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Taxation Implications:

Taxation Implications of Policy Ownership

Income Tax

Capital Gains Tax

 

CGT Exemptions:

CGT Exemptions for Insurance

2015 Amendments

Death Benefits

Non-Death Benefits

Terminal Illness

 

Methods of Policy Ownership:

Ownership Implications

Cross Ownership

Self Ownership

Trust Ownership

Super Buy/Sell

 

Buy/Sell Cover:

Implications for Buy/Sell Cover

Cross Ownership

Self Ownership

Related Party Vendors

Deemed Dividends

Risks If No Agreement

Trust Ownership

Super Buy/Sell

Origins of Self-Ownership

 

Debt Reduction Cover:

Implications for Debt Reduction Cover

Cross Ownership

Self Ownership

Trust Ownership

Bank Ownership

 

Third Party Payments:

Implications for Promises to Distribute Insurance Proceeds to Third Parties

 

Commercial Debt Forgiveness:

Commercial Debt Forgiveness

Cross Ownership

Self Ownership

Trust Ownership

 

Super Fund Ownership:

Super Fund Ownership

Tax Disadvantages

Cost Disadvantages

Other Disadvantages

Geared Premium Funding

 

Aggregation onto One Policy:

Methods of Aggregation

 

 

 

 

 

 

 

 

Cross-Ownership of Buy/Sell Cover

 

Traditionally, each Life Insured's Buy/Sell Cover has been owned by the Purchasers (i.e., the Proprietors other than the Life Insured).

This method of ownership is commonly called "Cross-Ownership" (because someone other than the Life Insured owns the Policy).

 

Diagram

Click here to see a diagram that illustrates the Cross-Ownership of Buy/Sell Cover and Debt Reduction Cover.

 

Death Benefit

Cross-Ownership will normally obtain a CGT exemption for the Death Benefit.

 

Non-Death Benefits

Unfortunately, Cross-Ownership will result in a CGT liability in the case of Non-Death Benefits.

 

Implications for Policies that Bundle Death and Non-Death Benefits

Because Non-Death Benefits are usually bundled with a Death Benefit under the one Policy, there is a risk that Cross-Ownership of a Policy will result in a CGT liability.

 

Normal Methods of Ownership

As a result, the normal method of ownership of all Buy/Sell Insurance is now Self-Ownership or Trust Ownership.

It is no longer normal for the Business or the Purchasers to own Buy/Sell Insurance (“Cross-Ownership”), because of the CGT liability with respect to Non-Death Benefits. 

 

Copyright: Ian Gray Solicitor

 

 

Adviser Tip

Trust ownership is an indirect form of self-ownership.

The Life Insured is the "beneficial owner" for legal and tax purposes under the roof of the Trust.

See more Adviser Tips

 

Current Marketing Schedule

Current Marketing Schedule

Ian Gray travels to most capital cities regularly throughout the year and is available for Meetings.

Please click here to see his availability in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Please contact us to arrange an appointment or teleconference.