The great thing about life insurance payments in New Zealand is that if the owner of the policy is a person, then the payout is tax-free, so what you pay for is what you get.
Under New Zealand tax laws, you do not pay any income tax on any life insurance payment you receive. This income tax exemption applies to any claims related to loss of life, or illness, so relate to our Life Cover, Mortgage Cover and Funeral Cover policies, as well as our Trauma add-ons.
It’s also worth checking with your tax advisor if you have an income protection policy, as these payments relate to loss of income. Income is a taxable earning, so unfortunately you’re likely to need to hand over a portion to the IRD.
If a company / trust etc is involved in either paying for the premiums, or receiving the benefit of a life policy, then the tax rules get a bit more complex. So talking to your tax advisor is the way to go if you are unsure.
Just as an aside - you don’t pay GST for your life /mortgage / funeral cover premiums either, but there is GST on trauma and Income Protection – so if you are registered make sure you claim it back.
So while you shouldn’t take this information as tax advice, hopefully it will help you work out what questions you may want to ask your tax advisor.