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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

 

 

 

 

 

 

 

 

 

Implications for Debt Reduction Cover

 

Overview

The tax implications of Policy Ownership generally are discussed here.

Income Tax

Debt Reduction Cover is generally regarded as Capital in nature.

As a result, the Insurance Proceeds are not subject to Income Tax on normal principles.

Capital Gains Tax

However, the Insurance Proceeds might be subject to Capital Gains Tax (subject to the availability of an Exemption for the particular method of Policy Ownership).

 

Alternative Methods of Ownership

The following pages summarise the tax implications for the three alternative methods of ownership of Debt Reduction Cover:

This analysis applies equally to other forms of Key Person Capital Cover (e.g., cover intended to compensate the Company or Business for a capital loss as a result of the loss of a Key Person).

 

Commercial Debt Forgiveness Provisions

The potential implications of the Commercial Debt Forgiveness provisions of the Income Tax Legislation for Debt Reduction Cover are discussed in more detail here.

 

Insurance Trust Solution

The problems of both Cross-Ownership and Self-Ownership can be avoided by the use of a Business Insurance Trust Agreement (i.e., Trust Ownership).

 

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

 

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Current Marketing Schedule

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