Private ruling: life insurance policy
Date of advice: 28 October 2024
Published: 9 December 2024
Ruling period: Year ended XX XXXX 20YY
Date scheme commenced: XX XXXX 20YY

Ruling: Q1: Will any payment you receive on surrender of the life insurance policy held for more than 10 years be included in your assessable income? | A1: No. The payment you will receive upon surrender of the policy will not be income according to ordinary concepts under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) and will not constitute assessable income under section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936). Additionally, section 118-300 of the ITAA 1997 enables any capital gain or capital loss made by the beneficial owner of a policy of life insurance to be disregarded for capital gains tax purposes. Therefore, the amount you will receive upon surrender of the policy will not be included in your assessable income.

Relevant facts and circumstances: You are an Australian resident for tax purposes. You took out a life insurance policy on XX XXXX 19YY with a company based in the Country A. The policy is a whole of life insurance policy with compounding reversionary bonus. The basic assured sum of the policy, payable on death of the policy owner or maturity of the policy, is $XX. You pay a monthly premium of $XX. You are the sole owner of the insurance policy and Beneficiary A is the direct beneficiary. The surrender value of the policy as of XX XXXX 20YY was $XX. You will surrender the policy in the income year of which this ruling applies.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 118-300 | Income Tax Assessment Act 1936 section 26AH