Tax Laws Amendment (2004 Measures No. 6) Act 2005 (23 of 2005)
Schedule 12 Transfer of life insurance business
Income Tax Assessment Act 1997
5 At the end of Division 320
Add:
Subdivision 320-I - Transfers of business
Guide to Subdivision 320-I
320-300 What this Subdivision is about
This Subdivision contains special rules that apply when all or part of the life insurance business of a life insurance company is transferred to another life insurance company under the Life Insurance Act 1995 or the Financial Sector (Transfers of Business) Act 1999.
Table of sections
Operative provisions
320-305 When this Subdivision applies
320-310 Special deductions and amounts of assessable income
320-315 Virtual PST and segregated exempt assets
320-320 Certain amounts treated as life insurance premiums
320-325 Friendly societies
320-330 Immediate annuities
320-335 Parts of assets treated as separate assets
320-340 Continuous disability policies
320-345 Exemption of management fees
Operative provisions
320-305 When this Subdivision applies
The rules in this Subdivision have effect if all or part of the *life insurance business of a *life insurance company (the originating company ) is transferred to another life insurance company (the recipient company ):
(a) in accordance with a scheme confirmed by the Federal Court of Australia under Part 9 of the Life Insurance Act 1995; or
(b) under the Financial Sector (Transfers of Business) Act 1999.
320-310 Special deductions and amounts of assessable income
Deduction for originating company
(1) If the originating company pays an amount to the recipient company in respect of liabilities under the *net risk components of *life insurance policies transferred to the recipient company, the originating company can deduct that amount for the income year in which the transfer took place.
Amount included in originating company's assessable income
(2) If the originating company receives an amount from the recipient company in respect of liabilities under the *net risk components of *life insurance policies transferred to the recipient company, that amount is included in the assessable income of the originating company for the income year in which the transfer took place.
Deduction for recipient company
(3) If the recipient company pays an amount to the originating company in respect of liabilities under the *net risk components of *life insurance policies transferred to the recipient company, the recipient company can deduct that amount for the income year in which the transfer took place.
320-315 Virtual PST and segregated exempt assets
(1) Assets that were *virtual PST assets of the originating company just before the transfer took place and that are transferred to the recipient company become virtual PST assets of the recipient company.
(2) Assets that were *segregated exempt assets of the originating company just before the transfer took place and that are transferred to the recipient company become segregated exempt assets of the recipient company.
320-320 Certain amounts treated as life insurance premiums
(1) This Division applies to the recipient company as if the amount or value of any consideration received by the recipient company in respect of liabilities under *life insurance policies transferred to the company were *life insurance premiums paid to the company at the time the transfer took place.
(2) However, subsection (1) does not apply to consideration:
(a) that relates to liabilities that, just before the transfer took place, were discharged out of the originating company's *virtual PST assets or *segregated exempt assets; or
(b) that relates to the part of a *life insurance policy that has been reinsured under a *contract of reinsurance (except consideration that relates to a risk, or part of a risk, in relation to which subsection 148(1) of the Income Tax Assessment Act 1936 applies).
320-325 Friendly societies
(1) This section has effect if the originating company and the recipient company were *friendly societies just before the transfer took place.
(2) For the purposes of paragraph 320-37(1)(d), an *income bond, *funeral policy, *sickness policy or *scholarship plan issued by the recipient company in substitution for an income bond, funeral policy, sickness policy or scholarship plan (the original policy ) transferred from the originating company is taken to have been issued at the time the original policy was issued if the terms of the substituted policy are not materially different from those of the original policy.
320-330 Immediate annuities
For the purposes of section 320-246, a *life insurance policy that provides for an *immediate annuity issued by the recipient company in substitution for a policy (also the original policy ) transferred from the originating company is taken to have been issued at the time the original policy was issued if the terms of the substituted policy are not materially different from those of the original policy.
320-335 Parts of assets treated as separate assets
If:
(a) an asset is transferred to the recipient company from the originating company; and
(b) parts of that asset were, under section 320-170 or 320-225 of the Income Tax (Transitional Provisions) Act 1997, treated as separate assets of the originating company just before the transfer took place;
those parts of that asset are also treated as separate assets of the recipient company.
320-340 Continuous disability policies
(1) This section has effect if:
(a) the originating company and the recipient company were members of the same *wholly-owned group just before the transfer took place; and
(b) all of the liabilities under the *continuous disability policies of the originating company are transferred to the recipient company; and
(c) the transfer took place before the income year in which 1 July 2005 occurs; and
(d) an amount (the section 320-30 amount ) would have been included in the assessable income of the originating company under section 320-30 for the income year in which the transfer took place if the transfer had not taken place.
(2) Section 320-30 does not apply to the originating company for the income year in which the transfer took place or a later income year.
(3) The amount worked out using this formula is included in the assessable income of the originating company for the income year in which the transfer took place:
Section 320-30 amount * (Continuous disability policy days / 365)
where:
continuous disability policy days means the number of days during the income year in which the transfer took place that the originating company held *continuous disability policies.
(4) The section 320-30 amount, reduced by the amount included in the assessable income of the originating company under subsection (3), is included in the assessable income of the recipient company for the income year in which the transfer took place.
(5) For each income year after the year in which the transfer took place and that is a relevant income year for the purposes of section 320-30, the recipient company's assessable income includes the amount that would have been included in the originating company's assessable income under that section for that year if the transfer had not taken place.
320-345 Exemption of management fees
(1) This section has effect if:
(a) the originating company and the recipient company were members of the same *wholly-owned group just before the transfer took place; and
(b) a *life insurance policy (also the original policy ):
(i) is constituted by a contract made with the originating company before 1 July 2000; and
(ii) is transferred to the recipient company before 1 July 2005.
(2) For the purposes of section 320-40, a *life insurance policy issued by the recipient company in substitution for the original policy is taken to have been constituted by a contract made with the recipient company before 1 July 2000 if the terms of the substituted policy are not materially different from those of the original policy.
(3) Subsection 320-40(4) applies to so much of the sum of the amounts applicable in respect of the substituted policy under subsections 320-40(5), (6) and (7) as does not exceed any fees or charges made by the recipient company that the originating company would have been entitled to make under the terms of the original policy as applying just before 1 July 2000.