Commonwealth Numbered Regulations - Explanatory Statements

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INCOME TAX REGULATIONS (AMENDMENT) 1995 NO. 152

STATUTORY RULES 1995 No. 152

Issued by the Authority of the Assistant Treasurer

Income Tax Assessment Act 1936

Income Tax Regulations (Amendment)

GENERAL OUTLINE

Purpose of regulations

The purpose of these regulations is to give effect to the proposal to allow deductions to registered organisations for their expenses incurred in gaining the investment component of life insurance premiums from 1 July 1994.

The legislation giving effect to this change, Taxation (Deficit Reduction) Act (No 2) 1993, received Royal Assent on 27 October 1993. Since then, the provision providing the allowance of deductions (section 116HAA) has been repealed and replaced by Taxation Laws Amendment Act 1994 (section 116HAC).

Matters covered by regulations

The investment component of a life insurance premium is the amount remaining after deducting the risk component. The regulations contain the methods for calculating the risk component of life insurance premiums.

Life insurance companies are able to claim a deduction for the expenditure incurred in gaining the investment component of certain premiums and regulations are in place for this purpose (Part 3A, regulations 14A-14D). These regulations are amended to extend the application to registered organisations.

DETAILED NOTES ON THE REGULATIONS

Regulation 1

Regulation 1 is the commencement date. The regulations are taken to have commenced on 1 July 1994 because it was from this date that the Income Tax Assessment Act 1936 provided registered organisations with a deduction for the investment component.

The commencement date for the regulations is retrospective because it is to the benefit of the taxpayer and it places no burden on any person other than the Crown. Without this application date, registered organisations are unable to calculate the amount of deduction available under section 116HAC.

Regulation 2

Regulation 2 is procedural and is designed to modify the existing Income Tax Regulations as necessary and to substitute new regulations 14A and 14D in those Regulations.

Regulation 3

Regulation 14A is omitted and substituted with new regulation 14A to extend the application of Part 3A to registered organisations:

•       in relation to registered organisations, the terms 'life assurance policy', 'registered organisation' and 'risk component' are defined to have the same meaning as subsection 116E(1); for life insurance companies, these terms are defined in subsection 110(1);

•       for registered organisations, 'authorised actuary' has the same meaning as subsection 116HAC(1); for life insurance companies, the definition is the same as that contained in subsection 110(1);

•       'future premiums' has the same meaning as contained in subsection 110(1) for both registered organisations and life insurance companies.

Regulation 4

Regulation 14D is amended to extend its application to both life assurance companies and registered organisations.

New Regulation 14D provides a detailed description of how to calculate the risk component of a life insurance premium received by a life assurance or a registered organisation.