Accounting for allowances and benefits for staff: Special benefits
Taxing life insurance and personal accident premiums
Sometimes you may pay the premiums for an employee's life insurance or personal accident policy.
Policies payable on maturity or surrender
Some examples of these policies are:
- endowment policies
- whole-of-life policies.
How to tax
If you pay the whole premium of a payable-on-maturity or surrender policy, and:
- the proceeds of that policy are to go to the employee, the premiums you pay are treated as salary or wages. Include the gross premium with wages for the period that the premium was paid to the insurance company.
- the proceeds of the policy are payable to you, the premiums are not taxable to the employee, so you do not deduct PAYE.
Policies payable on accident or death only
There are various accident, temporary or term life insurance policies available on the market, and these have different tax implications.
How to tax
See the following table if you pay the premiums for accident or life insurance for your employees.
| If the policy is taken out by.. | and the policy covers.. | the premium is liable for.. |
|---|---|---|
| the employer | work accidents only | no deductions |
| the employer | non-work accidents | FBT |
| the employee | any type of accidents | PAYE and is treated as normal salary and wages |
Date published: 18 Jan 2007
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