Issue
Is a life insurance company entitled to an exemption under section 320-40 of the Income Tax Assessment Act 1997 (ITAA 1997) if, after 30 June 2000, it increases fees that it imposes under an investment linked superannuation policy to the extent of any increased or additional Government charges and the terms and conditions of the life policy entered into before 1 July 2000 permitted such increases?
Decision
Yes. A life insurance company is entitled to an exemption under section 320-40 of the ITAA 1997 if, after 30 June 2000, it increases fees that it imposes under an investment linked superannuation policy to the extent of any increased or additional Government charges and the terms and conditions of the life policy entered into before 1 July 2000 permitted such increases.
Facts
The terms and conditions of a life insurance policy entered into before 1 July 2000 provide that fees charged on the policy may be increased if there is an increase in government charges or there are additional government charges.
On 1 January 2001 a life insurance company increases certain fees on its policies to compensate it for an increase in stamp duty.
Reasons for Decision
Under subsection 320-40(1) of the ITAA 1997 a life insurance company is entitled to an exemption for one-third of specified management fees for contracts made with the company before 1 July 2000.
Subsection 320-40(4) of the ITAA 1997 provides that the fees and charges imposed by a life insurance company after 30 June 2000, on a policy entered into before 1 July 2000, are only exempt to the extent of any fees or charges that the company was entitled to make under the terms of the policy as applying immediately before 1 July 2000.
The terms and conditions of the policy prior to 1 July 2000 allowed the life insurance company to increase fees to the extent of any additional Government charges or any increases in Government charges.
Therefore the life insurance company meets the requirement of subsection 320-40(4) of the ITAA 1997 and is entitled to an exemption for specified management fees under section 320-40 of the ITAA 1997 for its investment linked superannuation policy.