Private ruling: Foreign life insurance policy - reversionary bonus
Date of advice: 30 May 2024
Published: 15 July 2024
Ruling period: Year ending 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Will you be assessed under section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936) for any reversionary bonus received, when your life assurance policy is surrendered? | A1: No. Certain bonuses received on surrender or maturity of a life insurance/assurance policy may be included in assessable income under section 26AH of the ITAA 1936. However, section 26AH of the ITAA 1936 operates so that reversionary bonuses received more than 10 years from the date of commencement of a life assurance policy are excluded from assessable income. As you will be withdrawing the full amount held within the policy after 10 years from the date of commencement, this is not assessable income. As such, it will not need to be included as assessable income in your individual income tax return.

Relevant facts and circumstances: You and your spouse are Australian residents for taxation purposes, having attained permanent residency in Australia many years ago. During the period you were living in Country A (for a few years, several years ago and more than 10 years ago), you invested in a foreign life policy (the policy) with an overseas Company in Country B. The investment plan type is an 'international investment bond'. You made a significant initial contribution to the policy when it was first established, and the investment has run in an overseas currency denomination for its entire duration. A death benefit of 101% of the cash value of the investment units will be paid on the death of the last to die, and the policy schedule confirms that both your and your spouses' lives are insured under the policy. No other contributions have been made to the policy since it commenced. The following sums have been withdrawn from the investment: • $x in 200X • $x in 200X • $x in 200X You intend to fully cash in the policy more than 10 years after it was first established.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 26AH