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Taxation Implications: Taxation Implications of Policy Ownership
CGT Exemptions:
Methods of Policy Ownership:
Buy/Sell Cover: Implications for Buy/Sell Cover
Debt Reduction Cover: Implications for Debt Reduction Cover
Third Party Payments: Implications for Promises to Distribute Insurance Proceeds to Third Parties
Commercial Debt Forgiveness:
Super Fund Ownership:
Aggregation onto One Policy:
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Taxation Implications of Policy Ownership
About This Page This page is a guide to the pages on the Complete Succession website that deal with the Taxation of the Insurance Proceeds used to fund a Business Succession Plan. The other tabs in the grey menu bar above can take you to the guides to other aspects of a Business Succession Plan (such as Commercial Issues, Agreements and Legal Fees).
If You're Ready, Contact Us If you know what type of Business Succession Plan or Business Succession Agreement you want, please contact IGS here. IGS will quote a Fixed Fee for your Agreement. If you want to understand more about Succession Planning in general, continue reading!
Income Tax vs. Capital Gains Tax Whenever Insurance Proceeds are paid under a Policy, it is necessary to consider the Income Tax implications of the payment. This requires an analysis of two issues:
Capital Gains Tax is a category of Income Tax that includes taxable capital gains in the assessable income of the taxpayer. Normal Income Tax is then payable with respect to the taxable capital gain. However, it is common for the tax to be referred to as a tax additional or different to Income Tax. Unfortunately, even if a payment or receipt is not subject to Income Tax on normal principles, there is still a risk that it might be subject to Capital Gains Tax. This is a particular problem for Insurance Proceeds.
Income Tax Click here to read about the Income Tax treatment of Insurance Proceeds.
Capital Gains Tax Click here to read about the CGT treatment of Insurance Proceeds.
Financial Adviser's Duty to Advise with respect to the Tax Implications of an Insurance Policy Some Advisers and Industry Consultants believe that it is not the role of Financial Advisers to consider or give advice with respect to the tax implications of a Financial Product (such as an Insurance Policy) that they are recommending. This extends to the method of ownership of the Policy and the tax implications of the method of ownership. By implication, they are trying to pass responsibility for these decisions on to the Client. ASIC's View (QFS 153) ASIC's view is set out in QFS 153:
Normal Tax Implications of Financial Product Advice ASIC differentiates between:
It regards an adequate knowledge of the normal tax implications of a Financial Product (such as an Insurance Policy) as a condition of PS146 compliance. The method of ownership of a Policy and the tax implications of its ownership are relevant in every case and therefore must be viewed as normal and fundamental aspects of the advice given by a Financial Adviser.
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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.
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