Timing of insurer’s responses to PHI tax changes

Amendments to the Income Tax Act have already come into effect and hopefully your clients are all now well aware of the changes that have to be made with regards to the taxation of their income disability benefit premiums, as well as the changes to the taxation of disability benefits should there be a claim.

We have also communicated the responses of each of our insurers to these changes but there seems to be some confusion as to the effective date of these changes. Below please find confirmation of these, which should hopefully dispel any uncertainty:

  • Sanlam’s cap (after-tax cost to company remuneration) comes into effect from 01 July 2015 for existing schemes, i.e. for all existing schemes regardless of their review date (originally communicated as 01 June but pushed out by a month now) and from 01 March 2015 for new business.
  • Old Mutual’s cap (total post-tax cost to company) came into effect from 01 March 2015 for existing schemes, i.e. for all existing schemes regardless of their review date, as well as for new business.
  • Capital Alliance’s cap (net of tax income) applies from 01 July 2015 for existing schemes, i.e. it will be effective at each scheme’s review date from 01 July, and from 01 March 2015 for new business.
  • Hollard do not have a cap in addition to their Rand maximum for PHI benefits.

Although references to tax treatment contained herein do not constitute tax, legal or accounting advice and policyholders must secure their own advice to confirm how the tax treatment may apply to them, please do not hesitate to contact us with further queries should you have any and we will do all we can to help you find answers to them.

Yours sincerely,

The TSA Team

You’ll find all back issues of TSA Connect by visiting our blog and you can do that by clicking here. All information provided in TSA Connect newsletters is intended to inform and explain, but please remember to always check the current terms on policies when considering options and advising clients.

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