ATO Interpretative Decision
ATO ID 2002/675 (Withdrawn)
Income Tax
Assessability of Reversionary AnnuityFOI status: may be released
-
This ATO ID is withdrawn. Guidance on the ATO view contained in this ATO ID can be found in web content ( QC 31968).This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
Status of this decision: Decision withdrawn 9 June 2017.
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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is the full amount of an annuity payment made after the death of the first annuitant assessable to the reversionary annuitant under section 27H of the Income Tax Assessment Act 1936 (ITAA 1936)?
Decision
Yes. The full amount of an annuity payment made after the death of the first annuitant is assessable to the reversionary annuitant under section 27H of the ITAA 1936.
Facts
The taxpayer's spouse was the policy owner and first annuitant for two fixed term annuities.
One policy is paid yearly.
The other policy is paid quarterly.
The taxpayer was named as the reversionary policy owner and reversionary annuitant under both policies.
Both policies provide that they will immediately vest in the reversionary policy owner upon the death of the policy owner. Upon the death of the taxpayer's spouse the taxpayer became entitled to receive the annuity payments.
Reasons for Decision
Subsection 27H(1) of the ITAA 1936 includes in the assessable income of a taxpayer the amount of any annuity derived by the taxpayer during the year of income excluding, where the annuity has been purchased, the 'deductible amount'.
When income is derived depends on the nature of the income and in some cases the circumstances in which it is derived.
In Woodhouse v. IR Comrs (1936) 20 TC 673 it was held that only the amount of annuity received was assessable. Therefore income from an annuity is derived when it is received by the taxpayer rather than progressively over the period that it relates to.
The policy stated that the policies vested immediately in the taxpayer on the death of their spouse and the annuities were then paid to the taxpayer, as the reversionary annuitant. As the annuities were received by the taxpayer the taxpayer's spouse derived no part of the annuities.
The full amount of the annuities received by the taxpayer after the death of their spouse is therefore assessable to the taxpayer under subsection 27H(1) of the ITAA 1936.
Date of decision: 15 March 2002Year of income: Year ending 30 June 2002
Legislative References:
Income Tax Assessment Act 1936
section 27H
subsection 27H(1)
Case References:
Woodhouse v. IR Comrs
(1936) 20 TC 673
Keywords
Annuity income
Derived
Date reviewed: 12 May 2015
ISSN: 1445-2782
| Date: | Version: | |
| 15 March 2002 | Original statement | |
| You are here → | 9 June 2017 | Archived |
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
