Private ruling: Life assurance policy
Date of advice: 24 March 2023
Published: 15 May 2023
Ruling period: Year ended 30 June 20xx
Date scheme commenced: 1 July 20xx

Ruling: Q1: Do you need to include the lump sum received upon surrender of your foreign life assurance policy in your income tax return? | A1: No. The payment you received on surrendering 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 provides that any capital gain or capital loss made by the owner of a policy of life insurance to be ignored for capital gains tax purposes. Accordingly, the amount you receive from surrendering the policy will not be included in your assessable income.

Relevant facts and circumstances: You held an Investment Bond (Life Assurance Policy) with a foreign life assurance policy provider which you opened while residing overseas. You contributed funds to the policy when you were working and living overseas. The final contribution to the fund was made before you moved to Australia. You arrived in Australia sometime afterwards and began your Australian residency at this time. You withdrew a portion of the funds held in the policy after you began residing in Australia. You surrendered the policy at a later date while residing in Australia, and received a lump sum in your Australian bank account.

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