Life Insurance within an SMSF

Cover Types

NobleOak offers Life Cover, TPD (any occupation) and Income Protection Insurance that can be held within a SMSF. Unlike Life Insurance that can be obtained outside superannuation, it’s important to know that there are some restrictions that are required under The Superannuation Industry (Supervision) Act 1993, also known as (SIS) regulations, that will apply to the cover you select.

• With Life cover, life insurance under superannuation doesn’t permit certain ancillary benefits to be paid. As such, if the cover is held by an SMSF (as a Trustee Member) NobleOak will not be able to pay the Funeral Advance Benefit, Financial Advice Benefit or Grief Counselling Benefit.
• With TPD cover, insurance provided through a superannuation fund can only be provided where the insurable event is consistent with a SIS Act Condition of Release. If TPD insurance is held through a SMSF (as a Trustee Member) only the ‘Any’ Occupation definition is consistent with SIS regulations.
• Income Protection cover may be purchased by a SMSF trustee on behalf of the Life Insured as a member of the SMSF. NobleOak refer to these trustees who hold the insurance cover as ‘Trustee Members’. Under the superannuation laws, Income Protection Insurance under superannuation doesn’t permit certain benefits to be paid. As such, if the cover is held by an SMSF trustee under superannuation, the Recovery at Work, the Vocational Transition Program and Rehabilitation Expenses Benefit are not available. Under the superannuation laws to be eligible for a benefit, you must have ceased to be Gainfully Employed or ceased temporarily to receive any gain or reward under a continuing agreement to be Gainfully Employed.

Premiums

Your insurance premiums are paid using your superannuation contributions, not your post tax income. Premiums are often tax-deductible or made from gross income, but you should always check with your accountant.

Tax on benefits paid in the event of a claim

Following a claim, Life cover benefits paid by the SMSF to a financially dependent beneficiary are generally tax-free. Benefits paid to non-financially dependent beneficiaries typically attract tax.

Consider your retirement savings

It’s important to consider the fact that the insurance premiums paid from your SMSF will reduce your retirement savings, so you may want to make additional super contributions (subject to concessional caps). Check with your accountant.

Cover Types

NobleOak offers a full range of covers, including Life Cover, TPD, Trauma Insurance and Income Protection Insurance.

Premiums

You pay your insurance premiums from your after-tax income.

Tax on benefits

Benefits paid are generally tax-free when paid to your nominated beneficiaries.

Retirement savings

Your retirement savings are not affected by your insurance premiums.

An SMSF is a trust. An SMSF is different to an industry or retail super fund – it’s a private super fund that members manage themselves.

An SMSF is different from other super funds in that SMSF members are also the trustees of the fund, except where a corporate trustee is appointed (in which case the members must all be directors of the trustee). In practice, this means that SMSF members manage the fund themselves for their benefit, and they are responsible for complying with all taxation and superannuation regulations. Between 2 and 6 members are allowed in an SMSF although care is needed when determining the number of members because some State and Territory laws restrict the number of trustees a trust can have to less than six.

Having an SMSF can be a good option if you want more control of how your retirement savings are invested. But you also need to ensure you’re prepared to put the time and money into meeting your SMSF obligations and have sufficient assets to achieve the relevant economies of scale.

The Australian Securities & Investments Commission (ASIC) and the ATO outline the importance of covering all the bases when setting up a SMSF.

Life Insurance and SMSFs

An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants; and all decisions made by SMSF trustees must be in the best financial interests of the members. The Superannuation Industry (Supervision) Act stipulates that all trustees of SMSFs must take steps to consider the need for Life Insurance covering every SMSF member. This requires formal documentation in the fund’s minutes and must be reviewed on an annual basis.

There can be a number of potential benefits of buying Life Insurance through your SMSF, including:

• Tax savings: Contributions to superannuation funds can be tax-deductible, encouraging members to increase their contribution levels within the prescribed limits.
• Tax-deductible premiums: the Trustee of the SMSF may be able to claim a tax deduction on the insurance premiums paid by the fund which reduces tax paid on capital gains, investment earnings and other taxable contributions received.

Superannuation is a detailed area which changes from time to time, so we suggest you obtain tax or accounting advice when considering your taxation affairs or those of your SMSF.

NobleOak’s Life Insurance

Taking Life Insurance through your SMSF can be a simple and cost-effective way to provide for your family, and protect other SMSF members, if you were to pass away.
Some of the benefits of choosing NobleOak’s Life Insurance cover:

High cover levels

You can apply for up to $25 million cover for Life Cover, and up to $5 million for Total and Permanent Disability (TPD) Insurance, without having to go through a financial adviser.

Competitive premiums

We look to keep an eye on our overheads and this can mean competitive premiums for you.

Fully underwritten cover

We take the time to get to know you upfront with a comprehensive underwriting process. That gives you more certainty at claim time.

There are potential benefits of buying Life Insurance through your SMSF.

For example, you can pay your premiums from the fund instead of out of your own pocket.

Your SMSF may be able to claim a tax deduction on the premiums which reduces tax paid on capital gains, investment earnings and other taxable contributions received. Keep in mind though that superannuation is a detailed area which changes from time to time, so we suggest you obtain tax or accounting advice when considering your taxation affairs or those of your SMSF.

NobleOak Premium Life Direct offers high levels of cover. You can apply for up to $25 million cover of Life Cover and up to $5 million of Total and Permanent Disability (TPD) cover, without having to go through a financial adviser.

In addition, NobleOak provides the flexibility to move your insurance out of your SMSF without cancelling your plan.
This could be beneficial if your SMSF members’ requirements changes, or you no longer want to pay premiums out of your SMSF funds.