When a life insurance policy has been held by the taxpayer for 10 years or longer, reversionary bonuses received on that policy are tax-free. (A reversionary bonus is the profit earned annually on traditional life contracts on top of the sum-insured.)
For policies held less than 10 years, stipulated amounts are included in the Taxpayers Australia’s assessable income, and a tax offset is available.
A bonus is not assessable income if it is received:
- At least 10 years after the policy was first acquired
- Under a life assurance policy that was part of a superannuation fund or scheme when the person on whose life the policy was effected dies, has an accident, illness or other disability, or
- As a result of serious financial difficulties, provided the policy was not taken out with a plan to mature or be terminated within 10 years.
More information? To find out more, give us a call on 1300 023 782 or email team@cdrta.com.au.
The team at C&D Restructure and Taxation Advisory are here to help. As part of the Vault Group we can offer the full suite of financial products and advice to help you navigate the business landscape. Schedule a meeting here via Calendly or give us a call on 1300 1 VAULT (1300 182 858)
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Craig Dangar
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