If you have life insurance, and if you’ve got kids and a mortgage then it is very desirable that you do, the best way to have your life insurance covered is to have it paid through your superannuation fund.

The reason for this suggestion is that life insurance, these days, no longer qualifies for tax deductibility. That was cut out years ago.

However, as superannuation funds are set up for the purpose of providing for members in retirement, life insurance is seen by the Government as being an appropriate expense, tax deductible, for a super fund.

As superannuation funds only pay tax at the rate of 15% the fact that a life insurance premium can be used to reduce tax paid by the super fund may not seem to be a very big deal when you work out how much tax is saved within the super area.

However when the opportunity exists for some extra superannuation to be deducted from salary through a “salary sacrifice” and this is coupled with life insurance being paid through the super fund the savings can be very substantial.

For example a taxpayer with a taxable income of say $81000 with a life insurance premium of $605 would have to use $1000 a year from that salary to meet those payments outside the super area. If $1000 was “sacrificed” into superannuation he would not only have his life insurance paid for by the superannuation fund but would have an annual investment into super of $421 after tax which would make a substantial difference to his total super entitlement on retirement.