Income derived by non-resident insurer: insurance for an Australian liability event and an unrelated global liability event

Is an insurance premium assessable under subsection 142(1) of the Income Tax Assessment Act 1936 (ITAA 1936) where an insurance contract covers a liability event that can only happen in Australia and an unrelated global liability event, and there is no allocation of the premium between these two liability events?

No. An insurance premium is not assessable under subsection 142(1) of the ITAA 1936 where the insurance contract covers a liability event that can only happen in Australia and an unrelated global liability event and there is no allocation of the premium between these two liability events.

The following facts apply in respect of the insurance contract entered into by a non-resident insurer. (a) The insurance contract covers a liability event that can only happen in Australia, but also covers a different liability event that can happen within or outside Australia. (b) The insurance contract does not allocate the premium between these events. (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 provides that an insurance premium paid to a non-resident insurer is assessable income of the non-resident if the insured event is one which can only happen in Australia.

As subsection 142(1) of the ITAA 1936 does not provide for apportionment of the premium, there is no authority to attribute part of the premium to the liability event that can happen within or outside Australia.

Accordingly, a premium paid or payable on a policy that covers both an insured event which can only happen in Australia and an insured event that can happen either in or outside Australia will not be included in the assessable income of the non-resident insurer under subsection 142(1) of the ITAA 1936.