ATO Interpretative Decision
ATO ID 2004/412
Income Tax
Income derived by non-resident insurer: property insurance where the properties covered are situated in Australia and other countries and the geographical location of the properties is specified in the insurance contractFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract and the geographical location of the properties is specified in the insurance contract?
Decision
No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract and the geographical location of the properties is specified in the insurance contract.
Facts
The following facts apply in respect of the insurance contract entered into by a non-resident insurer.
- (a)
- Some but not all of the properties were situated in Australia at the time of making the insurance contract.
- (b)
- The insurance contract does not allocate the premium between the items of property, or between Australia and other geographic locations.
- (c)
- The geographical location of the properties is specified in the insurance contract.
- (d)
- The insurance contract is entered into outside of Australia.
- (e)
- The requirements for the application of subsection 142(2) of the ITAA 1936 do not apply.
- (f)
- The policyholder is a non-resident of Australia.
Reasons for Decision
Subsection 142(1) of the ITAA 1936 includes certain premiums paid or payable under an insurance contract in the assessable income of a non-resident insurer.
Subsection 142(1) of the ITAA 1936 requires that the properties that are covered by the insurance contract are situated in Australia and does not apply to a premium paid or payable under an insurance contract which provides coverage to properties situated within and outside Australia.
As subsection 142(1) of the ITAA 1936 does not provide for apportionment of a premium under an insurance contract there is no authority to attribute part of the premium to the properties situated in Australia.
The specification of the location of the properties in the insurance contract is considered to be immaterial as ultimately it is the location itself of those properties that is the determinative factor.
Accordingly, a premium paid or payable under an insurance contract specifically for properties, which are situated both within and outside Australia at the time of making the contract, will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.
Date of decision: 13 May 2004Year of income: Year ended 30 June 2003
Legislative References:
Income Tax Assessment Act 1936
subsection 142(1)
subsection 142(2)
Keywords
Non resident insurance industry
ISSN: 1445-2782