Summary of Key Aspects of the Kenforth International Insurance Policy Document for Australian residents

Technical and educational

The Kenforth IIP is ideally suited to British people moving to live in Australia and Australian residents.

1. Australian Taxation of Insurance Policies:

• In Australia, gains within wealth insurance policies, such as the Kenforth IIP, are termed “bonuses.” These are taxed upon receipt, not during accumulation.
• A bonus payment received within the first eight years of the policy is fully assessable for income tax.
• For bonus payments received in the ninth and tenth years of the policy, two-thirds and one-third, respectively, are assessable.
• If the policy is held for over ten years, bonus payments are generally not subject to taxation.
• Additional premiums may restart the ten-year period.
• Proceeds received upon policy termination due to the insured’s death are not assessable income for other taxpayers, and the deceased’s estate is not subject to Capital Gains Tax (CGT).

2. Australian Taxation Office (ATO) Guidance:

• The ATO website provides information regarding the taxation of bonuses from life insurance policies and friendly society insurance bonds.
• ATO Product Ruling PR 2022/1 specifically addresses the tax consequences for Australian policyholders of a Kenforth IIP.

3. Applicability of ATO Ruling:

• ATO Product Ruling PR 2022/1 applies to Australian tax residents who purchase or are assigned a Kenforth IIP between 1 July 2021 and 30 June 2024.
• The ruling also extends to beneficiaries or the deceased estate of a policyholder in certain circumstances.

4. Kenforth IIPs and Family Trusts:

• If an Australian tax resident family trust invests in a Kenforth IIP and holds it for over ten years, distributions to beneficiaries may be tax-free under specific conditions.

5. Overview of Kenforth:

• Kenforth is a life insurance company licensed and registered in the Commonwealth of The Bahamas, offering International Insurance Policies (IIPs).
• The Bahamas’ regulatory environment is characterised by:
  • A stable political and legal system based on English Common Law.
  • The absence of certain taxes (income, capital gains, etc.).
  • Strong regulation and investor asset protection.

6. Key Aspects of the ATO Product Ruling:

• The Kenforth IIP is considered an “eligible policy” under Section 26AH of the relevant legislation.
• Specific rules govern the taxation of “bonuses” received under the IIP.
• CGT implications are addressed, with potential exemptions under certain conditions.
• Provided the scheme is carried out as described in the ruling, Part IVA anti-avoidance provisions will not apply.

7. Taxation Within the Kenforth Policy:

• Unlike Australian domestic policies, the Kenforth IIP, issued from The Bahamas, is generally not subject to internal taxes, which can allow for greater potential growth (except for small amounts of withholding tax).

8. Disclaimer:

• This document is intended for professional advisors and should not be used as the sole basis for investment decisions.
• Individuals considering investing in a Kenforth IIP should seek Australian tax and regulated financial advice.