Taxation Laws Amendment Act (No. 3) 2002 (97 of 2002)
Schedule 2 General insurance
Income Tax Assessment Act 1936
9 After Schedule 2H
Insert:
Schedule 2J - General insurance
Division 321 - General insurance companies
Table of Subdivisions
Guide to Division 321
321-A Provision for or payment of claims
321-B Premium income
Guide to Division 321
321-1 What this Division is about
This Division deals with several disparate matters relating to the taxation of general insurance companies.
Subdivision 321-A - Provision for or payment of claims
Guide to Subdivision 321-A
321-5 What this Subdivision is about
This Subdivision contains provisions relating to the assessment of general insurance companies in respect of provision for or payment of claims.
Table of sections
Operative provisions
321-10 Amount to be included in assessable income for outstanding claims liability
321-15 Deduction for outstanding claims liability
321-20 How value of outstanding claims liability is worked out
321-25 Deduction for claims paid during year of income
321-30 Application: insurance business other than reinsurance business
321-35 Application: reinsurance business
[This is the end of the Guide]
Operative provisions
321-10 Amount to be included in assessable income for outstanding claims liability
If the value, at the end of a year of income (the current year of income ), of the outstanding claims liability of a general insurance company under general insurance policies is less than the value, at the end of the previous year of income, of that liability, the company’s assessable income of the current year of income includes an amount equal to the difference.
321-15 Deduction for outstanding claims liability
If the value, at the end of a year of income (the current year of income ), of the outstanding claims liability of a general insurance company under general insurance policies exceeds the value, at the end of the previous year of income, of that liability, the company can deduct for the current year of income an amount equal to the excess.
321-20 How value of outstanding claims liability is worked out
The value of the outstanding claims liability , at the end of a year of income, of a general insurance company under general insurance policies issued in the course of carrying on insurance business is:
(a) the sum of the amounts that, at that time, the company determines, based on proper and reasonable estimates, to be appropriate to set aside and invest in order to meet:
(i) liabilities for outstanding claims under those policies; and
(ii) direct settlement costs associated with those outstanding claims;
less
(b) any part of that sum that at that time the company expects to recover under a policy of reinsurance or in any other way.
321-25 Deduction for claims paid during year of income
A general insurance company can deduct amounts paid during the year of income in respect of claims under general insurance policies.
321-30 Application: insurance business other than reinsurance business
(1) Subject to this section, this Subdivision applies, and is taken to have applied, to assessments in respect of insurance business other than reinsurance business, for the 1991-92 year of income and all later years of income.
(2) In determining whether an amount is to be included under section 321-10 in a general insurance company’s assessable income for the 1991-92 year of income in respect of insurance business other than reinsurance business, the value of the company’s outstanding claims liability under general insurance policies (other than policies of reinsurance) at the end of the previous year of income is taken to be the amount that would have been the value of that liability at that time if it had been worked out in accordance with section 321-20.
(3) In determining whether a general insurance company can deduct an amount under section 321-15 for the 1991-92 year of income in respect of insurance business other than reinsurance business, the value of the company’s outstanding claims liability under general insurance policies (other than policies of reinsurance) at the end of the previous year of income is taken to be the amount that would have been the value of that liability at that time if it had been worked out in accordance with section 321-20.
321-35 Application: reinsurance business
(1) Subject to this section, this Subdivision applies, and is taken to have applied, to assessments in respect of reinsurance business for the 1995-96 year of income and all later years of income.
(2) In determining whether an amount is to be included under section 321-10 in a general insurance company’s assessable income for the 1995-96 year of income in respect of reinsurance business, the value of the company’s outstanding claims liability under general insurance policies that are policies of reinsurance at the end of the previous year of income is taken to be the amount that would have been the value of that liability at that time if it had been worked out in accordance with section 321-20.
(3) In determining whether a general insurance company can deduct an amount under section 321-15 for the 1995-96 year of income, the value of the company’s outstanding claims liability under general insurance policies that are policies of reinsurance at the end of the previous year of income is taken to be the amount that would have been the value of that liability at that time if it had been worked out in accordance with section 321-20.
Subdivision 321-B - Premium income
Guide to Subdivision 321-B
321-40 What this Subdivision is about
This Subdivision contains provisions relating to the assessment of general insurance companies in respect of premium income.
Table of sections
Operative provisions
321-45 Assessable income to include gross premiums
321-50 Amount to be included in assessable income for reduction in value of unearned premium reserve
321-55 Deduction for increase in value of unearned premium reserve
321-60 How value of unearned premium reserve is worked out
321-65 Application
[This is the end of the Guide]
Operative provisions
321-45 Assessable income to include gross premiums
The assessable income of a general insurance company for a year of income includes the gross premiums received or receivable by the company during the year of income in respect of general insurance policies.
321-50 Amount to be included in assessable income for reduction in value of unearned premium reserve
If the value, at the end of a year of income (the current year of income ), of the unearned premium reserve of a general insurance company under general insurance policies is less than the value, at the end of the previous year of income, of that reserve, the company’s assessable income of the current year of income includes an amount equal to the difference.
321-55 Deduction for increase in value of unearned premium reserve
If the value, at the end of a year of income (the current year of income ), of the unearned premium reserve of a general insurance company under general insurance policies exceeds the value, at the end of the previous year of income, of that reserve, the company can deduct for the current year of income an amount equal to the excess.
321-60 How value of unearned premium reserve is worked out
The value of the unearned premium reserve , at the end of a year of income (the current year of income ), of a general insurance company under general insurance policies issued in the course of carrying on insurance business is so much of the sum of the net premiums received or receivable by the company in relation to those policies as the company determines, based on proper and reasonable estimates, to relate to risks covered by the policies in respect of later years of income where:
apportionable issue costs means so much of the costs incurred by the company in connection with the issue of the relevant policies as relate to the gross premiums and, without limiting the generality of the above, includes the following:
(a) commission and brokerage fees;
(b) administration costs of processing insurance proposals and renewals;
(c) administration costs of collecting premiums;
(d) selling and underwriting costs;
(e) fire brigade charges;
(f) stamp duty;
(g) other charges, levies and contributions imposed by governments or governmental authorities that directly relate to general insurance policies.
net premiums means:
(a) the sum of:
(i) the gross premiums received or receivable by the company in relation to the relevant policies in the current year of income or an earlier year of income; and
(ii) any reinsurance commissions received or receivable by the company that relate to relevant reinsurance premiums;
less
(b) the sum of:
(i) the apportionable issue costs; and
(ii) any relevant reinsurance premiums.
relevant reinsurance premiums means premiums paid by the company in the current year of income or an earlier year of income for the reinsurance of risks covered by the relevant policies, other than:
(a) reinsurance premiums that the company cannot deduct because of the application of subsection 148(1); and
(b) treaty non-proportional reinsurance premiums.
treaty non-proportional reinsurance premiums means reinsurance premiums that were paid in respect of a particular class of insurance business where, under the contract of reinsurance, the reinsurer agreed to pay, in respect of a loss incurred by the company that is covered by the relevant policy, some or all of the excess over an agreed amount.
321-65 Application
This Subdivision applies to assessments for the 1999-2000 year of income and all subsequent years of income.
Division 323 - Companies that are not required by law to insure in respect of workers’ compensation liabilities
Guide to Division 323
323-1 What this Division is about
This Division deals with provision for and payment of outstanding claims for workers’ compensation liabilities against companies that are not required by law to insure, and do not insure, in respect of such liabilities.
Table of sections
Operative provisions
323-5 Amount to be included in assessable income for outstanding claims liability
323-10 Deduction for outstanding claims liability
323-15 How value of outstanding claims liability is worked out
323-20 Deductions for claims paid during year of income
323-25 Application
[This is the end of the Guide]
Operative provisions
323-5 Amount to be included in assessable income for outstanding claims liability
If the value, at the end of a year of income (the current year of income ), of the outstanding claims liability for workers’ compensation claims of a company that is not required by law to insure, and does not insure, against liability for such claims is less than the value, at the end of the previous year of income, of that liability, the company’s assessable income of the current year of income includes an amount equal to the difference.
323-10 Deduction for outstanding claims liability
If the value, at the end of a year of income (the current year of income ), of the outstanding claims liability for workers’ compensation claims of a company that is not required by law to insure, and does not insure, against liability for such claims exceeds the value, at the end of the previous year of income, of that liability, the company can deduct for the current year of income an amount equal to the excess.
323-15 How value of outstanding claims liability is worked out
The value of the outstanding claims liability , at the end of a year of income, of a company for workers’ compensation claims is the sum of the amounts that, at that time, the company determines, based on proper and reasonable estimates, to be appropriate to set aside and invest in order to meet:
(a) liabilities for those claims; and
(b) direct settlement costs associated with those claims.
323-20 Deductions for claims paid during year of income
A company that is not required by law to insure, and does not insure, against liability for workers’ compensation claims can deduct amounts paid during the year of income in respect of such claims.
323-25 Application
This Division applies, and is taken to have applied, to assessments for the 1996-97 year of income and all later years of income.