Private ruling: Foreign insurance policy
Date of advice: 31 July 2024
Published: 9 September 2024
Ruling period: Year ended 30 June 20XX
Date scheme commenced: XX XXXX 20XX

Ruling: Q1: Is any amount required to be included in your assessable income in relation to the lump sum payment you received when your foreign life assurance policy reached its full term? | A1: No. The payment you received upon maturity of the policy will not be income according to ordinary concepts under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997). Certain bonuses received on surrender or maturity of a life insurance/assurance policy may be included in assessable income under section 26AH of the Income Tax Assessment Act 1936 (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 your policy has reached its full term after a date more than 10 years after the date of commencement, this is not assessable income. 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. As such, it will not need to be included as assessable income in your individual income tax return.

Relevant facts and circumstances: On XX XXXX 19XX, you entered a XX-year term savings plan policy in country A, also referred to as a cash value insurance policy (the policy). Company A initially managed the policy but was eventually taken over by company B. From 19XX to 20XX, you made contributions towards the policy. You contributed XX in total towards the policy. After 20XX you made no further contributions. After 20XX, the policy did not change. The policy provided an additional guarantee if you died in the XX-year term. Your heirs would be the beneficiaries of the policy if you died during the term. Your investment was dependent on inflation and the economic growth in country A. On XX XXXX 20XX, the policy reached maturity and company B transferred you a lump sum. You are not a tax resident of country A and are not required to complete a tax return in country A. The lump sum you received is exempt in country A.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 26AH | Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 15-75 | Income Tax Assessment Act 1997 section 118-300