ATO ID 2002/200: Amount Paid Under An Ordinary Bundled Endowment Policy of a Friendly Society Upon The Death or Disability of a Policyholder
Date of decision: 27 August 2001
Year of income: Year ended 30 June 2001 and subsequent income years
Business line: Public Groups and International

Issue
How does section 320-80 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to an amount paid under an ordinary bundled endowment policy of a friendly society on the death or disability of the insured.?

Decision
Paragraph 320-80(2)(c) of the ITAA 1997 specifies how the risk component of an amount paid under an ordinary bundled endowment policy of a friendly society on the death or disability of the insured is determined.

Facts
A friendly society pays an amount under an ordinary bundled endowment policy on the death or disability of the insured.

Reasons for decision
Summary: An ordinary bundled endowment policy issued by a friendly society has a risk component and an investment component. A friendly society is entitled to a deduction for the risk component of such a policy for an amount paid on the death or disability of the insured. Paragraph 320-80(2)(c) of the ITAA 1997 is the relevant provision which determines the amount relating to the risk component of the policy. The risk component under paragraph 320-80(c) of the ITAA 1997 is the amount paid under the policy on the death or disability of the insured reduced by the current termination value of the policy (calculated by an actuary) immediately before the death, or the occurrence of the disability, of the insured person.

Legislative references: Income Tax Assessment Act 1997 paragraph 320-80(2)(c)
Related ATO interpretative decisions: ATO ID 2002/197 | ATO ID 2002/198 | ATO ID 2002/199 | ATO ID 2002/201
Subject references: Life assurance Endowment insurance