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 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.



Copyright: Clover Law Pty Ltd



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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