Income Tax Assessment Act 1997

CHAPTER 3 - SPECIALIST LIABILITY RULES  

PART 3-35 - INSURANCE BUSINESS  

Division 320 - Life insurance companies  

Subdivision 320-H - Segregation of assets to discharge exempt life insurance policy liabilities  

Operative provisions

SECTION 320-255   Consequences of transfer of assets to or from segregated exempt assets  

320-255(1)    

This section applies if:

(a) an asset (other than money) is transferred from the company ' s *segregated exempt assets under subsection 320-235(1) or 320-250(1A) , (1) or (2) ; or

(b) an asset (other than money) is transferred to the company ' s *segregated exempt assets under subsection 320-235(3) or section 320-240 .

320-255(2)    
In determining:

(a) for the purposes of this Act (other than Division 40 and Parts 3-1 and 3-3 ) whether an amount is included in, or can be deducted from, the assessable income of a *life insurance company in respect of the transfer of the asset; or

(b) for the purposes of Parts 3-1 and 3-3 :

(i) whether the company made a *capital gain in respect of the transfer; or

(ii) whether the company made a *capital loss in respect of the transfer;

the company is taken:

(c) to have sold, immediately before the transfer, the asset transferred for a consideration equal to its *market value; and

(d) to have purchased the asset again at the time of the transfer for a consideration equal to its market value.

320-255(3)    
If, apart from this subsection, section 320-60 and subsection 320-105(1) , a *life insurance company could deduct an amount or apply a *capital loss as a result of the transfer of an asset to its *segregated exempt assets, the deduction or capital loss is disregarded until:

(a) the asset ceases to exist; or

(b) the asset, or a greater than 50% interest in it, is *acquired by an entity other than an entity that is an *associate of the company, immediately after the acquisition.

320-255(3A)    

Subsection (3) does not apply in relation to an amount that the company can deduct under a provision in Division 40.

320-255(4)    
A *life insurance company cannot deduct an amount or apply a *capital loss as a result of the transfer of an asset from its *segregated exempt assets.

320-255(5)    
(Repealed by No 83 of 2004)

320-255(6)    

If a *depreciating asset is transferred to the *segregated exempt assets of a *life insurance company, then, in determining for the purposes of Division 40 whether an amount is included in, or can be deducted from, the company ' s assessable income as a result of the transfer, the company is taken:

(a) to have, at the time immediately before the transfer, sold the asset for a consideration equal to its *market value at that time; and

(b) to have, at the time of the transfer, purchased the asset again for a consideration equal to its market value at that time.

320-255(7)    

If a *depreciating asset that has been included in the *segregated exempt assets of a *life insurance company since the asset was acquired by the company or the initial segregation of those assets took place is transferred from those assets, then the company must assume for the purposes of Division 40 that:

(a) if the asset ' s *market value at the time of the transfer is greater than its *adjustable value at that time, the company:

(i) had, at the time immediately before the transfer, sold the asset for a consideration equal to its adjustable value at that time; and

(ii) had, at the time of the transfer, purchased the asset again for a consideration equal to its adjustable value at that time; or

(b) if the asset ' s market value at the time of the transfer is equal to or less than its adjustable value at that time, the company:

(i) had, at the time immediately before the transfer, sold the asset for a consideration equal to its market value at that time; and

(ii) had, at the time of the transfer, purchased the asset again for a consideration equal to its market value at that time.

320-255(8)    

If a *depreciating asset that was previously transferred to the *segregated exempt assets of a *life insurance company is transferred from those assets, then, the company must assume, for the purposes of Division 40 that:

(a) if the asset ' s *market value at the time of its transfer from those assets is greater than its market value at the time when it was transferred to those assets, the company:

(i) had, at the time immediately before the transfer from those assets, sold the asset for a consideration equal to its market value at the time when it was transferred to those assets; and

(ii) had, at the time of the transfer from those assets, purchased the asset again for a consideration equal to its market value at the time when it was transferred to those assets; or

(b) if the asset ' s market value at the time of its transfer from those assets is equal to or less than its market value at the time when it was transferred to those assets, the company:

(i) had, at the time immediately before the transfer from those assets, sold the asset for a consideration equal to its market value at that time; and

(ii) had, at the time of the transfer from those assets, purchased the asset again for a consideration equal to its market value at that time.

320-255(9)    

Division 40 has effect in relation to an asset covered by subsection (6), (7) or (8) as if:

(a) in relation to the sale of the asset that is taken to have occurred under that subsection:

(i) the sale were a *balancing adjustment event; and

(ii) the *termination value of the asset for that event were equal to the consideration for the sale under that subsection; and

(iii) the company had stopped *holding the asset at the time of the sale; and

(b) in relation to the purchase of the asset that is taken to have occurred under that subsection:

(i) the company had only begun to hold the asset after the purchase; and

(ii) the first element of the asset ' s *cost were equal to the consideration for the purchase under that subsection; and

(iii) the company had acquired the asset from an *associate of the company.

Note:

This means that, amongst other things, as a result of the transfer:

• the asset ' s cost for the purposes of working out a deduction under Division 40 is reset; and

• the company ' s assessable income might be adjusted under section 40-285 if the transfer is a transfer to the company ' s segregated exempt assets.