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Income tax: does the transfer of an asset between the statutory funds of a life insurance company constitute a disposal for income tax purposes?

Preamble

No. An internal transfer of an asset between a life company's statutory funds does not result in taxation implications for the company because there is no disposal or sale for income tax purposes. The life company remains the beneficial owner of the asset both before and after the transfer, as the statutory fund is not a separate entity.

It is only upon disposal by a life company to an external party that any profit or loss is realised for taxation purposes.

This determination is applicable to both gains assessable under subsection 25(1) and Part IIIA of the Income Tax Assessment Act 1936.

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