A life insurance company is defined for tax purposes as a company registered under the Life Insurance Act 1995 and includes:
- life insurance companies
- life reinsurance companies
- friendly societies carrying on life insurance business.
If a friendly society does not conduct life insurance business, write zero (0) at B to F item 16.
Life insurance companies separate their taxable income into two classes (the ordinary class and the complying superannuation class) and multiply the taxable income of each class by the appropriate tax rate to determine their gross tax. Where a life insurance company is an RSA provider and there is no-TFN contributions income, the tax rate is determined in accordance with section 29 of the Income Tax Rates Act 1986.
The taxable incomes of the complying superannuation class and the ordinary class are worked out separately.
Tax losses of one class can only be applied to reduce future income of the same class.
The tax rates to assist with the calculation of the gross tax amount for life insurance companies are listed in appendix 7.
Life insurance companies, including friendly societies carrying on life insurance business, are entitled to a franking tax offset for franked dividends.
If franking tax offsets exceed the tax that would be payable after all other tax offsets are taken into account, life insurance companies may be entitled to a refund of the excess to the extent that it relates to distributions paid on shares and other membership interests held on behalf of policy holders. Claim the amount of the excess franking tax offset that is refundable at E Refundable tax offsets in the Calculation statement.
If a life insurance company receives a dividend from a LIC which includes a LIC capital gain amount, the life insurance company is entitled to a deduction of 33 1/3% of its share of the LIC capital gain amount if the shares in the LIC are complying superannuation assets. The deduction should be included at X Other deductible expenses item 7.
If a life insurance company’s assessable income includes a distribution from a partnership or trust that claimed a deduction for a LIC capital gain amount, the company must add back an amount as income in accordance with subsection 115-280(5) of the ITAA 1997. Include the amount added back at B Other assessable income item 7.
Information for consolidated and multiple entry consolidated (MEC) groups
The special rules in the income tax law that apply to life insurance companies will apply to the head company of a consolidated or MEC group if that group has at least one member that is a life insurance company.
End of exampleB - Complying superannuation class
Write at B the amount of taxable income of the complying superannuation class.
If the company is a life insurance company that is not a member of a consolidated group and has the following losses carried forward to later income years in the complying superannuation class:
- tax losses, or
- net capital losses
then it may need to complete a Losses schedule 2016. For more information, see Losses schedule instructions 2016.
Information for consolidated and multiple entry consolidated (MEC) groups
The head company of a consolidated or MEC group that has at least one subsidiary member that is a life insurance company at any time during the income year is also taken to be a life insurance company for the purposes of applying the income tax law.
If the head company has the following losses carried forward to later income years in the complying superannuation class:
- tax losses, or
- net capital losses
then it may need to complete a Consolidated groups losses schedule 2016. For more information, see Consolidated groups losses schedule instructions 2016.
End of exampleC - Net capital gain – complying superannuation class
Write at C the amount of the net capital gain that accrued from the investment of complying superannuation assets.
D - Net capital gain – ordinary class
Write at D the amount of the net capital gain that is included in the ordinary class of taxable income.
For the head company of a consolidated or MEC group that has at least one subsidiary member that is a life insurance company, include at D the net capital gain for all members of the consolidated or MEC group, except for any net capital gain from complying superannuation assets.
E - Assessable contributions
Write at E assessable contributions of complying superannuation funds that were transferred to the life insurance company under section 295-260 of the ITAA 1997 and are included in its assessable income under paragraph 320-15(1)(i).
F - Fees and charges
Write at F the amount of all fees and charges included in assessable income. This includes premium-based fees, establishment fees, time-based account fees, asset fees, switching fees, surrender penalties, buy–sell margins, exit fees and interest on overdue premiums. For more information on fees and charges, see Taxation Ruling TR 2003/14 – Income tax: Life insurance companies: the actuarial determination of fees and charges.