Private ruling: International income - lump sum
Date of advice: 12 March 2026
Published: 4 May 2026
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY
Date scheme commenced: DD MM YYYY

Ruling: Q1: When you surrender your life assurance policy, will the payment you will receive be assessable income under section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: No. You have held the policy for more than 10 years from the commencement of risk and therefore the resulting bonus is not included in your assessable income under 26AH of the ITAA 1936. | Q2: Will any capital gain or capital loss, resulting from the surrender of your life assurance policy, be disregarded pursuant to section 118-300 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A2: Yes. You are the original owner and holder of the policy, and the capital gain will occur when the policy is surrendered. Therefore, any capital gain will be disregarded pursuant to section 118-300 of the ITAA 1997.

Relevant facts and circumstances: After 27 August 1982, you took out the policy with organisation A. The policy provides benefits to you upon survival to the benefit date, or to your beneficiaries upon death prior to that date. The policy originally ran for a fixed term of XX years to the benefit date. For a period, you paid a monthly contribution of $XX. Since DD MM YYYY, you have been living in Australia as an Australian tax resident. Your change in residency did not affect the policy. Since MM YYYY, due to a change in your financial circumstances you increased your monthly contribution. In YYYY, organisation A merged with another organisation and was renamed organisation B. In MM YYYY, you contributed a lump sum towards the policy. Upon reaching the benefit date, you were given the option of continuing contributing the increased amount to the policy. You agreed to this option. In MM YYYY, you contributed another lump sum towards the policy. On DD MM YYYY, organisation B informed you that they no longer had a copy of the full policy documents relating to the policy. On DD MM YYYY, you received a letter from organisation B stating the policy was currently valued is $XX. The value included a final bonus of $XX. The letter gave you the following options on surrender of your policy: • lump sum • annuity • combination of a lump sum and reduced annuity. On DD MM YYYY, you surrendered the policy and opted to receive the lump sum option. You will receive payment of the lump sum in either the income year ended 30 June 20YY or 20YY.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 26AH | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 section 104-5 | Income Tax Assessment Act 1997 section 118-300