ATO Interpretative Decision
ATO ID 2004/413
Income Tax
Income derived by non-resident insurer: liability insurance where the insured event may occur within or outside of AustraliaFOI 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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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 insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia?
Decision
No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia.
Facts
The following facts apply in respect of the insurance contract entered into by a non-resident insurer.
- (a)
- The relevant insured event under the insurance contract is one which can happen within or outside of Australia.
- (b)
- The insurance contract does not allocate the premium to the extent to which the insured event may occur within or outside Australia.
- (c)
- The insurance contract is entered into outside Australia.
- (d)
- The requirements for the application of subsection 142(2) of the ITAA 1936 do not apply.
- (e)
- 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 insured event is one which can happen only in Australia and does not apply to a premium paid or payable under an insurance contract providing coverage to an event which may occur both within and outside Australia.
Accordingly, a premium paid or payable under a policy where the insured event may occur within or outside Australia 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