Are life insurance premiums tax-deductible in Australia?

Generally, life insurance premiums are NOT tax-deductible in Australia when you purchase a policy outside of superannuation, according to the Australian Taxation Office (ATO). However, there are some important exceptions and nuances. If you hold life insurance through your superannuation fund, the premiums are paid from your pre-tax super contributions, which effectively provides a tax benefit, though you cannot claim a personal deduction. For self-managed super funds (SMSF), the SMSF trustee may be able to claim a deduction for insurance premiums, though individual members cannot. Income protection insurance is the major exception – premiums for income protection are tax-deductible when held outside super, as they protect your income earning capacity. Some life insurance policies include a 'business expenses' component which may be partially tax-deductible if used for business purposes. The tax treatment of life insurance payouts is also important: lump sum death benefits paid to a spouse or financially dependent child are generally tax-free, whether from super or retail policies. However, if paid from super to a non-dependent adult child, tax may apply. Always consult a qualified tax adviser or financial planner to understand your specific circumstances, as Australian tax law is complex and individual situations vary.