ATO ID 2004/416: Income derived by non-resident insurer: insurance for an Australian liability event and an unrelated global liability event
Date of decision: 13 May 2004
Year of income: Year ended 30 June 2003
Business line: Public Groups and International

Issue
Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where an insurance contract covers a liability event that can only happen in Australia and an unrelated global liability event, and there is no allocation of the premium between these two liability events?

Decision
No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insurance contract covers a liability event that can only happen in Australia and an unrelated global liability event and there is no allocation of the premium between these two liability events.

Facts
The following facts apply in respect of the insurance contract entered into by a non-resident insurer.

Reasons for decision
Summary: Subsection 142(1) of the ITAA 1936 provides that an insurance premium paid to a non-resident insurer is assessable income of the non-resident if the insured event is one which can only happen in Australia. As subsection 142(1) of the ITAA 1936 does not provide for apportionment of the premium, there is no authority to attribute part of the premium to the liability event that can happen within or outside Australia. Accordingly, a premium paid or payable on a policy that covers both an insured event which can only happen in Australia and an insured event that can happen either in or outside Australia will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.

Legislative references: Income Tax Assessment Act 1936 subsection 142(1) subsection 142(2)
Subject references: Non resident insurance industry