Issue
Is the taxpayer entitled to a refund of the tax offset available under section 160AAB of the Income Tax Assessment Act 1936 (ITAA 1936) where the amount of the tax offset exceeds the amount of the tax payable?
Decision
No. The taxpayer is not entitled to a refund of the tax offset available under section 160AAB of the ITAA 1936 as this offset is not a refundable tax offset.
Facts
The taxpayer invested in an Investment Bond offered by a life assurance company after 7 December 1983 and was issued with an investment-linked policy of life assurance.
Under the investment bond, bonuses received would not be paid to the taxpayer until the policy matured, or was surrendered/forfeited.
The taxpayer surrendered the policy of life assurance within 10 years and received a return of capital invested and a bonus.
The taxpayer included the appropriate amount of the reversionary bonus in their assessable income.
The amount of the tax offset for the bonus exceeded the amount of the tax payable under the assessment.
Reasons for Decision
Under subsection 26(i) of the ITAA 1936 the assessable income of a taxpayer includes any amount received as a bonus, except bonuses paid on maturity, forfeiture or surrender of a policy of life assurance (reversionary bonuses). Reversionary bonuses are included in assessable income under section 26AH of the ITAA 1936.
The sum received by the taxpayer after surrendering the investment bond is the amount of capital invested plus the reversionary bonuses earned. The amount of the reversionary bonus which is included in the taxpayer's assessable income is calculated under subsection 26AH(6) of the ITAA 1936.
If an amount is included in the assessable income of a taxpayer under section 26AH of the ITAA 1936, the taxpayer is entitled to a tax offset under section 160AAB of the ITAA 1936.
Generally the amount of a tax offset is limited to the amount of tax payable. The exception to this is where the tax offset is a refundable tax offset under Division 67 of the Income Tax Assessment Act 1997 (ITAA 1997). Division 67 of the ITAA 1997 allows for the refund of certain tax offsets where the taxpayer's offsets exceed the tax payable. Section 67-25 of the ITAA 1997 lists the tax offsets which are refundable. The tax offset available under section 160AAB of the ITAA 1936 is not included in this list and therefore is not refundable.
The taxpayer is therefore not entitled to a refund of the excess tax offset available under section 160AAB of the ITAA 1936.