Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-1 - CAPITAL GAINS AND LOSSES: GENERAL TOPICS  

Division 118 - Exemptions  

Subdivision 118-D - Insurance and superannuation  

SECTION 118-300   Insurance policies  

118-300(1)    

A *capital gain or *capital loss you make from a *CGT event happening in relation to a *CGT asset that is your interest in rights under a *general insurance policy, a *life insurance policy or an *annuity instrument is disregarded in the situations set out in this table.

Insurance policies
Item	The *CGT event happens to this type of policy:	… and you are
1	Any insurance policy or *annuity instrument	the insurer or the entity that issued the instrument
.
2	A *general insurance policy for property where, if a *CGT event happened in relation to the property, any *capital gain or *capital loss would be disregarded	the insured
.
3	A policy of insurance on the life of an individual or an *annuity instrument	the original owner of the policy or instrument (other than the trustee of a *complying superannuation entity)
.
4	A policy of insurance on the life of an individual or an *annuity instrument	an entity that *acquired the interest in the policy or instrument for no consideration
.
5	A policy of insurance on the life of an individual or an *annuity instrument	the trustee of a *complying superannuation entity for the income year in which the *CGT event happened
.
6	A policy of insurance on the life of an individual or an *annuity instrument, where the *life insurance company ' s liabilities under the policy or instrument are to be discharged out of *complying superannuation assets or *segregated exempt assets	the life insurance company
.
7	A policy of insurance against an individual suffering an illness or injury	the trustee of a *complying superannuation entity for the income year in which the *CGT event happened

EXAMPLES

Example 1:

Brian (as the insured) receives an insurance payment from his insurer for the destruction of a building he owned as an investment. The payment constitutes capital proceeds on the destruction (CGT event C1). The discharge of the insurance policy (CGT event C2) has no CGT consequences.

Example 2:

Peter is the original beneficial owner of the rights under a policy of insurance on the life of an individual. He transfers the rights to his spouse for nothing. There are no CGT consequences for him, and none for his spouse if he dies.

Payment to trust beneficiary (or representative) if trustee owns the policy or instrument

118-300(1A)    

A *capital gain or *capital loss you make from a *CGT event happening because you receive a *CGT asset from the trustee of a trust is disregarded if:

(a) you receive the CGT asset as:

(i) a beneficiary of the trust; or

(ii) a *legal personal representative of a beneficiary of the trust; and

(b) the CGT asset is attributable to another CGT event and CGT asset to which table item 3 in subsection (1) applies for the trustee.

118-300(2)    
Only these *CGT events are relevant: CGT events A1, B1, C2, E1, E2, E3, E5, E6, E7, E8, I1, I2, K3 and K4.

Note:

The full list of CGT events is in section 104-5 .