Taxation Determination

TD 94/31

Income tax: capital gains: what is meant by the term "original beneficial owner" as used in subsection 160ZZI(3) of the Income Tax Assessment Act 1936 (the Act)?

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FOI status:

1. The exemption from Part IIIA provided by section 160ZZI is intended to apply to all disposals of rights, or any interest in rights, under a life assurance policy other than where a person trades or deals (including holding until maturity) in those rights, or any interest in those rights, as a result of acquiring them for money or other consideration from a previous owner.

2. Although the term "original beneficial owner" is not defined in the Act, in the context of section 160ZZI, and for the purpose only of that section, an "original beneficial owner" of any of the rights, or any interest in any of the rights, under a policy of life assurance is the first person who:

(i)

at the time the policy is effected, holds such rights, or any interest in such rights, and

(ii)

possesses all the normal incidents of beneficial ownership (for example, is entitled to the benefits of the policy proceeds and has the power of management and control over the policy as well as the power to transfer, grant as security, surrender or otherwise dispose of, the policy).

3. Where two or more persons jointly effect a policy of life assurance, each person may be an "original beneficial owner". Furthermore, the person holding the rights or any interest in rights under a policy of life assurance may be an individual, a company or a trustee of a trust estate alone or in partnership.

4. It is generally accepted in trust law that the trustee of a trust estate is the legal owner, and not the beneficial owner, of rights, or any interest in rights, under a policy of life assurance taken out and held on trust for the beneficiaries of that trust. For the purpose of, and in the context of section 160ZZI, a trustee will be regarded as the "beneficial owner" of such rights or any interest in such rights if the trustee possesses all the normal incidents of beneficial ownership as referred to in paragraph 2 (ii) above.

Note:

(i)

Where a beneficiary of a trust is absolutely entitled as against the trustee to any of the rights, or any interest in any of the rights under the policy, the beneficiary (and not the trustee) will be the relevant taxpayer for CGT purposes in respect of the disposal of such rights, or an interest in any of the rights.

(ii)

Where a trustee of a complying superannuation fund, complying ADF or PST disposes of any rights, or any interest in any of the rights under a policy of life assurance, subsection 160ZZI(3A) applies to exempt any gains or losses.

Note: The Addendum to this Determination that issued on 15 December 2004 applies on and from 15 December 2004.

Commissioner of Taxation
21/4/94

Previously issued as Draft TD 93/D284;

and 285

References

ATO references:
NO CGT Cell CGTDET90 & 91

Related Rulings/Determinations:

TD 94/32
TD 94/33
TD 94/34

Subject References:
exemption
life assurance policy
original beneficial owner
trustee

Legislative References:
ITAA 160V
ITAA 160ZZI
ITAA 160ZZI(3)
ITAA 160ZZI(3A)