Tax deductible, provided:
OR
As from 1 March 2012, any premium paid by an employer to any insurer under an employer-owned insurance policy (Group life or disability plan) directly or indirectly, for the benefit of the employee, spouse, child, dependant or nominee will be taxed in the hands of the employee as a fringe benefit. The premium may, however, qualify as an income protection insurance contribution deduction by die employee. If the employer makes a lump sum payment for all employees the fringe benefit is determined in accordance with a formula, which will have effect of apportionment amongst all employees concerned
Any premiums disallowed as a deduction may be offset against the taxable proceeds.
If no premium was ever tax deductible, the proceeds will normally be tax free.
Policy loans from the insurer are also taxable if premiums are tax deductible.
Tax deductible for the employer if incurred in the production of income, as evidenced by the payment over to the employee in terms of:
As from 1 March 2011, employer provided severance payments for reasons of age, ill health and retrenchment are aligned with the taxation of lump sum benefits, including the R315 000 (2011:R300 000) exemption. This exemption does not apply to directors/membersif they at any time held an interest of more than 5% in the entity
Prior to 1 March 2011, a once off exemption of R30 00 applied where an employee had reached the age of 55 or the termination of services was due to ill helath or the employee was retrenched because of the amployer had ceased to operate or because of a reduction in personnel.