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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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Cross-Ownership and Commercial Debt Forgiveness
Debt Reduction Cover has traditionally been owned by the Company or Business. This method of ownership allows the Debtor to obtain funds out of which it can reduce the Debt owing to the Creditor. If the Policy is owned by the Debtor, it will receive the funds directly from the Insurance Company. It will then use the Insurance Proceeds to repay the Debt. The Insurance Proceeds are simply the source of funds which the Debtor uses to repay the Debt.
No Forgiveness of Debt Because the Debt has been repaid, there is no "forgiveness" of the Debt. Therefore, Cross-Ownership of a Debt Reduction Policy by the Debtor will not be subject to the Commercial Debt Forgiveness provisions.
Other CGT and Income Tax Issues While it is important that the Commercial Debt Forgiveness provisions do not apply, there are other CGT and Income Tax issues that need to be taken into account, if Cross-Ownership is used. Please click here to read a discussion of these issues.
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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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