CGT: Loss on Disposal of Life Assurance Policy

Whether a loss on the disposal of a life assurance policy by the original beneficial owner can be set-off against capital gains.

No. The capital gains tax provisions do not apply and the loss cannot be offset against capital gains realised in accordance with the capital gains tax provisions.

The taxpayer made a capital loss on the disposal of his life assurance policy. The taxpayer was the original beneficial owner of the policy.

Division 16 of Part IIIA ( Income Tax Assessment Act 1936 (ITAA 1936)) contains provisions dealing with disposal of rights under insurance policies. The effect of subsection 160ZZI(2) (ITAA 1936) is that, subject to subsection 160ZZI(3) (ITAA 1936), the capital gains tax provisions do not apply in respect of the disposal of, or disposal of an interest in, any rights under a policy of life assurance, by the original beneficial owner. If another person has acquired rights or interest for an amount of money or other consideration, subsection 160ZZI(3) (ITAA 1936) applies and the disposal becomes subject to capital gains tax.