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  • Insurance with foreign resident insurers

    You may have to fulfil certain tax obligations on behalf of foreign resident insurers if you either:

    • insure Australian property or events with foreign resident insurers
    • are an insurance broker or agent who facilitates insurance with foreign resident insurers.

    Note: for this topic, 'foreign resident' is the same as non-resident.

    Foreign resident insurer tax requirements

    If you pay insurance premiums to a foreign resident insurer, the foreign resident insurer may be required to pay tax on either the:

    • premiums they receive from you
    • profit they make from premiums you pay.

    You, and any person in Australia acting on the insurer's behalf, may be considered an agent of the insurer. You may need to:

    • apply for a separate tax file number (TFN) for this specific purpose
    • lodge an income tax return using this separate TFN
    • pay the relevant tax to us on behalf of the insurer.

    Refer to Division 15 of Part III of the Income Tax Assessment Act 1936This link will download a file.

    When the insurance premium or profit is taxable

    Premiums you pay to, or profits made by, a foreign resident insurer under an insurance contract (except a contract of life assurance) are taxable in Australia if either:

    • you are the insured person  
      • regardless of whether you are an Australian resident or foreign resident
      • the insured property is situated in Australia at the time the insurance contract is made, or the insured event can happen only in Australia
    • an agent or representative of the foreign resident insurer in Australia is instrumental in you entering into the contract and you are an Australian resident  
      • regardless of where the insured property is situated or where the event may occur.

    Premiums paid to an Australian principal office or branch of a foreign resident insurer are not covered by the foreign resident insurer tax.

    The Australian principal office or branch of the foreign resident insurer may be subject to Australian tax on its Australian source insurance business.

    How foreign resident insurer tax is calculated

    Foreign resident insurer tax may be calculated in two different ways:

    • The 10% method  
      • The foreign resident insurer tax will be based on 10% of the total amount of the premiums you paid to foreign resident insurers multiplied by the company tax rate
      • Under this method, based on a company tax rate of 30%, the foreign resident insurer tax payable is 3% of the premiums paid.
    • The actual profit or loss method  
      • This takes into account the receipts and expenditure of the foreign resident insurer for premiums you paid
      • Foreign resident insurer tax is payable on the actual profit made by the foreign insurer multiplied by the company tax rate
      • This method can only be used where the Commissioner of Taxation agrees it can be used.

    Example: Foreign resident insurer tax

    You pay an insurance premium of $1,000 to a foreign resident insurance company to insure an Australian property.

    To work out the foreign resident insurer tax on that payment using the 10% method, apply the company tax rate of 30% to 10% of the insurance premiums paid – that is, $1,000 x 10% x 30% = $30.

    End of example

    How foreign resident insurer tax is different

    Foreign resident insurer tax is different to withholding taxes. You do not have pay as you go (PAYG) obligations on your foreign resident insurer tax.

    You do not need to obtain an Australian business number (ABN) and you do not need to complete a business activity statement.

    Substituted accounting periods

    If you have a substituted accounting period (SAP) and you want to lodge your income tax return as agent for the foreign resident insurer on the same basis, you need to make a separate request to us.

    See also:

    What you need to do

    Your tax obligations as an agent of the foreign resident insurer are outlined in Table 1 below.

    Table 1: Steps for an agent

     

    Steps

    More details

    1

    Apply for a separate TFN

    If you do not have a separate TFN as agent for the foreign resident insurer, you need to apply for one.

    Identify if you are acting as agent for the foreign resident insurer. For example ‘XX company as agent for non-resident insurers/reinsurers’ (as appropriate).

    See TFN application for companies and other organisationsThis link will download a file for ways to apply.

    See Division 15 – how to fill out the tax file number application form.

    2

    Retain funds to cover the foreign resident insurer tax

    When you pay insurance premiums to foreign resident insurers, you must retain funds to cover the foreign resident insurer tax payable. This is either under the:

    • 10% method – 3% of the premiums paid to the foreign resident insurer based on a company tax rate of 30%
    • actual profit or loss method – actual profit multiplied by the company tax rate.

     

    3

    Complete the income tax return

    At the end of the income year, complete an ‘as agent for’ income tax return (AAF return). Show the taxable income arising from your position as agent for foreign resident insurers.

    Where you use the 10% method – complete an aggregated AAF return to cover amounts paid to all foreign resident insurers.

    Where we agree you can use the actual profit or loss method – disclose any taxable income calculated separately from taxable income calculated using the 10% method.

    The AAF return is separate to your own income tax return.

    You must use the ANZSIC industry code 99050 on the AAF return.

    See Division 15 – how to fill out the company tax return.

    4

    Lodge the income tax return

    You must lodge your AAF return by the first day of the sixth month of the following year of income – unless we advise it must be lodged by a different date.

    5

    Pay the foreign resident insurer tax

    Generally, you pay the tax by the due date specified in the notice of assessment.

    If you lodge your AAF return late, you must pay the tax due within 21 days after the due date for lodgment.

     

    Example: Agent of foreign resident insurer

    On 2 February 2015, you pay Client A's insurance premiums of $700 to foreign resident insurance company A.

    On 2 March 2015, you pay Client B's insurance premiums of $300 to foreign resident insurance company B.

    You are considered an agent of the foreign resident insurers.

    If the foreign resident insurer tax is calculated under the 10% method, you must keep $30. That is, 10% of the $1,000 insurance premiums, multiplied by the company tax rate of 30%.

    You must apply for a separate TFN as agent for foreign resident insurers.

    On 1 December 2015, you lodge an AAF return for the 2014–15 income tax year. This needs to include the premiums you paid to foreign resident insurers of $1,000.

    On 15 December 2015, we issue you a notice of assessment for tax payable of $30. The amount must be paid by 8 January 2016, which is the payment due date specified in the notice of assessment on 15 December 2015.

    End of example

    Division 15 – how to fill out the tax file number application form

    These instructions are for Division 15 purposes only and cover specific information for certain questions.

    Section A: Applicant information

    Question 1 – Type of applicant

    Select - Other unincorporated entity.

    Question 2 – What is the entity's legal name?

    Provide the name of the entity that is acting as agent.

    For example: ABC Company Pty Ltd as agent for non-resident insurers.

    Question 3 – Does the entity have an Australian Company Number (ACN) or an Australian Registered Body Number (ARBN)?

    Select No.

    Question 4 – Is the entity a subsidiary company?

    Select No.

    Section B: Address details

    Question 5 – Where is the entity's main business location or address?

    Provide the business address of the entity that is acting as agent, not that of the non-resident insurer.

    For example: the business address of ABC Company Pty Ltd.

    Question 6 – What is the entity's postal address for service of notices and correspondence?

    Is the entity's postal address the same as the business address?

    If you select No, provide the business address where notices and correspondence should be sent (not the address of the non-resident insurer).

    Section D: Business activity details

    Question 10 – On what date was the entity established?

    Provide the date from which premiums were paid or became payable to the non-resident insurer.

    Question 11 – What is the main industry that the entity operates in?

    Select - Financial and insurance services.

    Question 12 – Describe the main activity from which the entity derives the majority of its business income

    Provide the following description: Acting as agent for non-resident insurer.

    Section E: Taxation details

    Answer each of the following questions by selecting the appropriate box by reference to the entity that is acting as agent:

    13 – Is the entity a resident of Australia for tax purposes?

    14 – Is the entity exempt for income tax purposes?

    15 – Is the entity a non-profit organisation?

    Section F: Associates of the entity

    Question 17 – Who is its public officer?

    Public officer details are those of the public officer of the entity that is acting as agent.

    For example: the public officer of ABC Company Pty Ltd.

    Section G: Declaration

    Question 21 – Who is the authorised person signing this declaration?

    Complete this section as usual.

    How to lodge your application

    Send the TFN application to:

    Non-Resident Registration Team

    GPO Box 9977

    Hobart TAS 7001

    Division 15 – how to fill out the company tax return

    These instructions are for Division 15 purposes only and cover specific information for certain questions.

    Specify the period of the tax return as usual.

    Company information

    Tax file number (TFN)

    Use the TFN allocated for Division 15 purposes only.

    Name of company

    Use the name of the entity that is acting as agent.

    For example: ABC Company Pty Ltd as agent for Non-Resident Insurers.

    Provide the current postal and business addresses as usual.

    Question 2 – Description of main business activity

    Provide the following description: Acting as agent for Non-Resident Insurer.

    Provide the following industry code number: 99050.

    Question 3 – Status of company

    Select Resident C1.

    Select - Private D9 or Public D10.

    Question 6 – Calculation of total profit or loss

    Complete label R Other gross income as follows: 10% of gross premium paid.

    Complete label S Total income as usual.

    Complete label T Total profit or loss as usual; this is as per label S Total income.

    Question 7 – Reconciliation to taxable income or loss

    At label G Did you have a CGT event during the year?, select No.

    Complete label T Taxable/net income or loss as usual; this is as per label T Total profit or loss in Question 6.

    Question 14 – Personal services income

    At label N Does your income include an individual's personal services income?, select No.

    Question 22 – Internet trading

    At label Q Did you sell any goods or services using the internet?, complete as appropriate.

    Question 23 – Reportable tax position

    At label B Are you required to lodge a reportable tax position schedule?, select No.

    Overseas transactions or interests/thin capitalisation

    For questions 24, 25, 26, and 27, select No.

    Calculation statement

    Complete label A Taxable or net income as usual; this is as per label T Taxable income or loss in Question 7.

    Complete label T1 Tax on taxable or net income as usual; this is label A multiplied by the corporate tax rate.

    Complete labels B, T2, T3, T4 and T5 Tax payable as usual.

    Complete label S Amount due or refundable as usual.

    Declarations

    Complete as usual.

    More information

    For more information, contact us at Div15-ITAA1936@ato.gov.auThis link will download a file.This link will download a file

      Last modified: 10 Apr 2017QC 50679