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How does section 320-75 of the Income Tax Assessment Act 1997 (ITAA 1997) apply to ordinary bundled endowment policies issued by a friendly society?

Section 320-75 of the ITAA 1997 allows a deduction for the investment component of ordinary bundled endowment policies issued by a friendly society.

A friendly society issues ordinary bundled endowment policies, and charges a fee for administering these policies.

Section 320-75 of the ITAA 1997 allows a deduction for a component of premiums in respect of ordinary non-participating investment policies. An ordinary bundled endowment policy issued by a friendly society is an ordinary non-participating investment policy.

If the policy is issued before 1 July 2001, the amount allowed as a deduction under section 320-75 of the ITAA 1997 is the sum of the net premium less the amount that an actuary determines (having regard to the change over in the income year in the sum of the net current termination values of the policies and the movements in those values during the year) to be attributable to fees and charges (including risk charges)

If the policy is issued after 1 July 2001, the amount allowed as a deduction under section 320-75 of the ITAA 1997 is the lesser of : • the amount specified in the policy to be the capital component of the premium adjusted for any part of the premium that is reinsured; • the sum of the net premiums less the amount that an actuary determines (having regard to the change over the income year in the sum of the net current termination values of the policies and the movements in those values during the year ) to be attributable to fees and charges (including risk charges).

The current termination value of the policy is the surrender value of the policy. (Note: Taxation Laws Amendment Bill (No 4) 2001 (which has lapsed) introduced an amendment which changes the date the policy is issued from 1 July 2001 to 1 July 2002.)