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 adds new members to a superannuation master fund superannuation policy, which was established before 1 July 2000, in the ordinary course of the life insurance company's business?
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 adds new members to a superannuation master fund superannuation policy, which was established before 1 July 2000, in the ordinary course of the life insurance Company's business.
Facts
A superannuation master fund superannuation policy was established by a life insurance company in 1997. When it was established, the terms and conditions of the policy entitled the life insurance company to add new members to the policy. During the 2000/01 and 2001/02 years new members were continually added to the policy. Both the establishment of the fund and the addition of new members occurred in the ordinary course of the company's business.
Under the terms of the policy fees and charges remained at the same level both before and after 30 June 2000.
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 in respect of life insurance policies constituted by contracts made with the company before 1 July 2000.
The superannuation master fund policy was established before 1 July 2000 in the ordinary course of the company's business. When it was established, the terms and conditions of the policy entitled the life insurance company to add new members to the policy.
The addition of new members to the policy is allowed by the terms of the policy which was entered into before 1 July 2000.
Therefore the life insurance company is entitled to an exemption for management fees under section 320-40 of the ITAA 1997.