Issue
Is a life insurance company entitled to an exemption under section 320-40 of the Income Tax Assessment Act 1997 (ITAA 1997) for any increase in the annual management fee it imposes after 30 June 2000, which exceeds the maximum annual management fee it was entitled to impose under the terms of its investment linked superannuation policy before 1 July 2000?
Decision
No. A life insurance company is not entitled to an exemption under section 320-40 of the ITAA 1997 for any increase in the annual management fee it imposes after 30 June 2000, which exceeds the maximum annual management fee it was entitled to impose under the terms its investment linked superannuation policy before 1 July 2000.
Facts
The terms of an investment-linked superannuation policy of a life insurance company before 1 July 2000 entitled the company to impose a maximum annual management fee of 1.5 per cent of assets under management.
After 30 June 2000 the life insurance company changed the terms and conditions of the policy to increase the maximum annual management fee it can impose to 2 per cent of assets under management
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.
Therefore the life insurance company is only entitled to an exemption for the annual management fee it was entitled to impose before 1 July 2000.