The Federal Government has finalised the tax treatment rules on total and permanent disability (TPD) insurance in superannuation funds.

The amendment to the Income Tax Assessment Act will allow 100% deductions of the cost of the policy for any occupation TPD cover.

Conditions such as cognitive loss, activities of daily living and home duties conditions are also included in the 100% deduction.

Funds offering TPD own occupation cover will be able to claim a 67% deduction while TPD bundled with life cover will enable a 80% deduction.

Because the amendment has specified the deductable amounts for the different types of policies, funds will avoid the need to hire an actuary to calculate the proportions that can be claimed.

The tax treatment of TPD will be applicable to the current financial year ending June 30 2012.