New regulations from 1 July 2014 require all new insurance policies issued to SMSFs to be consistent with the SIS conditions of release in respect of a member which means SMSFs can now only buy life policies to insure against:
- Terminal illness
- Permanent incapacity, or
- Temporary incapacity.
This means that trustees will no longer be permitted to acquire new trauma or own occupation TPD policies to use as part of these strategies from 1 July 2014.
Advantages of having insurance in a SMSF:
- Provides insurance protection for members
- Tax effective vs personal ownership
- Cashflow benefits of using accumulated funds in super to pay premiums
Disadvantages of having insurance in a SMSF:
- Premiums can be higher than group insurance rate
- Tax may be payable on some Life insurance and TPD benefit
- Contributions to pay insurance premiums count towards Super Cap
- Using existing funds to pay premiums reduces retirement balance
- Restrictions on the features and benefits available
If you would like help and professional advice on using your fund to protect your lifestyle against illness, disability or death then please feel free to call Michael on 02 9299 7044 to arrange a time to meet.