ATO Interpretative Decision
ATO ID 2001/804 (Withdrawn)
Income Tax
Mortgage insurance receiptsFOI status: may be released
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This ATO ID is withdrawn as there are insufficient facts included in the ATO ID to establish the nature of the mortgage insurance agreement and as a result the ATO ID may be misleading.This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Are the amounts paid under a mortgage insurance agreement, as a result of the taxpayer's injury, assessable to the taxpayer under sections 6-5 or 6-10 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Decision
No. The amounts paid under a mortgage insurance agreement, as a result of the taxpayer's injury, are not assessable under sections 6-5 or 6-10 of the ITAA 1997.
Facts
The taxpayer took out mortgage insurance to assist with the mortgage payment on a home loan in the event of incapacity. The taxpayer sustained an injury and made a claim on the mortgage insurance policy. The amounts were paid by the insurer to the mortgage loan financier and were applied against the loan.
Reasons for Decision
Section 6-5 of the ITAA 1997 provides that the assessable income of Australian residents includes the ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year. The payments are not considered to be ordinary income according to ordinary concepts under section 6-5.
The amounts payable by the insurer under the mortgage protection policy are not paid to the insured but to the mortgage loan financier. The payments have not been derived by the insured and therefore, are not ordinary income of the insured.
Section 6-10 of the ITAA 1997 provides that assessable income includes statutory income, that is, income included by the provisions in section 10-5 of the ITAA 1997. Mortgage loan insurance receipts are not embraced within section 10-5 of the ITAA 1997. Section 6-15 of the ITAA 1997 provides that if an amount is not ordinary income and is not statutory income, it is not assessable income.
Date of decision: 22 November 2001Year of income: Year ended 30 June 2000 Year ended 30 June 2001
Legislative References:
Income Tax Assessment Act 1997
section 6-5
section 6-10
section 10-5
Keywords
Insurance receipts
Mortgage
ISSN: 1445-2782
| Date: | Version: | |
| 22 November 2001 | Original statement | |
| You are here | 15 October 2002 | Archived |