Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024 (52 of 2024)

Schedule 6   Income tax amendments for updates to accounting standards for general insurance contracts

Part 3   Application and transitional provisions

27   Transitional - special provision for certain income years

Election for this item to apply

(1) This item applies to a general insurance company for the following income years (each a relevant income year ) if the company chooses for this item, instead of item 26, to apply to the company:

(a) the start year;

(b) the following 4 income years.

(2) The choice:

(a) is irrevocable; and

(b) must be made in the approved form by the earlier of:

(i) the day by which the company's income tax return for the start year is due to be lodged; and

(ii) the day on which that income tax return is lodged.

Note: The Commissioner may defer the time for giving the choice: see section 388-55 in Schedule 1 to the Taxation Administration Act 1953.

Interaction with other amendments

(3) This item has effect in addition to the operation of the Income Tax Assessment Act 1997, as amended by this Schedule, provided for by item 25 of this Schedule.

Provision for, and payment of, claims by general insurance companies

(4) If:

(a) the value, at the end of the income year before the start year, of the company's liability for outstanding claims under general insurance policies as worked out:

(i) under section 321-20 of the Income Tax Assessment Act 1997 as in force immediately before the commencement of this Schedule; and

(ii) not under that section as amended by this Schedule; exceeds

(b) the value, at the end of the income year before the start year, of the company's adjusted liability for incurred claims under general insurance policies as worked out under section 321-20 of that Act as amended by this Schedule;

the company's assessable income for each relevant income year includes an amount equal to one-fifth of the excess.

(5) If:

(a) the value, at the end of the income year before the start year, of the company's adjusted liability for incurred claims under general insurance policies as worked out under section 321-20 of the Income Tax Assessment Act 1997 as amended by this Schedule; exceeds

(b) the value, at the end of the income year before the start year, of the company's liability for outstanding claims under general insurance policies as worked out:

(i) under section 321-20 of that Act as in force immediately before the commencement of this Schedule; and

(ii) not under that section as amended by this Schedule;

the company can deduct for each relevant income year an amount equal to one-fifth of the excess.

Premium income of general insurance companies

(6) If:

(a) the value, at the end of the income year before the start year, of the company's unearned premium reserve as worked out:

(i) under section 321-60 of the Income Tax Assessment Act 1997 as in force immediately before the commencement of this Schedule; and

(ii) not under that section as amended by this Schedule; exceeds

(b) the value, at the end of the income year before the start year, of the company's adjusted liability for remaining coverage under general insurance policies as worked out under section 321-60 of that Act as amended by this Schedule;

the company's assessable income for each relevant income year includes an amount equal to one-fifth of the excess.

(7) If:

(a) the value, at the end of the income year before the start year, of the company's adjusted liability for remaining coverage under general insurance policies as worked out under section 321-60 of the Income Tax Assessment Act 1997 as amended by this Schedule; exceeds

(b) the value, at the end of the income year before the start year, of the company's unearned premium reserve as worked out:

(i) under section 321-60 of that Act as in force immediately before the commencement of this Schedule; and

(ii) not under that section as amended by this Schedule;

the company can deduct for each relevant income year an amount equal to one-fifth of the excess.

Company ceases to carry on insurance business

(8) However, if the company ceases in a relevant income year to carry on an insurance business:

(a) subitems (4) to (7) do not apply for that income year or any future income years; and

(b) instead, for that income year, so much of any excess referred to in any of those subitems as has not been included in the company's assessable income, or allowed as a deduction, for any previous relevant income years is to be included in that assessable income or allowed as a deduction (as the case requires).