1 Will any amount received by you upon the surrender of a foreign life assurance savings plan be assessable as ordinary income under the Income Tax Assessment Act 1997 (ITAA 1997)?
No. The amount you received on the full surrender in MM YYYY is not assessable as ordinary income under subsection 6-5(1) of the ITAA 1997. Question 2 When you surrender the life assurance policy, will the payment you will receive be assessable income under section 26AH of the Income Tax Assessment Act 1936 (ITAA 1936)? Answer No. You have held the policy for more than 10 years from the commencement of risk and therefore the resulting bonus is not included in your assessable income under 26AH of the ITAA 1936. Question 3 Will the surrender of the foreign life assurance savings plan give rise to a capital gains tax (CGT) event under the ITAA 1997? Answer Yes. The surrender or termination of your rights under the policy causes CGT event C2 to happen under section 104-25 of the ITAA 1997. Question 4 If CGT applies to the surrender of the plan, are you entitled to a capital loss in the 2024-25 income year equal to the difference between the plan's cost base and the amount received upon surrender? Answer No.
Although CGT event C2 happens on surrender under section 104-25 of the ITAA 1997, any capital gain or capital loss you make from that event is disregarded under section 118-300 of the ITAA 1997 because the CGT event happens in relation to your interest in rights under a life insurance policy. You are the original owner of those rights on the facts provided. Accordingly, you cannot claim a capital loss in 20YY-YY in relation to the surrender. This ruling applies for the following period : Year ended 30 June 20YY The scheme commenced on: 1 July 20YY
Tax Residency On DD MM YYYY, you were born in Australia. On DD MM YYYY, you left Australia and you became a non-resident for tax purposes. On DD MM YYYY, you returned to Australia and became an Australian resident for tax purposes. In MM YYYY, you left Australia and you became a non-resident for tax purposes. On DD MM YYYY, you resumed Australian tax residency and have remained an Australian resident for tax purposes since that date. Policy Details On DD MM YYYY, Insurer A received your application for a unit-linked whole-of-life life assurance policy (the Policy). On DD MM YYYY, you: • commenced Policy number XXXXXXXXX with Insurer A (later administered by Administrator B) • entered a unit-linked whole-of-life life assurance policy, under which benefits are calculated by reference to notional fund units • held the Policy as policy owner, and you were also the life assured • set the Policy currency to a non-specified currency and agreed to pay a regular premium monthly for a X-year premium payment term • set a regular premium of XX per month (payable monthly from DD MM YYYY)
• directed premium allocations across investment funds including: - Investment Fund A - Investment Fund B - Investment Fund C The Policy is a regular premium investment-linked life assurance policy designed to receive periodic contributions over a predetermined term. Premium payments and increases Between DD MM YYYY and DD MM YYYY, you paid XX in regular premiums. You did not make any extra top-up or lump-sum payments outside your usual premiums. You did not have any premiums paid by someone else on your behalf. Withdrawals and Surrender On DD MM YYYY, you elected to make a partial withdrawal of XX. On DD MM YYYY, you received XX from your elected withdrawal. On DD MM YYYY, you elected to make a second partial withdrawal of XX. On DD MM YYYY, you received XX from your elected withdrawal. Between DD MM YYYY and DD MM YYYY, you switched your remaining holdings into Investment Fund D and Investment Fund E. On DD MM YYYY, Administrator B paid XX as the final amount and issued the full surrender statement. On DD MM YYYY, you fully surrendered the remaining holdings and closed the Policy. In total, you received XX.
Policy Ownership During the period of holding the policy: • you did not assign or transfer the policy • you did not take policy loans • you did not hold the policy on trust or use it as security.
Income Tax Assessment Act 1936 section 26AH Income Tax Assessment Act 1997 subsection 6-5(1) Income Tax Assessment Act 1997 section 6-10 Income Tax Assessment Act 1997 section 10-5 Income Tax Assessment Act 1997 section 104-25 Income Tax Assessment Act 1997 section 118-300