The Federal Government has amended a tax law to allow for the deduction of insurance premiums for disability superannuation benefits.

Financial Services Minister Chris Bowen says the changes mean the super industry can continue to deduct total and permanent disability (TPD) premiums until mid-2011.

From 1 July 2011, funds can only deduct premiums if policies have a connection to a liability to provide TPD benefits to their members and not other types of insurance.

Macquarie Adviser Services’ Head of Technical David Shirlow says the announcement is a “welcome development” and confirmation that disability insurance strategies have shifted considerably.

He says it also confirms the need for advisers and their clients to rethink long-term strategies on ownership of TPD insurance cover as a result of super tax reform.

“Previously the key drawback of holding own-occupation TPD insurance inside super was that in the event of a claim being paid there was also a risk that the benefit would not be able to be released to the disabled member immediately,” he said.