Life insurance companies and life insurance business
A life insurance company is defined for tax purposes as a company registered under the Life Insurance Act 1995 and includes:
- life insurance companies
- life reinsurance companies
- friendly societies carrying on life insurance business.
If a friendly society doesn't conduct life insurance business, write 0 (zero) at item 16 – labels B to F.
Life insurance companies separate their taxable income into 2 classes (the ordinary class and the complying superannuation class) and multiply the taxable income of each class by the appropriate tax rate to determine their gross tax. The tax rates are specified in section 23A of the Income Tax Rates Act 1986. Where a life insurance company is an RSA provider and there is no TFN contributions income, the tax rate is determined in accordance with section 29 of the Income Tax Rates Act 1986.
The taxable incomes of the complying superannuation class and the ordinary class are worked out separately.
Tax losses of one class can only be applied to reduce future income of the same class.
The tax rates to assist with the calculation of the gross tax amount for life insurance companies are listed in Appendix 1.
Life insurance companies, including friendly societies carrying on life insurance business, are entitled to a franking tax offset for franked dividends. If franking tax offsets exceed the tax that would be payable after all other tax offsets are taken into account, life insurance companies may be entitled to a refund of the excess to the extent that it relates to distributions paid on shares and other membership interests held on behalf of policy holders. Claim the amount of franking tax offset that is refundable in the Calculation statement at label E Refundable tax offsets.
If a life insurance company receives a dividend from a LIC which includes a LIC capital gain amount, the life insurance company is entitled to a deduction of thirty three and one third percent of its share of the LIC capital gain amount if the shares in the LIC are complying superannuation assets. The deduction should be included at item 7 – label X Other deductible expenses.
If a life insurance company’s assessable income includes a distribution from a partnership or trust that claimed a deduction for a LIC capital gain amount, the company must add back an amount as income in accordance with subsection 115-280(5) of the ITAA 1997. Include the amount added back at item 7 – label B Other assessable income item 7.
Consolidated or multiple entry consolidated (MEC) groups
The special rules in the income tax law that apply to life insurance companies will apply to the head company of a consolidated or MEC group if that group has at least one subsidiary member that is a life insurance company at any time during the income year.
B – Complying superannuation class
Write at item 16 – label B the amount of taxable income of the complying superannuation class.
The life insurance company may need to complete a Losses schedule 2024, if it is not a member of a consolidated group, and has tax losses or net capital losses carried forward to later income years in the complying superannuation class.
Consolidated or MEC groups
The head company of a consolidated or MEC group that has at least one subsidiary member that is a life insurance company at any time during the income year is also taken to be a life insurance company for the purposes of applying the income tax law.
The head company of a consolidated or MEC group may need to complete a Consolidated groups losses schedule 2024, if it has a subsidiary member that is a life insurance company and has tax losses or net capital losses carried forward to later income years in the complying superannuation class.
C – Net capital gain – complying superannuation class
Write at item 16 – label C the amount of the net capital gain that accrued from the investment of complying superannuation assets.
D – Net capital gain – ordinary class
Write at item 16 – label D the amount of the net capital gain that is included in the ordinary class of taxable income.
For the head company of a consolidated or MEC group that has at least one subsidiary member that is a life insurance company, include at label D the net capital gain for all members of the consolidated or MEC group, except for any net capital gain from complying superannuation assets.
E – Assessable contributions
Write at item 16 – label E assessable contributions of complying superannuation funds that were transferred to the life insurance company under section 295-260 of the ITAA 1997 and are included in its assessable income under paragraph 320-15(1)(i) of the ITAA 1997.
F – Fees and charges
Write at item 16 – label F the amount of all fees and charges included in assessable income. This includes premium-based fees, establishment fees, time-based account fees, asset fees, switching fees, surrender penalties, buy–sell margins, exit fees and interest on overdue premiums.
For more information on fees and charges, see Taxation Ruling TR 2003/14 Income tax: Life insurance companies: the actuarial determination of fees and charges.
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