Are Insurance Payouts Taxable in New Zealand?

Posted on October 4, 2023

Have you just received an insurance payout? You may be wondering if you need to pay tax on this. We’re here to help. The tax implication of insurance can get a little complex in New Zealand, so we wrote this blog to help demystify the topic for you. We’ve covered which payouts are not taxable, which are, and some that are situation-dependent. Check it out!

A quick disclaimer – this blog is intended as a guide only and shouldn’t be considered tax advice. For definitive tax implications specific to your situation, get in touch with a tax specialist. This blog is aimed purely at personal covers only. The tax landscape can get a bit complex when it comes to business covers, so we’ve left that out of this article.

Not Taxable Insurance Payouts

Let’s start with the types of payouts you do not owe tax on: this includes lump sums, agreed value and mortgage cover. We’ve addressed the pros and cons of each below.

Lump Sums


 Agreed Value


 Mortgage Cover


Taxable Insurance Payouts

Now let’s address which insurance payouts you do need to pay tax on in New Zealand. There’s only one, so it’s relatively simple.



Both Taxable and Not Taxable Insurance Payouts

Now, it’s not always black and white. For some payouts, you could be taxed or skip the tax. Let’s discuss disability income.

Disability Income

Another important note

Aside from just tax, you also need to be aware that some insurance payouts will affect your ability to receive certain government benefits like income support or disability payments. They can also impact estate planning and asset distribution after death. It’s best to talk to an expert about these implications, get in touch today.

Did you know?

As an employed person, if you pay income protection premiums, the premiums can be deducted against your personal tax return. The IRD believes that benefits on this policy are taxable. However, the premium costs are tax-deductible, which means you can claim this as an expense in your tax return – which could eventually lead to a big refund!

Confused? We can help

As you can see from the outline above, insurance payouts are not one-size-fits-all when it comes to taxation. It can very quickly get complex and at times confusing if you are not an expert in insurance. If you’re still feeling a little confused, get in touch with us on info@macdonaldwealth for a no-obligation chat to see how we can help you.