ATO ID 2004/413: Income derived by non-resident insurer: liability insurance where the insured event may occur within or outside of Australia
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 the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia?

Decision
No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia.

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 includes certain premiums paid or payable under an insurance contract in the assessable income of a non-resident insurer. Subsection 142(1) of the ITAA 1936 requires that the insured event is one which can happen only in Australia and does not apply to a premium paid or payable under an insurance contract providing coverage to an event which may occur both within and outside Australia. Accordingly, a premium paid or payable under a policy where the insured event may occur within 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