The Federal Government will allow a 100% tax deduction for any occupation total and permanent disability (TPD) policy that is sold through a superannuation fund.

A new consultation paper sets out a sliding scale for deductions, depending on the amount of disability covered.

These range from a 50% deduction for a policy that pays on the insured not being able to perform daily living activities, with a loss of limb add-on up to the full deduction for a policy with any occupation cover.

The paper is seeking the industry’s view on the percentages to be allowed under a new bill and the policy descriptions.

The Government also wants the financial services industry to detail any other policies that could be included in the list of deduction to be allowed.

Submissions are due by July 1.

Assistant Treasurer Bill Shorten says the Tax Laws Amendment Bill, which passed through the Senate last week, will define in a simplified form the amount of deductions to be claimed.

“These changes will give many superannuation funds the option of using a simpler method to determine the deductible portion of TPD insurance premiums without having to engage an actuary,” he said.