Concerns have been raised over policy definitions in Treasury’s plan to allow tax deductions for total and permanent disability (TPD) insurance sold through superannuation funds.

The Association of Superannuation Funds of Australia (ASFA) says in a submission to Treasury it’s concerned at the omission of two common add-ons – mental/cognitive loss and the inability to perform normal domestic duties.

“As these items are included in Regulation 4 of Income Tax (Transitional Provisions)

Regulations 2010, it seems logical that they would also be included in the new regulations,” ASFA says in its submission.

It is also concerned the policy-type deductions table in Treasury’s consultative paper assume TPD insurance is a stand-alone policy.

“Many policies are composite policies providing death, terminal medical condition, TPD and add-on cover with no split between the components,” ASFA says.

“Additionally, even where the insurance policy provides a split between the components, the split premiums are generally not reflected in administration systems which would typically only hold the combined premium.”  

ASFA is calling for Treasury to create a deduction table that reflects these composite policies.

“We are surprised that the inability to perform activities of daily living is only listed in the table as a stand-alone item,” it said. 

“In practice, this definition is often included in combination with the any occupation definition and loss of limbs.

“The reason for the inclusion of the ‘daily living activity’ definition in a group life policy for a superannuation fund is to cover those superannuation fund members who are either not working or are working on a casual basis only.” 

ASFA says there are 10 broad policy groupings for TPD insurance and 40 policy combinations that should be included in the table.

Policy definition concerns were also raised in a submission from the Industry Super Network and the Australian Institute of Superannuation Trustees in a joint submission.