Taxation Determination

TD 94/33

Income tax: capital gains: is exemption under section 160ZZI of the Income Tax Assessment Act 1936 limited to the disposal of the right under a policy of life assurance that results from those acts, transactions or events listed in subsection 160ZZI(4)?

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FOI status:

1. No. Subsection 160ZZI(4) merely clarifies the application of section 160M and does not have the effect of limiting "disposals" for the purpose of section 160ZZI to those listed in subsection 160ZZI(4).

2. Accordingly, the exemption provided by subsection 160ZZI(2) is available:

*

to an original beneficial owner of rights under a policy of life assurance, or

*

to a person who did not acquire the rights or interest in such a policy for money or other consideration,

on any gain or loss realised either on a disposal constituted by an act, transaction or event listed in subsection 160ZZI(4) or by a change of ownership of rights or interest deemed generally by section 160M to be a disposal.

Example 1:

In July 1987, Mary took out a 10 year endowment life assurance policy with AJAX Insurance. Mary is the original beneficial owner of the rights under the policy.

In July 1993, Mary surrenders the policy and receives $5,000 from AJAX Insurance being payment of the surrender value of the policy.

By paragraph 160ZZI(4)(c), Mary is taken to have disposed of her rights under the policy. She is not subject to CGT by virtue of subsection 160ZZI(2).

Note: Section 26AH may apply to the amount received by Mary in these circumstances.

Example 2:

In September 1990, Adrian took out a 10 year endowment life assurance policy with AJAX Insurance. Adrian is the original beneficial owner of the rights under the policy.

In December 1992, Adrian assigns the rights under the policy to Brian for $10,000.

By subsection 160M(1), Adrian is taken to have disposed of his rights under the policy. He is not subject to CGT by virtue of subsection 160ZZI(2).

Note: Section 26AH may apply to the amount received by Adrian in these circumstances.

Commissioner of Taxation
21/4/94

Previously issued as Draft TD 93/D287

References

ATO references:
NO CGT Cell CGTDET93

Related Rulings/Determinations:

TD 94/31
TD 94/32
TD 94/34

Subject References:
exemption
life assurance policy
original beneficial owner

Legislative References:
ITAA 26AH
ITAA 160M
ITAA 160ZZI
ITAA 160ZZI(2)
ITAA 160ZZI(4)
ITAA 160ZZI(4)(c)