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Edited version of private advice
Authorisation Number: 1052294858058
Date of advice: 22 August 2024
Ruling
Subject: Foreign life insurance policy
Question 1
Will you be assessed under section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936) for any reversionary bonus received, when your life assurance policies are surrendered?
Answer 1
No. Certain bonuses received on surrender or maturity of a life insurance/assurance policy may be included in assessable income under section 26AH of the ITAA 1936. However, section 26AH of the ITAA 1936 operates so that reversionary bonuses received more than 10 years from the date of commencement of a life assurance policy are excluded from assessable income.
Question 2
Is any capital gain (or capital loss) made by you from the withdrawal of amounts of initial contributed capital of your life insurance policies, disregarded under section 118-300 of the Income Tax Assessment Act 1997 (ITAA 1997)?
Answer 2
Yes. Any capital gain or loss resulting from the total cash value, including the initial contributed capital made to you on the surrender of your life assurance policy is disregarded as it was a policy of insurance on the life of an individual.
This ruling applies for the following period:
Year ending 30 June 20XX
The scheme commenced on:
1 July 20XX
Relevant facts and circumstances
You are a resident of Australia for income tax purposes.
You own and are the sole beneficiary of two foreign life insurance policies.
No further premiums have been paid into the policies, aside from the single premium at the outset.
The death benefit for each policy is 101% of the policy value at the point of death.
The policies have been held for more than 10 years.
You plan to surrender the life insurance policies.
Each policy is a separate contract.
Relevant legislative provisions
Income Tax Assessment Act 1936 section 26AH
Income Tax Assessment Act 1997 section 6-5
Income Tax Assessment Act 1997 section 118-300