If you have business insurance your premiums might be tax deductible. Find out how tax deductions and business insurance work.
In most cases, the premiums you pay for business insurance are tax deductible as long as you can prove that they are connected to your ability to earn an assessable income. In the words of the ATO, “you can claim the cost of any premiums you pay for insurance against the loss of your income”.
Any insurance you take out to protect a business’ capacity to earn an income or to protect a business’ assets are therefore tax deductible. This includes premiums for workers compensation insurance, professional indemnity insurance, fire damage, theft cover, public liability insurance, loss of profits and commercial motor vehicle insurance.
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Can I claim my business insurance on my taxes?
According to the ATO, you can claim tax deductions for most costs that are incurred in the running of your business. However, there are exceptions to this. You are not able to claim for private or domestic expenses.
Insurance premiums are deductible if they have a necessary connection with earning an assessable income. Premiums are deductible for the following types of insurance:
- Workers compensation insurance
- Professional indemnity insurance
- Income protection insurance
- Public liability insurance
- Fire and theft cover
Can I claim key person insurance as a tax deduction?
Premiums for key person insurance may be tax deductible if the policy was taken out for revenue purposes (ie, to protect revenue generated by the business).
Premiums for key person insurance taken out to cover capital losses are not tax deductible. This includes a benefit payment to a worker's estate following his or her death.
The expenses that you are eligible to claim will depend on the structure of your business, whether you hold and sell trading stock and the nature of your income and expenses. If you are unsure whether you are eligible to claim your insurance premiums, check with a tax professional.
Can I claim income insurance protection as a tax deduction?
If you take out income protection insurance to cover you against a loss of income, the premiums you pay on this type of policy can also be claimed as tax deductions. Business expenses insurance premiums are also considered to be tax deductible.
For more information on which insurance premiums are and aren’t tax deductible, speak to your accountant or financial adviser.
What other forms of business insurance are tax deductible?
You can typically claim the following insurance premiums as tax deductions:
- building insurance
- theft cover
- public liability insurance
- professional indemnity insurance
- workers compensation insurance
- loss of profits insurance
- commercial motor vehicle insurance
What other business expenses can I claim on tax?
You can typically claim tax deductions on a range of expenses related to running your business. It's always a good idea to consult a tax professional if you're unsure about what to claim. The following businesses expenses can generally be claimed on tax:
- Accounting, bookkeeping and BAS preparation
- Advertising and marketing expenses
- Bank fees and other charges
- The costs of running business vehicles
- Council rates and fees
- Electricity, gas, fuel etc
- Interest on business loans or overdrafts
- Legal fees
- Office expenses and stationery
- Registrations and licences
- Business travel
- Computers and software programs
- Depreciation of plant and equipment, business vehicles
- Lease fees
- Service and repairs to plant and equipment
- Employee allowances, bonuses and commissions
- Labour hire fees
- Professional fees or registrations
- Recruitment costs
- Staff training
- Uniforms and protective clothing
What sort of business insurance cover do I need?
This will depend on a whole host of factors including the type and size of your business, your annual turnover and the risks you face. You’ll also need to consider the likelihood of those risks becoming reality and how much that would cost your business.
To start, you need to consider your insurance needs and the nature of your business. Are you looking for a policy that provides cover against basic risks, such as fire damage and theft, or do you want a comprehensive business insurance plan that protects you against an array of potential problems? How much do you want to insure your business for? Factors like your annual turnover and the number of employees you have can also be contributing factors.
Then there’s the nature of your work to be taken into account. A construction site will obviously be exposed to a completely different range of risks than a small office-based business, while some businesses will need cover for expensive and specialised equipment that others won’t.