The Australian Taxation Office, in its ruling IT 2480 on Variable Annuities of 16 June 1988, has set out the essential characteristics of purchased annuities. They are income and not repayments of capital. There are a number of contracts, or products as they are referred to by issuers, marketed by life insurance companies as immediate variable annuity contracts or policies, and there has been some doubt about their liability to stamp duty. Annuity contracts providing for the payment of bonuses, for residual capital values on termination or for commutation of the annuity into a lump sum, may also benefit from the stamp duty exemption provided they comply with the requirements set out in paragraphs 21 to 25 of ruling IT 2480. The purchase price under these contracts forms part of the vendor's statutory funds and is credited to an investment account in the name of the purchaser.
Charges are debited to the account and interest is credited to it.
The liability of the company is limited to the balance of the funds in the purchaser's account. The essential feature of the contracts is that the identity of the capital sum invested is never lost. The benefit payable under this type of contract is related to the number and value of units in the insured's unit account from time to time. The liability of the insurer is limited to the number of units and their value at cashing-in or redemption. Duty is payable on these contracts in the same way as investment account contracts above.