The Taxation Laws Amendment Act was promulgated in December 2013. However, effectively the new changes only come into effect from March 2015. We will highlight some of the important changes in our newsletters between now and March next year.
One of the significant changes affects disability income protection schemes, whether individually owned or as part of an employee benefit group scheme.
Currently premiums paid towards an income protection plan are tax deductible from income with no limit. However, in the event of a claim, the income benefit is fully taxable in the recipient’s hands. This will now change from 1 March 2015. Premiums for such cover will no longer be tax deductible; however the income benefits when paid on claim will be tax free for the recipient. In the case of a group employee income protection benefit, where the employer pays premiums, the amounts paid on behalf of each employee will attract fringe benefits tax. However, employers will continue to be able to deduct the premiums for tax purposes.
Please contact us if you should have any queries on this upcoming change.