the loan.  This is on the basis that the potential benefit received (ie lump sum insurance payout) is more than minor.       

Despite this, the IRD's rental guide and website both still list "mortgage repayment insurance" as a tax deductible expense.  I presume the IRD's rental guide and website would then be updated in due course.

At least some income protection insurance is still claimable.  So, if it's not an agreed sum policy, then you should request an end of year summary from the insurance provided each year which will state the amount of the tax deductible premiums to claim. 

Disclaimer: The above article is general in nature and we recommend you seek professional advice tailored to your specific personal situation.