Income Tax Assessment Act 1997



Division 713 - Rules for particular kinds of entities  

Subdivision 713-L - Life insurance companies  

Tax cost setting rules for life insurance companies joining consolidated group

SECTION 713-515   Certain assets taken to be retained cost base assets where life insurance company joins group  

If an entity that becomes a * subsidiary member of a * consolidated group at a time (the joining time ) is a * life insurance company, these assets are retained cost base assets :

(a) a * complying superannuation asset, or a * segregated exempt asset, of the company; and

(b) another asset of the company that is held by the company for the purpose of discharging its liabilities under the * net investment component of ordinary life insurance policies (except policies that provide for * participating benefits or * discretionary benefits under * life insurance business carried on in Australia); and

(c) for a life insurance company that has demutualised under Division 9AA of Part III of the Income Tax Assessment Act 1936 where, in the period starting just after the company demutualises and ending at the joining time, all of the * membership interests in the company were owned by the same group - a goodwill asset of the company.

If the * retained cost base asset is covered by paragraph(1)(a) or (b), its * tax cost setting amount is:

(a) for the purposes of working out the tax cost setting amounts for reset cost base assets (see section 705-35 ) - the asset ' s * transfer value just before the joining time; and

(b) for all other purposes - the asset ' s * terminating value.

If the * retained cost base asset is covered by paragraph (1)(c), its * tax cost setting amount is the embedded value (see subsection 121AM(1) of the Income Tax Assessment Act 1936 ) on the applicable accounting day (see subsection 121AM(3) of that Act) of the * life insurance company concerned reduced by the net value of shareholders ' assets held by the company on that day.


The net investment component of ordinary life insurance policies is the component of * life insurance policies (except * exempt life insurance policies and * complying superannuation life insurance policies) that:

(a) is the component in respect of the part of those policies that has not been reinsured under a * contract of reinsurance; and

(b) is not the * net risk component of those policies.

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