ATO Interpretative Decision
ATO ID 2002/200
Income Tax
Amount Paid Under An Ordinary Bundled Endowment Policy of a Friendly Society Upon The Death or Disability of a PolicyholderFOI status: may be released
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
How does section 320-80 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to an amount paid under an ordinary bundled endowment policy of a friendly society on the death or disability of the insured.?
Decision
Paragraph 320-80(2)(c) of the ITAA 1997 specifies how the risk component of an amount paid under an ordinary bundled endowment policy of a friendly society on the death or disability of the insured is determined.
Facts
A friendly society pays an amount under an ordinary bundled endowment policy on the death or disability of the insured.
Reasons for Decision
An ordinary bundled endowment policy issued by a friendly society has a risk component and an investment component.
A friendly society is entitled to a deduction for the risk component of such a policy for an amount paid on the death or disability of the insured.
Paragraph 320-80(2)(c) of the ITAA 1997 is the relevant provision which determines the amount relating to the risk component of the policy. The risk component under paragraph 320-80(c) of the ITAA 1997 is the amount paid under the policy on the death or disability of the insured reduced by the current termination value of the policy (calculated by an actuary) immediately before the death, or the occurrence of the disability, of the insured person.
Date of decision: 27 August 2001Year of income: Year ended 30 June 2001 and subsequent income years
Legislative References:
Income Tax Assessment Act 1997
paragraph 320-80(2)(c)
ATO ID 2002/197
ATO ID 2002/198
ATO ID 2002/199
ATO ID 2002/201
Keywords
Life assurance
Endowment insurance
ISSN: 1445-2782