As the end of the financial year (EOFY) approaches in Australia, it’s the perfect opportunity to review your finances and ensure your insurance coverage is up to date. While many Australians diligently prepare their tax returns, insurance considerations are often overlooked during this crucial period, resulting in missed tax deductions and inadequate financial protection.
This comprehensive EOFY insurance guide provides a detailed checklist and practical tips to help you navigate tax time effectively. Whether you’re looking to maximise deductions, update your coverage, or simply ensure your financial protection is adequate, this guide will walk you through the essential steps for a smooth EOFY experience.
Why Insurance Matters for EOFY Tax Planning and the New Financial Year
Insurance isn’t just about protection—it can also impact your tax position significantly. Many insurance premiums may be tax-deductible under specific circumstances, potentially reducing your taxable income and increasing your tax refund.
Beyond potential tax benefits, reviewing your insurance at EOFY ensures you maintain adequate coverage against unexpected events. This is particularly important if you’ve experienced changes in your income, acquired new assets, or undergone significant life changes over the past year.
Insurance reviews at EOFY also help you meet any legal or lender requirements. For example, if you’ve taken out a new mortgage, your lender will require adequate home insurance. Similarly, if you’ve started a business, you may need specific types of coverage to meet regulatory requirements.
The Essential EOFY Insurance Checklist
1) Review Your Current Insurance Policies
The first step in your EOFY insurance checklist is to gather all your current insurance policies. This includes life, income protection, health, home and contents, car, and any other policies you may have.
Keep a record of your important insurance paperwork and documents such as:
- Policy numbers
- Premium costs
- Renewal dates
- Insurer contact details
Check each policy’s details carefully to ensure they still meet your needs. This is also the perfect time to confirm that your beneficiaries are up to date, especially for life insurance policies.
2) Update Your Coverage for Personal Circumstances
As your life circumstances change, so should your insurance coverage. The EOFY is an ideal time to adjust your policies to reflect any changes in your assets, income, or personal situation.
Have you purchased a new property, renovated your home, or acquired valuable items? Has your income increased or decreased? Have you welcomed a new family member? All these factors can significantly impact your insurance needs.
Ensure your sum insured accurately reflects your current needs and asset values. If you’re looking to maximise your house valuation, remember that underinsurance is a common problem in Australia, leaving many people financially vulnerable when making claims.
3) Document Your Assets
Maintaining an updated inventory of your valuable possessions is crucial, especially for home and contents insurance. This documentation will be invaluable if you ever need to make a claim.
Take photographs or videos of your belongings, particularly high-value items. Keep receipts and professional valuations for major purchases in a safe, easily accessible location—preferably both physical and digital copies.
Consider using a digital inventory app or spreadsheet to track your assets, including purchase dates, values, and serial numbers where applicable.
4) Assess Risk Management Practices
EOFY is the perfect time to evaluate whether you have the right mix of insurance types to protect against various risks.
Consider any new risks that may have emerged over the past year. For example, if you’ve started working from home, you might need additional coverage for business equipment. If you’ve begun renting out a property, landlord insurance would be essential.
Other risks to consider include cyber threats, travel plans, or changes in health conditions that might warrant additional or specialised coverage.
5) Check for Tax-Deductible Premiums
One of the most overlooked aspects of insurance at tax time is identifying which premiums are tax-deductible.
Income protection insurance premiums are generally tax-deductible for individuals, as they insure against the loss of income. However, life insurance, trauma insurance, and critical illness insurance premiums are typically not tax-deductible unless held through superannuation.
For specific advice on your situation, it’s advisable to consult with a tax professional who can help identify all potential deductions related to your insurance premiums.
6) Common Insurance Mistakes to Avoid at EOFY
Many Australians make costly mistakes when it comes to insurance at EOFY. Here are some common pitfalls to avoid:
Forgetting to update policies after major life changes is perhaps the most common oversight. Marriage, divorce, having children, buying property, or changing jobs all necessitate insurance reviews.
Overlooking tax-deductible premiums is another frequent error. Many taxpayers miss out on legitimate deductions simply because they’re unaware that certain insurance premiums can reduce their taxable income.
Poor record-keeping can also cause headaches at tax time. Without proper documentation of premiums paid and coverage details, you may struggle to claim deductions or process claims efficiently.
Underinsuring assets is a significant risk that becomes apparent at claim time. Many Australians discover too late that their coverage isn’t sufficient to replace damaged or lost assets at current market values.
Relying on wrong or incomplete information can lead to costly mistakes. Always check for important information on insurance and financial websites to avoid scams and ensure you’re making informed decisions.
7) Actionable EOFY Insurance Tips for Individuals
To make your EOFY insurance review more effective, consider these practical tips:
Set a calendar reminder for annual insurance reviews about one month before EOFY. This gives you ample time to make any necessary changes before the financial year closes.
Compare policies across different providers to ensure you’re getting value for money. Insurance markets are competitive, and better deals may be available than when you first took out your policies.
Utilise online insurance calculators provided by insurers or financial websites to quickly check if your coverage levels are appropriate for your current situation.
Consider bundling policies with the same insurer where possible. Many insurance companies offer multi-policy discounts that can significantly reduce your overall premium costs. For more information, you can compare landlord insurance policies to find the best coverage for your needs.
For complex insurance needs, discuss your situation with a qualified financial adviser or insurance broker who can provide personalised recommendations.
When considering extended warranties, weigh the cost carefully and decide if the extra expense is justified, as it may not always provide better protection than your existing rights.
Maintain focus and put in the necessary effort to streamline your EOFY insurance review. Staying organised and prioritising key tasks will help you get the most out of your insurance and tax planning.
8) EOFY Insurance, Tax, and Tax Returns: What You Need to Know
The Australian Taxation Office (ATO) estimates that billions in legitimate deductions go unclaimed each year, with insurance-related deductions forming a significant portion of these missed opportunities.
For the 2023-24 financial year, the average tax refund was approximately $2,800. Ensuring you claim all eligible insurance-related deductions could potentially increase your refund amount.
When preparing your tax return, be sure to have all insurance-related documents ready, including:
- Annual statements showing premiums paid
- Policy documents indicating coverage types
- Receipts for one-off payments
- Documentation of any claims made during the financial year
These documents will support your deduction claims if the ATO requests verification.
Key Takeaways
- Review all insurance policies before 30 June every year to ensure they reflect your current circumstances.
- Update your coverage to account for new assets, changes in income, or significant life events.
- Check which insurance premiums are tax-deductible and ensure you have the documentation to support your claims.
- Maintain detailed records of assets, premiums paid, and policy details for both tax and claims purposes.
- Consider bundling policies and comparing providers to get the best value for your insurance dollar.
- Avoid underinsurance by regularly reassessing the replacement value of your assets.
- Consult with financial professionals to optimise your insurance strategy and maximise tax benefits.
Make it happen this EOFY—take action on your insurance checklist and set yourself up for a more secure and financially savvy year ahead.