ATO Interpretative Decision
ATO ID 2002/249 (Withdrawn)
Income Tax
Assessability of bonuses received upon termination of a life insurance policyFOI status: may be released
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This ATO ID is withdrawn from the database as it is a straight application of the law in section 26AH of the Income Tax Assessment Act 1936 and does not contain an interpretative decision. Further information can be found in Taxation Ruling IT 2346.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 bonuses received by a taxpayer, who purchases a life insurance policy before 1982, included in assessable income upon termination of the policy under subsection 26AH(13) of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
No. As the terms and conditions of the life insurance policy allow a taxpayer to make further premium payments, any bonuses received by the taxpayer upon termination of the policy will not be included in assessable income under subsection 26AH(13) of the ITAA 1936.
Facts
A taxpayer purchased a life insurance policy prior to 1982. The terms and conditions of the life insurance policy allow the taxpayer to make additional premiums. The taxpayer proposes to make additional premium payments.
Reasons for Decision
The assessability of bonuses received upon the termination of a life insurance policy, where additional premium payments have been made, is determined by subsection 26AH(13) of the ITAA 1936. The subsection only applies if the taxpayer's policy is an eligible policy as defined in subsection 26AH(1) of the ITAA 1936. An eligible policy is a life insurance policy where the commencement of risk is after 27 August 1982.
Paragraph 17 of Taxation Ruling IT 2346 states:
'Where the conditions attached to an eligible policy are varied (e.g., an increase in the sum insured or a change in its term), the rearrangement of the policy conditions does not give rise to a new eligible policy ...'
The terms and conditions of the taxpayer's policy allows for additional premium payments, therefore, the date of commencement of risk of the life insurance policy remains unaltered (i.e., prior to 27 August 1982). Any bonuses received upon termination of the policy will not be included in the taxpayer's assessable income as subsection 26AH(13) of the ITAA 1936 has no application.
Date of decision: 12 November 2001Year of income: Year ending 30 June 2002 Year ending 30 June 2003 Year ending 30 June 2004 Year ending 30 June 2005 Year ending 30 June 2006 Year ending 30 June 2007
Legislative References:
Income Tax Assessment Act 1936
subsection 26AH(1)
subsection 26AH(13)
Related Public Rulings (including Determinations)
IT 2346
Keywords
Income
Life assurance income
Life assurance bonuses
Life assurance
Short term life assurance
ISSN: 1445-2782
| Date: | Version: | |
| 12 November 2001 | Original statement | |
| You are here | 25 July 2008 | Archived |