Home' Charter : 0711 Charter July Contents July 2011 I Charter 37
Brown warns however that insurance
should be one of the frst things a new
business owner or executive considers rather
than a decision down the track.
“Better to get it young, when you are
healthy and it is easier to get. Once you have
it, they can raise the premium but they can’t
take it away from you,” he points out.
He also advises on considering life
insurance investments as part of a self-
managed superannuation fund (SMSF).
Constructing a policy in this way also takes
some of the red tape out of spouses or family
members trying to access business funds.
“By nominating a spouse or other benefciary
for your insurance policy in an SMSF, the
money will go directly to them and not
through the estate, which can take weeks or
months to get fnalised.”
Brown warns that the fnancial implications
of succession planning also need to be
considered. A company may have a viable
succession plan in place which allows for
an employee to have the option of buying
a controlling partner or business owner’s
stake in the event of a death, but while that
transaction takes place the company will
need access to working capital to continue.
“A well constructed insurance plan
provides money to keep the wheels of
commerce moving. You need that capital to
keep things going.”
Common policies to consider include
term life and total and permanent disability
(TPD) insurances. According to recent data,
66 per cent of small business owners don’t
have any TPD cover.
There are tax implications when a business
pays for the TPD policies as tax will be
incurred on the lump sum going to the
business. But the policy is tax exempt if the
proceeds are received by the original holder
of the policy or a family member.
Unlike the UK and other markets, Australia
has been free of an inheritance tax since it
was abolished in 1979.
However the recent Henry Review did
include a recommendation to revive death
duties in Australia.
Brown recalls the tumult that the
inheritance tax caused when it was in place.
“The market was fraught with disputes
over valuation of assets and it became a very
messy tax. Any form of death duty becomes
a very diffcult and costly area.”
Brown warns that whether that particular
recommendation from the Henry Review is
re-introduced or not, the idea of it is never far
from the surface and should be factored in
when considering longer term tax obligations
for estate planning.
Currently certain income or capital
transactions that occur as a consequence
of a person’s death are taxed. Many
superannuation products incur a 15 per cent
tax when transferred to benefciaries of a
deceased estate. Also when inherited assets
from an estate are sold off they may be
subject to capital gains tax (CGT).
Any capital gain or capital loss they make
on disposal of that asset to the benefciary is
subject to the normal CGT rules.
Churchill adds that when people begin
to plan their estate they often realise they
need more detailed fnancial advice that
considers their personal situation and the
latest information on tax and superannuation
laws. “Choosing a fnancial planner might
be the single most valuable decision you will
make when planning the management and
disbursement of your estate and the future of
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