Income derived by non-resident insurer: property insurance where the properties covered are situated in Australia and other countries and the geographical location of the properties is not specified in the insurance contract but is known to the insurer

Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract and the location of the properties is not specified in the insurance contract but is known to the insurer?

No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the properties covered under the insurance contract are situated in Australia and other countries, there is no allocation of the premium in respect of the different properties that are covered by the insurance contract, and the location of the properties is not specified in the insurance contract but is known to the insurer.

The following facts apply in respect of the insurance contract entered into by a non-resident insurer. (a) Some, but not all of the properties were situated in Australia at the time of making the insurance contract. (b) The insurance contract does not allocate the premium between the items of property, or between Australia and other geographic locations. (c) The geographical location of the properties is not specified in the insurance contract but is known to the insurer. (d) The insurance contract is entered into outside of Australia. (e) The requirements for the application of subsection 142(2) of the ITAA 1936 do not apply. (f) The policyholder is a non-resident of Australia.

Subsection 142(1) of the ITAA 1936 includes certain premiums paid or payable under an insurance contract in the assessable income of a non-resident insurer.

Subsection 142(1) of the ITAA 1936 requires that the properties covered by the insurance contract are situated in Australia and does not apply to a premium paid or payable under an insurance contract which provides coverage to properties situated within and outside Australia.

As subsection 142(1) of the ITAA 1936 does not provide for apportionment of a premium under an insurance contract there is no authority to attribute part of the premium to the properties situated in Australia.

The fact that the location of the properties is not specified in the insurance contract does not affect the application of subsection 142(1) of the ITAA 1936. Subsection 142(1) will not apply where the properties covered by the contract are situated both within and outside Australia.

Accordingly, a premium paid or payable under an insurance contract specifically for properties, which are situated both within and outside Australia at the time of making the contract, will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.