S 321-20 substituted by No 52 of 2024, s 3 and Sch 6 item 5, effective 1 July 2024. No 52 of 2024, s 3 and Sch 6 items 24
-
27, contains the following application and transitional provisions:
SECTION 24
24 Definition
24
In this Part:
start year
means the first income year starting on or after 1 January 2023.
25 Application of amendments
25
The amendments made by this Schedule apply in relation to assessments for the start year and later income years.
26 Transitional
-
first income year for which amendments apply
Scope
(1)
This item applies to a general insurance company unless the company elects for item 27 to apply in the manner set out in that item.
Provision for, and payment of, claims by general insurance companies
(2)
In applying Subdivision
321-A
of the
Income Tax Assessment Act 1997
(as amended by this Schedule) to a general insurance company
'
s assessment for the start year:
(a)
treat paragraphs
321-10(a)
and
321-15(b)
of that Act as referring to the value, at the end of the previous income year, of the company
'
s liability for outstanding claims under general insurance policies; and
(b)
that value is to be 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.
(3)
Subitem (2) does not affect paragraph
321-10(b)
of that Act.
Note:
That paragraph refers to the value, at the end of that first income year, of the company
'
s adjusted liability for incurred claims under general insurance policies.
Premium income of general insurance companies
(4)
In applying Subdivision
321-B
of the
Income Tax Assessment Act 1997
(as amended by this Schedule) to a general insurance company
'
s assessment for the start year:
(a)
treat paragraphs
321-50(a)
and
321-55(b)
of that Act as referring to the value, at the end of the previous income year, of the company
'
s unearned premium reserve; and
(b)
that value is to be 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.
(5)
Subitem (4) does not affect paragraph
321-50(b)
of that Act.
Note:
That paragraph refers to the value, at the end of that first income year, of the company
'
s adjusted liability for remaining coverage under general insurance policies.
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).
S 321-20 formerly read:
SECTION 321-20 How value of outstanding claims liability is worked out
321-20
Work out the value, at the end of an income year, of a *general insurance company
'
s liability for *outstanding claims under *general insurance policies in this way:
Method statement
Step 1.
Add up the amounts that, at the end of the income year, the company determines, based on proper and reasonable estimates, to be appropriate to set aside and invest in order to meet:
(a) liabilities for outstanding claims under those policies; and
(b) direct settlement costs associated with those outstanding claims.
Step 2.
Reduce the step 1 amount by so much of it as the company expects at the end of the income year to recover:
(a) under a contract of reinsurance; or
(b) in any other way;
other than under a contract of reinsurance to which subsection 148(1) of the
Income Tax Assessment Act 1936
(about reinsurance with non-residents) applies.
S 321-20 inserted by
No 79 of 2010
, s 3 and Sch 5 item 2, applicable to the first income year starting on or after 1 July 2010 and later income years.
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