ASIC financial adviser exam, Investment, debt and insurance advice strategies question: tight budget after buying

ASIC examInvestment, debt and insurance advice strategies

Hannah, 31, a physiotherapist on A$85,000, has a tight budget after buying her first home. She wants income protection and asks her adviser whether to hold it through her super fund or in her own name outside super. Which statement about her choice is correct?

A Outside super, benefits are held back until she reaches her preservation age
B Inside super, she generally gets a wider disability definition than outside super
C Outside super, she cannot claim a tax deduction for premiums she pays personally
D Inside super, the premiums ease her cash flow but reduce her retirement savings

Show the answer and explanation

Answer: D. Inside super, the premiums ease her cash flow but reduce her retirement savings

Premiums paid inside super come out of Hannah's balance, so her take-home pay is not stretched, but every premium reduces the amount compounding for her retirement. Cover inside super must also match the temporary incapacity condition of release (SIS Regulations reg 4.07D), so definitions are often narrower, not wider. Outside super, income protection premiums she pays personally are generally tax deductible (ATO), and benefits are paid when she claims, not at preservation age. Weighing these trade-offs for her budget is part of advice that is appropriate to her (Corporations Act 2001 s961G, compilation 19 Sep 2026).

Common mistake

Super can make cover affordable now at the expense of later retirement savings.

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