Edited version of private advice

Authorisation Number: 1052040432731

Date of advice: 7 October 2022

Ruling

Subject: Assessable income - life assurance policy

Question

Will any payments you receive on maturity of the life insurance policies held for more than 10 years be included in your assessable income?

Answer:

No.

The payments you will receive on maturity of the policies will not be income according to ordinary concepts under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and will not constitute assessable income under section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936). Additionally, Section 118-300 of the ITAA 1997 enables any capital gain or capital loss made by the beneficial owner of a policy of life insurance to be ignored for capital gains tax purposes.

Accordingly, the amounts you receive from redeeming the policies held for more than 10 years will not be included in your assessable income.

This ruling applies for the following period

Income year ending 30 June 202XX

The scheme commences on:

I July 20XX.

Relevant facts and circumstances

You, being an individual resided in Country A and whilst a citizen of Country A,purchased two life insurance policies in 20xx.

You purchased a Certificate of Life Assurance through a Company in Country A on xx xxx xxxxx.

The Policy:

•                    is a life assurance policy

•                    purchased for a one off payment

•                    provides for a share of profits in the life insurance business in the form of 2 types of bonus:

1             Income bonus - a monthly amount that is added to the value of your Account and is guaranteed if you keep your policy until the maturity date

2             Growth bonus - an additional amount that we give to you on the maturity of your policy or on the death of the life insured

The second Certificate of Life Assurance contract you entered with a Company in Country A was also purchased on xx xxx xxxxx.

The Policy:

•                    is a life assurance policy

•                    purchased for a one off payment

•                    provides for a share of profits in the life insurance business in the form of 2 types of bonus:

1             Income bonus - a monthly amount that is added to the value of your Account and is guaranteed if you keep your policy until the maturity date

2             Growth bonus - an additional amount that we give to you on the maturity of your policy or on the death of the life insured.

No additional premiums have been made, or will be made, in relation to either of the policies.

You became a resident of Australia for taxation purposes in the financial year ending 30 June 20xx.

You are the original beneficial owner and are the sole person insured under both policies.

There have been no withdrawals from either policy during your ownership period of the policy up to this point.

No bonuses have been paid in relation to the policies up to this point.

You will not redeem or surrender the policies within the 10 years from the date of commencement of risk.

You will redeem both policies during the ruling period and after the date 10 years from the date of risk commencement has passed.

Relevant legislative provisions

Income Tax Assessment Act 1936 Section 26AH

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Income Tax Assessment Act 1997 Section 15-75

Income Tax Assessment Act 1997 Section 118-300