Posted on 12 April '16 by , under General News.
After a taxpayer has held a life insurance policy for ten years or longer, the reversionary bonuses received on that policy become tax-free.
Life insurance policies are issued by life insurance companies and friendly societies.
A reversionary bonus is profit earned annually on traditional life contracts on top of the sum insured that is added to the amount of an insurance policy payable at the maturation of the policy or the death of the person insured.
For taxpayers with policies that are less than ten years old, stipulated amounts are included in that taxpayer’s assessable income and a tax offset is available.
A bonus is not considered to be assessable income if it is received:
At least ten years after the policy was first acquired
Under a life assurance policy that was part of a super fund or scheme when the person on whose life the policy was effected passes away, has an accident, falls ill or becomes disabled
As a result of severe financial difficulties provided the policy was not taken out with a plan to mature or be terminated within ten years