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.
Contracts of life assurance with foreign resident insurers are excluded from these tax obligations.
Note: For this topic, foreign resident is the same as non-resident and you is a person not carrying on the business of insurance in Australia. Specific rules exist for a person carrying on the business of insurance in Australia who reinsures with a foreign resident. These rules however, are not covered on this page.
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 a tax return using this separate TFN
- pay the relevant tax to us on behalf of the insurer.
When the insurance premium or profit is taxable in Australia
Premiums you pay to, or profits made by, a foreign resident insurer under an insurance contract are taxable if either:
- you are the insured person and the insured property is situated in Australia at the time the insurance contract is made, or the insured event can happen only in Australia – this is regardless of whether you are an Australian resident or foreign resident
- 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 – this is 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. However, 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.
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, 30%×(10% ×$1,000) = $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 tax return as agent for the foreign resident insurer on the same basis, you need to make a separate request to us.
Your tax obligations as an agent of the foreign resident insurer are outlined in Table 1 below.
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 – see TFN application for companies and other organisations.
If you are acting as agent for the foreign resident insurer identify that on the form, for example ‘XX company as agent for non-resident insurers/reinsurers’ (as appropriate). See instructions at Division 15 – how to fill out the tax file number application form.
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 amount to be retained is calculated either under the:
Complete the tax return
At the end of the income year, complete an ‘as agent for’ 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 tax return.
You must use the ANZSIC industry code '99050' on the AAF return.
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.
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 total $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
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)?
Question 4 – Is the entity a subsidiary company?
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 the address 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 description 'Acting as agent for non-resident insurer'.
Section E: Taxation details
Answer each of the following questions for 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
These instructions are for Division 15 purposes only.
Unless specific instructions are given below, the company tax return should be completed as normal.
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.
Question 2 – Description of main business activity
Provide the description 'Acting as agent for Non-Resident Insurer'.
Provide the 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
Where the 10% method has been used, complete label R Other gross income as '10% of gross premium paid'.
Question 7 – Reconciliation to taxable income or loss
At label G Did you have a CGT event during the year? select No.
Overseas transactions or interests/thin capitalisation
At labels X and Y for the questions under the heading International related party dealings/transfer pricing, select No.
At label Z for the question under the heading Overseas interests select No.
At label O for the question under the heading Thin capitalisation select No.How insurance premiums paid to foreign resident insurers are taxed and how to fulfil tax obligations under Division 15.