Issue
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 geographical location of the properties is specified in the insurance contract?
Decision
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 geographical location of the properties is specified in the insurance contract.
Facts
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 specified in the insurance contract. (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.
Reasons for Decision
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 that are 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 specification of the location of the properties in the insurance contract is considered to be immaterial as ultimately it is the location itself of those properties that is the determinative factor.
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.