There is a great deal of debate about tax treatment of Income Protection. Given the importance of this product as society progressively shifts towards greater dependence on living benefits from a focus on death benefits this matters. A little while ago I asked the FSC to tell me what their goal in lobbying for consistent tax treatment is. This was their response:
- Consistent income tax and GST treatment of income protection products. The income tax treatment is on the current Government work programme with an Officials Issues Paper the likely next step as part of the Government Generic Tax Policy Process (“GTPP”). The TAG will continue to lobby Tax Policy Officials for consistent GST treatment as part of this process also.
So far so good. So I blogged that, and this tax watcher on Twitter said something which shall we say contrasted with the above.
- "Review likely but outcome non-taxable non-deductible (AV) taxation. Existing indemnity policies are grandparented" Adding for good measure: "...years away. IRD got bigger projects on; no drive from industry to change tax treatment either"
Back in among the industry on LinkedIn JP Hale had this to say, in this case, he kind of put it differently.
- "...the IRD has repeatedly refused to review the position over the years"
It is, of course, perfectly possible that someone is right, and the rest are wrong. But clarity in long-term planning is handy, more so when contemplating a contract which can be hard to switch or change if your health has deteriorated. This is an example of a long-term issue we should be prioritising. Meanwhile, you may find this explanatory video helpful (yes, it is the right video, requires sound, and is suitable for work).