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Disability Income Benefits
The tax treatment of disability income benefits.
As from 1 March 2015 the tax treatment of this benefit is as follows:
- The premium which the Employer pays for this insured benefit is regarded as a fringe benefit in your hands, so you will be taxed on the amount of the premium each month. This means that in effect the premium will be paid out of your after-tax income. The premium is however a small percentage of your pensionable salary, so the fringe benefit tax will be small.
- However, should you become entitled to a disability income benefit, the monthly benefit you receive will be paid to you free of tax. This also applies to any members who were already in receipt of a disability income benefit on 1 March 2015 – their income after that date will also be paid free of tax.
Disclaimer
In providing the material that follows, the Fund has tried to reflect the tax treatment of contributions and benefits accurately at the time of writing, but the Income Tax Act is very complicated and is subject to regular changes. In the event that the following material conflicts with the Income Tax Act, the Act will apply. Because the Income Tax Act is so complicated, it is very important that you seek specialist advice if you have questions about taxation of your retirement benefits and when you have to make decisions, for instance about the form of the benefit that you take after you leave office.