Commonwealth Numbered Acts

INCOME TAX ASSESSMENT AMENDMENT ACT 1984 No. 14 of 1984 - SECT 5

5. After section 26AG of the Principal Act the following section is inserted:
Bonuses and other amounts received in respect of certain short-term life
assurance policies

"26AH. (1) In this section, unless the contrary intention appears-
'agreement' means any agreement, arrangement or understanding, whether formal
or informal, whether express or implied and whether or not enforceable, or
intended to be enforceable, by legal proceedings;
'assurance year', in relation to an eligible policy, means the period of 12
months commencing on, or on any anniversary of, the date of commencement of
risk of the policy;
'date of commencement of risk', in relation to an eligible policy, means the
date of commencement of the period in respect of which the first or only
premium paid under the policy was paid or, if the first or only premium was
not paid in respect of a period, the date on which that premium was paid;
'eligible period', in relation to an eligible policy, means the period of 10
years commencing on the date of commencement of risk of the policy;
'eligible policy' means a policy of life assurance in relation to which the
date of commencement of risk is after 27 August 1982;
'eligible reckoning date', in relation to an eligible policy, means the date
of commencement of an assurance year that, for the purposes of an application
of sub-section (13), is the premium increase year referred to in that
sub-section.

"(2) Where a paid-up policy of life assurance is issued to a taxpayer in lieu
of an eligible policy-

   (a)  the paid-up policy shall, for the purposes of this section, be deemed
        to be a continuation of the eligible policy; and

   (b)  no amount shall be taken for the purposes of sub-section (4) to have
        been re-invested or otherwise dealt with on behalf of the taxpayer or
        as he directs in connection with the issue of the paid-up policy to
        the taxpayer in lieu of the eligible policy.



"(3) This section applies to any amount received after 27 August 1982 under an
eligible policy.

"(4) For the purposes of this section, but subject to sub-section (5), a
taxpayer shall be taken to have received an amount under or in relation to an
eligible policy although the amount is not actually paid to the taxpayer but
is re-invested or otherwise dealt with on his behalf or as he directs.

"(5) Sub-section (4) does not apply in relation to an amount in relation to an
eligible policy if the amount is re-invested or otherwise dealt with on behalf
of the taxpayer or as the taxpayer directs so as to increase the amount that
might reasonably be expected to be received under the eligible policy on a
surrender or maturity of the eligible policy.

"(6) Where, during the eligible period in relation to an eligible policy, a
taxpayer receives an amount (in this sub-section referred to as the 'relevant
amount') under the policy as or by way of a bonus, being an amount that, but
for this section, would not be included in the assessable income of the
taxpayer of any year of income, the assessable income of the taxpayer of the
year of income in which the relevant amount is received shall include-

   (a)  if the relevant amount is received during the first 8 years of the
        eligible period-an amount equal to the relevant amount;

   (b)  if the relevant amount is received during the ninth year of the
        eligible period-an amount equal to two-thirds of the relevant amount;
        or

   (c)  if the relevant amount is received during the tenth year of the
        eligible period-an amount equal to one-third of the relevant amount.



"(7) Sub-section (6) does not apply to any amount received by a taxpayer in a
year of income under an eligible policy where-

   (a)  the amount is received in consequence of-

        (i)    the death of the person on whose life the policy was effected;
               or

        (ii)   an accident, illness or other disability suffered by the person
               on whose life the policy was effected;

   (b)  the eligible policy is a superannuation policy within the meaning of
        Division 8; or

   (c)  except where the policy was effected, purchased or taken on assignment
        with a view to it being forfeited, surrendered or otherwise
        terminated, or to it maturing, within 10 years-the amount was received
        by the taxpayer by reason of the forfeiture, surrender or other
        termination of the whole or a part of the policy in circumstances
        arising out of serious financial difficulties of the taxpayer.



"(8) Where-

   (a)  sub-section (6) would, but for this sub-section, apply to an amount
        (in this sub-section referred to as the 'relevant amount') received by
        a taxpayer by reason of the forfeiture, surrender or other termination
        of the whole or a part of an eligible policy; and

   (b)  the Commissioner, having regard to-

        (i)    the total amount of premiums paid under the eligible policy;

        (ii)   the total amounts received by the taxpayer or by any other
               person under the eligible policy and the total amounts of
               bonuses included in the amounts so received;

        (iii)  the amount of the surrender value of the eligible policy at the
               time when the forfeiture, surrender or other termination
               occurred; and

        (iv)   such other matters as the Commissioner considers relevant,
is of the opinion that it would be unreasonable for sub-section (6) to apply
to the relevant amount or to a part of the relevant amount, sub-section (6)
does not apply to the relevant amount, or to that part of the relevant amount,
as the case may be.

"(9) Where-

   (a)  otherwise than as or by way of a bonus, a taxpayer receives an amount
        (in this sub-section referred to as the 'relevant amount') under an
        eligible policy; and

   (b)  the Commissioner is of the opinion that the relevant amount or a part
        of the relevant amount represents the whole or part of-

        (i)    a bonus that has accrued or has been declared in respect of the
               policy; or

        (ii)   a bonus that can reasonably be expected to accrue in respect of
               the policy, the relevant amount or the part of the relevant
               amount, as the case may be, shall, for the purposes of
               sub-section (6), be deemed to have been received by the
               taxpayer under the policy as or by way of a bonus.

"(10) Where-

   (a)  sub-section (9) applies by reason that the Commissioner has formed an
        opinion under paragraph (9) (b) that the whole or a part of an amount
        received by a taxpayer represents the whole or a part of a bonus; and

   (b)  the taxpayer subsequently receives an amount (in this sub-section
        referred to as the 'actual bonus'), being the whole or a part of the
        bonus, or of the part of the bonus, as the case may be, referred to in
        paragraph (a) of this sub-section, the following provisions have
        effect:

   (c)  the operation of sub-section (9) is not affected by the receipt of the
        actual bonus; and

   (d)  no part of the actual bonus shall be included in the assessable income
        of the taxpayer.



"(11) Where, in relation to an eligible policy, a taxpayer receives an amount
from the assurer, or from another person at the request of, or under an
agreement with, the assurer, by way of an advance or loan in respect of which
interest is not payable or in respect of which interest is payable at a rate
less than the rate of interest that could reasonably be expected to be payable
in respect of a loan of the same amount made on similar terms and conditions
by the assurer or the other person, as the case may be, to a person with whom
the assurer or that other person was dealing at arm's length, the amount
shall, for the purposes of sub-section (9), be deemed to be an amount to which
paragraph (9) (a) applies.

"(12) Where an eligible policy, or any right to receive any benefits that have
accrued, or will or may reasonably be expected to accrue, under an eligible
policy, is sold or assigned in whole or in part by a taxpayer during the
eligible period in relation to the policy-

   (a)  the amount of any consideration received by the taxpayer in respect of
        that sale or assignment shall be deemed to be an amount to which
        paragraph (9) (a) applies; and

   (b)  sub-sections (9) and (10) apply in relation to that consideration as
        if 'represents' were omitted from paragraphs (9) (b) and (10) (a) and
        'is attributable to' were substituted.



"(13) Where the amount of the premiums payable under an eligible policy in
relation to an assurance year (in this sub-section referred to as the 'premium
increase year') exceeds by more than 25% the amount of the premiums payable
under the policy in relation to the immediately preceding assurance year, the
eligible period in relation to the policy shall, for the purposes of-

   (a)  the application of sub-section (6) in relation to any amount received
        under the policy after the date of commencement of the premium
        increase year and before the first subsequent eligible reckoning date
        (if any) in relation to the eligible policy; and

   (b)  the application of sub-section (12) in relation to any sale or
        assignment of the policy after the date of commencement of the premium
        increase year and before the first subsequent eligible reckoning date
        (if any) in relation to the eligible policy, be reckoned from the date
        of commencement of the premium increase year.

"(14) This section has effect in relation to an eligible policy in relation to
which the date of commencement of risk is on or before 7 December 1983 as if-

   (a)  '10 years' were omitted from the definition of 'eligible period' in
        sub-section (1) and '4 years' were substituted;

   (b)  '8 years', 'ninth year' and 'tenth year' were omitted from sub-section
        (6) and '2 years', 'third year' and 'fourth year' respectively were
        substituted; and

   (c)  '10 years' were omitted from paragraph (7) (c) and '4 years' were
        substituted.".