INSURANCE: INSIDE OR OUTSIDE SUPER? Structuring your insurance tax-effectively.

HOW DOES IT WORK?Personal insurance is a smart way to protect your quality of life and provide support for your loved ones if you get sick or injured.

While you often hear how important it is to have sufficient cover, it’s just as important to be smart about the structure of your insurance – so that the dollars you pay for premiums work harder for you.

Most types of life insurance can be held inside or outside of super. These include:

• Income Protection (IP). Pays a regular monthly benefitif you become severely disabled by sickness or injuriesand you are unable to work – potentially helping yourpartner take time off work to care for you and/or covermortgage repayments.

• Living/Trauma Insurance. Pays a benefit if you suffera serious illness or accident – helping you cover majormedical expenses and/or paying for help around the house.

• Term Life. Pays a benefit if you die or become terminallyill – helping your family take care of debts and ongoinghousehold expenses.

• Total & Permanent Disablement (TPD) Insurance. Paysa benefit if you are permanently disabled – helping coverthe long-term costs of care for you and your family.

There are advantages and disadvantages to holding insurance inside or outside of super.

Do you and your family have adequate insurance cover?

Did you know there is a more tax-effective way to fund your insurance premiums?

1. Life insurance proceeds will be subject to CGT if paid to someone other than the original beneficial owner and that person / entity acquired the policy for consideration. TPD and Living insurance is subject to CGT if the proceeds are paid to someone other than the life insured or a defined relative.

Concessional contributions Non-Concessional contributions

Insurance inside super • IP, Term Life and TPD insurance premiums aregenerally tax deductible to your super fund.

• You can pay your premiums using accumulatedsuper money or by making additional super contributions – which may come from your before-tax income.

• While most insurable events for IP, Term Lifeand TPD result in a condition of release, there are some limited situations where you may not be able to access the insurance benefits until you retire.

• The tax rate payable on a death benefit

Insurance outside super • IP insurance premiums are generally tax deductible.

• Living, Term Life and TPD benefits aregenerally tax free1.

• Insurance benefits are paid directly to youor your nominated beneficiary.

• Living, Term Life and TPD insurance premiumsare generally not tax deductible when paid forpersonally.

Securitor Financial Group Limited ABN 48 009 189 495 AFSL 240687 Australian Credit Licence 240687. This publication is current as at August 2013. This publication provides an overview or summary only and it shouldn’t be considered a comprehensive statement on any matter or relied upon as such. The information in this publication does not take into account your objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it and obtain financial advice. Any taxation position described in this publication is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. The rules associated with the super and tax regimes are complex and subject to change and the opportunities and effects will differ depending on your personal circumstances. SECCB14178GC-0813lc

TAX TREATMENT AT A GLANCEThe following table summarises the tax treatment of premiums and payouts (benefits) inside and outside super.

From 1 July 2014 living insurance cannot be purchased inside super. Living cover will only be purchased outside of super. Premiums for living insurance are generally not tax deductible.

Inside super Outside super

Income Protection Are premiums tax-deductible? Yes Yes

Are benefits taxed? Yes Yes

Term Life Are premiums tax-deductible? Yes No

Are benefits taxed? • Tax-free to dependants• Taxable if paid to non-dependants

(with concessions)

Generally tax free

TPD Are premiums tax-deductible? Yes* No

Are benefits taxed? Taxable (with concessions) Generally tax free

* Deductions for own occupation cover may only be partially deductible.

WHAT DOES IT MEAN FOR ME?Whether you have insurance cover inside or outside of super depends on your personal circumstances and needs. By choosingthe right combination, not only can you have the appropriate insurance cover to give peace of mind, but you can do it in a costand tax-effective manner.

STRATEGY IN ACTION

As the table below shows, the higher your marginal tax rate, the bigger the potential saving by taking insurance inside

super. Before-tax cost of a $1,000 insurance premium:

Taxable income Marginal tax rate (inc. Medicare levy)

$37,001 – $80,000 34%

Before-tax cost outside super

$1,515

Before-tax cost inside super

$1,000

$80,001 – $180,000 38.5% $1,626 $1,000

Over $180,000 46.5% $1,869 $1,000

Source: BT Life Insurance. Assumes insurance is arranged through a taxed super fund.

Note: Most insurance premiums are tax deductible to your super fund so it may offset other taxable income (such as investment income and concessional

super contributions) your fund receives throughout the year.

For more information, please contact your financial adviser

Contact us for further information on 1300 761 669 or email to info@ofm.com.au