ATO Interpretative Decision

ATO ID 2002/837 (Withdrawn)

Income Tax

Life Insurance Contracts: additional government charges
FOI status: may be released

This ATO ID is withdrawn form the database because it contains a view in respect of provisions of the Income Tax Assessment Act 1997 that doesn't apply after the 2006- 2007 income year. Despite its withdrawal from the database, this ATO ID continues to be a precedential view in respect of decisions for income years up to, and including, the 2006-2007 income year.

This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

CAUTION: This is an edited and summarised record of a Tax Office decision. This record is not published as a form of advice. It is being made available for your inspection to meet FOI requirements, because it may be used by an officer in making another decision.

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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 a life insurance company entitled to an exemption under section 320-40 of the Income Tax Assessment Act 1997 (ITAA 1997) if, after 30 June 2000, it increases fees that it imposes under an investment linked superannuation policy to the extent of any increased or additional Government charges and the terms and conditions of the life policy entered into before 1 July 2000 permitted such increases?

Decision

Yes. A life insurance company is entitled to an exemption under section 320-40 of the ITAA 1997 if, after 30 June 2000, it increases fees that it imposes under an investment linked superannuation policy to the extent of any increased or additional Government charges and the terms and conditions of the life policy entered into before 1 July 2000 permitted such increases.

Facts

The terms and conditions of a life insurance policy entered into before 1 July 2000 provide that fees charged on the policy may be increased if there is an increase in government charges or there are additional government charges.

On 1 January 2001 a life insurance company increases certain fees on its policies to compensate it for an increase in stamp duty.

Reasons for Decision

Under subsection 320-40(1) of the ITAA 1997 a life insurance company is entitled to an exemption for one-third of specified management fees for contracts made with the company before 1 July 2000.

Subsection 320-40(4) of the ITAA 1997 provides that the fees and charges imposed by a life insurance company after 30 June 2000, on a policy entered into before 1 July 2000, are only exempt to the extent of any fees or charges that the company was entitled to make under the terms of the policy as applying immediately before 1 July 2000.

The terms and conditions of the policy prior to 1 July 2000 allowed the life insurance company to increase fees to the extent of any additional Government charges or any increases in Government charges.

Therefore the life insurance company meets the requirement of subsection 320-40(4) of the ITAA 1997 and is entitled to an exemption for specified management fees under section 320-40 of the ITAA 1997 for its investment linked superannuation policy.

Date of decision: 10 July 2002

Year of income: Year ended 30 June 2002

Legislative References:
Income Tax Assessment Act 1997
subsection 320-40(1)
subsection 320-40(4)

Related ATO Interpretative Decisions
ATO ID 2002/838
ATO ID 2002/839
ATO ID 2002/840
ATO ID 2002/841
ATO ID 2002/842

Keywords
Life assurance expenses
Life assurance
Life assurance industry
Management fees expenses

Business Line: Centres of Expertise Superannuation & Insurance

Date of publication: 23 August 2002

ISSN: 1445-2782

history

	Date:	Version:
	10 July 2002	Original statement
You are here	18 February 2011	Archived

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