In August the Department of Finance published their changes to the taxation of life insurance as previewed in March 2013 Federal Budget. When final legislation is passed later this year, these changes will result in an updating to the “exempt test” which determines how much tax-deferred value can accumulate in a life insurance policy before it is subject to accrual taxation. The new rules take effect and will apply to policies issued January 1, 2016 and later.
Highlights of the new rules and their affect
For Cash Value Life Insurance:
- Effective with policies issued after 2015 the new rules will reduce the ability to tax-shelter accumulating cash values;