Private ruling: Life assurance policy
Date of advice: 10 March 2026
Published: 28 April 2026
Ruling period: Year ended 30 June 20YY | Year ended 30 June 20YY | Year ending 30 June 20YY
Date scheme commenced: 1 July 20YY

Ruling: Q1: Does the life assurance policy meet the definition of an eligible policy as set out in section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997) and section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936)? | A1: Yes. | Q2: Is the increase in value from the date you became a resident of Australia for taxation purposes, assessable under section 6-5 and/or section 6-10 of the ITAA 1997? | A2: No.

Relevant facts and circumstances: You are an Australian resident for tax purposes. On DD MM YYYY, you commenced a foreign life assurance policy (the policy) with an overseas insurer. The policy is a whole-of-life (lifetime) contract, effective subject to receipt of the first premium. You are both the policyholder (subscriber) and the insured person under the policy. The policy includes a death benefit payable to nominated beneficiaries in the following order: • your spouse • failing your spouse, your children in equal shares • failing your children, your heirs. On DD MM YYYY, you contributed XX as a single premium to the policy. You have not made any further contributions or premiums to the policy up to the date of your application. You have not made any withdrawals or redemptions (surrenders) from the policy to date. Under the policy, amounts are realised through partial or full withdrawal or redemption. Gains are credited within the policy but are generally not available until a withdrawal or redemption occurs. The policy is denominated in a foreign currency and/or units of account (unit-linked). As of DD MM YYYY, the insurer reported the policy value as XX. On DD MM YYYY, the policy value was approximately XX. As of DD MM YYYY, the insurer reported the policy value as XX. As of DD MM YYYY, the insurer reported the policy value (surrender or savings value before tax withholdings) as XX. On DD MM YYYY, the insurer recorded a dividend distribution of XX, which was credited within the policy.

Relevant legislative provisions: Income Tax Assessment Act 1936 section 6 | Income Tax Assessment Act 1936 section 26AH | Life Insurance Act 1995 section 9 | Life Insurance Act 1995 subsection 9(1) | Income Tax Assessment Act 1997 section 995-1

Reasons for decision: Summary: The life assurance policy is a life insurance policy within the meaning of section 995-1 of the ITAA 1997, as it is a whole-of-life contract providing for the payment of a benefit on death, consistent with the meaning of a life policy adopted from the LIA 1995 and applied to the term life assurance policy. Further, the policy satisfies the definition of an eligible policy for the purposes of section 26AH of the ITAA 1936, as the commencement of risk occurred after 27 August 1982 and the policy is not an excluded funeral policy. | Detailed Reasoning - Detailed reasoning: Section 26AH of the ITAA 1936 applies to amounts received under an 'eligible policy'. An 'eligible policy' is a life assurance policy where the date of commencement of risk is after 27 August 1982 (and is not an excluded funeral policy). Section 6 of the ITAA 1936 gives 'life assurance policy' the same meaning as 'life insurance policy' in the ITAA 1997. The definition of 'life insurance policy' in section 995-1 of the ITAA 1997 has the meaning given to the expression 'life policy' in section 9 of the Life Insurance Act 1995 (LIA 1995). Subsection 9(1) of the LIA 1995 states that each of the following constitutes a life policy for the purposes of the Act: (a) a contract of insurance that provides for the payment of money on the death of a person or on the happening of a contingency dependent on the termination or continuance of human life; (b) a contract of insurance that is subject to payment of premiums for a term dependent on the termination or continuance of human life; (c) a contract of insurance that provides for the payment of an annuity for a term dependent on the continuance of human life; (d) a contract that provides for the payment of an annuity for a term not dependent on the continuance of human life but exceeding the term prescribed by the regulations for the purposes of this paragraph; (e) a continuous disability policy; (f) a contract (whether or not it is a contract of insurance) that constitutes an investment account contract; (g) a contract (whether or not it is a contract of insurance) that constitutes an investment-linked contract. Subsection 14(2) of the LIA 1995 provides that an 'investment account contract', as listed at paragraph 9(1)(f) above, is a contract that provides for benefits to be paid on death, or on a specified date, and provides for the benefits to be calculated by reference to: • a running account under the contract; or • units the value of which are guaranteed by the contract not to be reduced; and • provides for the account to be increased (for example, by the amounts of premiums paid or interest payable). However, a contract is not an investment account contract if it provides for the account to be reduced otherwise than by the amounts of withdrawals by the person responsible for the payment of premiums or by the amounts of charges payable under the contract (subsection 14(3)). | Detailed Reasoning - Application to your circumstances: In your circumstances, the foreign life assurance policy is a life assurance policy because it is a whole-of-life contract under which a death benefit is payable on your death to your nominated beneficiaries. This feature falls within the meaning of a life policy in subsection 9(1) of the LIA 1995 (relevantly, a contract providing for the payment of money on the death of a person), which is adopted by section 995-1 of the ITAA 1997 (via the LIA meaning) and, through section 6 of the ITAA 1936, for the expression 'life assurance policy'. The policy's commencement of risk was DD MM YYYY. The contract became effective subject to receipt of the first premium, and you paid a single premium of XX on that date. As the commencement of risk is after 27 August 1982, and the policy is not an excluded funeral policy on the facts provided, it satisfies the definition of an eligible policy for the purposes of section 26AH of the ITAA 1936. | Detailed Reasoning - Question 2: Is the increase in value from the date you became a resident of Australia for taxation purposes, assessable under section 6-5 and/or section 6-10 of the ITAA 1997? | Summary: The increase in value of the policy after you became an Australian tax resident is not assessable as ordinary income under section 6-5 of the ITAA 1997, because no amount has been received, applied, or dealt with on your behalf. Mere growth in the policy's value does not constitute income according to ordinary concepts until an amount is realised through withdrawal or redemption. The increase is also not assessable as statutory income under section 6-10 of the ITAA 1997, as there is no specific provision that brings unrealised increases in policy value to account. In the absence of any payment or entitlement to payment, the post-residency increase in value is not included in assessable income under either provision. | Detailed Reasoning - Ordinary income: Section 6-5 of the ITAA 1997 provides that assessable income includes income according to ordinary concepts (ordinary income). For Australian residents, section 6-5 of the ITAA 1997 includes ordinary income from all sources during the income year. Section 6-5(4) of the ITAA 1997 treats an amount as received as soon as it is applied or dealt with in any way on your behalf or as you direct. Paragraph 16 of Taxation Ruling TR 98/1 Income tax: determination of income; receipts versus earnings (TR 98/1) explains that there are two commonly used methods of tax accounting for income: • the receipts method • the earnings method. Paragraph 17 of TR 98/1 also states that, when accounting for income for a year of income, the taxpayer must adopt the method that is most appropriate in the circumstances, and a method is appropriate if it gives a substantially correct reflex of income. | Detailed Reasoning - Statutory income: Section 6-10 of the ITAA 1997 includes amounts in assessable income that are not ordinary income but are included by another provision (statutory income). Section 6-10(3) of the ITAA 1997 similarly treats an amount as included once it is applied or dealt with in any way on your behalf or as you direct. Accordingly, section 6-10 of the ITAA 1997 does not include an increase in value unless another assessable-income provision operates to include that increase as statutory income. | Detailed Reasoning - Application to your circumstances: In your circumstances, you are an Australian resident for tax purposes. You hold a foreign life assurance policy with an overseas insurer and have not made any withdrawals or redemptions from the policy. Under the policy, amounts are realised through partial or full withdrawal or redemption, and gains are credited within the policy but are generally not available until withdrawal or redemption. The overseas insurer reported the policy value as XX (as of DD MM YYYY) and XX (as of DD MM YYYY), and later as XX (as of DD MM YYYY). Sections 6-5 and 6-10 of the ITAA 1997 assess amounts when they are received, including where an amount is applied or dealt with on your behalf or as you direct. Because no amount was paid to you (or applied or dealt with for you) merely because the policy value increased, the post-residency increase in value is not assessable on an annual basis under section 6-5 of the ITAA 1997 and is not included as statutory income under section 6-10 of the ITAA 1997.