Revenue purpose and capital purpose key person insurance serve distinctly different business needs with significantly different tax implications in Australia. Revenue purpose insurance is designed to replace lost business income and maintain day-to-day operations after losing a key person. It covers costs like temporary revenue decline, recruitment expenses, training costs for replacement staff, and maintaining profitability during the transition. According to the ATO, for revenue purposes a key person must be someone whose loss would result in significant profit loss during ongoing business operations. The tax treatment for revenue purpose policies is that premiums are fully tax-deductible as a business expense, but any insurance proceeds received are assessable income and subject to tax. Capital purpose insurance, in contrast, addresses capital needs such as repaying business loans, buying out the deceased or disabled key person's ownership stake, or covering capital expenses. The tax treatment is reversed - premiums for capital purpose insurance are not tax-deductible, but the proceeds are generally not assessable income (though CGT may apply in certain circumstances). Businesses can choose to structure coverage for one purpose or both. If covering both purposes, maintaining separate policies simplifies tax documentation, though a single policy can be used if you carefully document which premium portion relates to which purpose.