What insurance can sole traders claim as a deduction?
Understand which insurance premiums may be deductible for a sole trader and which are not.
Summary
Sole traders may be able to claim deductions for insurance premiums that directly relate to carrying on the business. Premiums for income protection may also be deductible to the extent the policy protects assessable income, while premiums for private or capital cover such as life, trauma or certain disability benefits are generally not deductible.
What this means
Business insurance premiums such as public liability, professional indemnity and cover for business assets may be deductible when they are incurred in carrying on the business. For income protection insurance, a deduction may be available for the part of the premium that covers loss of assessable income.
You generally cannot claim the part of a premium that provides a capital or private benefit, such as life insurance, trauma or critical-care cover, or a lump-sum payment for injury. Premiums paid through super are not personally deductible. Mixed policies may need to be apportioned, so the policy terms matter.
Typical actions
- List each insurance policy and the purpose it serves.
- Separate business insurance from personal cover.
- Check whether the premium is capital or private in nature.
- If a policy has mixed use, work out a reasonable business portion.
- Keep records of premium payments and policy documents.
Official ATO sources
Last checked: 24 August 2026
Business deductions
Main ATO hub for business deductions.
Income protection insurance
Explains when income protection insurance premiums are deductible.
Related questions
- What deductions can sole traders claim?
- What records do sole traders need to keep?
- How is sole trader income taxed?
- Can sole traders claim car expenses?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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