Income derived by non-resident insurer: liability insurance where the insured event may occur within or outside of Australia

Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia?

No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insured event covered under the insurance contract may occur within or outside of Australia and there is no allocation of the premium to the extent to which the insured event may occur within or outside of Australia.

The following facts apply in respect of the insurance contract entered into by a non-resident insurer. (a) The relevant insured event under the insurance contract is one which can happen within or outside of Australia. (b) The insurance contract does not allocate the premium to the extent to which the insured event may occur within or outside Australia. (c) The insurance contract is entered into outside Australia. (d) The requirements for the application of subsection 142(2) of the ITAA 1936 do not apply. (e) 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 insured event is one which can happen only in Australia and does not apply to a premium paid or payable under an insurance contract providing coverage to an event which may occur both within and outside Australia.

Accordingly, a premium paid or payable under a policy where the insured event may occur within or outside Australia will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.