Income Tax Regulations (Amendment) (Cth)

Statutory Rules 1990 No. 347

Income Tax Regulations2 (Amendment)

I, THE GOVERNOR-GENERAL of the Commonwealth of Australia, acting with the advice of the Federal Executive Council, hereby make the following Regulations under the Income Tax Assessment Act 1936.

Dated 25 October 1990.

BILL HAYDEN

Governor-General

By His Excellency's Command.

Paul Keating

Treasurer

Commencement

1. These Regulations are to be taken to have commenced on 1 January 1990.

PrincipalRegulations

2. In these Regulations, "Principal Regulations" means the Income Tax Regulations.

3. After Part 3 of the Principal Regulations, the following Part is inserted:

"PART 3a: RISK COMPONENT: LIFE INSURANCE PREMIUM

Interpretation

"14a. In this Part, unless the contrary intention appears:

'authorised actuary' has the same meaning as in section 110 of the Act;

'future premiums' has the same meaning as in section 110 of the Act;

'life assurance policy' has the same meaning as in section 110 of the Act;

'risk component' has the same meaning as in section 110 of the Act.

(S.R. 116/90)—Cat. No. 14/2.10.1990

 

Risk component: term insurance policy

"14b. The risk component of a premium received in respect of:

(a) a term insurance policy; or

(b) a rider or supplementary benefit attached to another policy where the sum insured is payable on death within a specified term;

is the whole of the premium.

Risk component: unbundled life assurance policy

"14c. (1) The risk component of a premium received under an unbundled life assurance policy is:

(a) if expenses are not included in the mortality charge—the mortality charge plus so much of the expenses as the authorised actuary determines relate to the mortality charge; or

(b) if expenses are included in the mortality charge—the mortality charge.

"(2) In this regulation, an unbundled life assurance policy:

(a) means a policy where the premium consists of an identified mortality charge and identified investment contribution, whether or not expenses are treated separately; and

(b) does not include a term insurance policy.

Risk component: other life assurance policies

"14d. (1) The risk component of a premium received under a life assurance policy, other than one referred to in regulation 14b or 14c is the amount worked out in accordance with the following steps:

Step 1: Find out the calculated liability for the policy by multiplying the valuation of liability by the adjustment factor according to the rate of compound interest used in the last actuarial valuation of liabilities made in respect of the company, on the basis of the following table:

Rate of interest	Adjustment factor
4% or more............................................................................................	100%
3.5% to less than 4%.............................................................................	95%
3% to less than 3.5%.............................................................................	90%
less than 3% .........................................................................................	85%

Step 2: Find out the sum at risk under the policy as follows:

(a) deduct from the sum payable on death any amount reinsured: and

(b) deduct the calculated liability from the amount worked out under paragraph (a);

 

each of these amounts being worked out as at:

(c) the end of the year of income; or

(d) immediately before the policy ceased, if the policy ceased in the year of income.

Step 3: If a premium received relates to a period of less than a year, adjust the sum at risk (Step 2) by multiplying it by the fraction of the year to which the premium relates.

Step 4: Work out the mortality factor on the basis of the formula:

;

where q is the ultimate mortality rate in IA1964-70, worked out by reference to the age or ages of the life or lives insured.

Step 5: Multiply the sum at risk (Step 2) or the adjusted sum at risk (Step 3), as the case requires, by the mortality factor.

Step 6: Add the total worked out under Step 5 to that part of the premium, if any, paid to reinsure the mortality risk under the policy.

"(2) If premiums are not contracted to be payable in each year of the policy, the risk component includes an amount determined by the authorised actuary for the period for which the policy can reasonably be expected to remain in force after premiums have ceased.

"(3) In making a determination under subregulation (2), the authorised actuary must have regard to the bases set out in subregulation (1).

"(4) In this regulation:

'IA1964-70' means the Australian Insured Lives Mortality Table 1964-1970, published by the Institute of Actuaries of Australia and New Zealand:

'valuation of liability' means the amount that would be enough to pay in full at maturity, according to the rates of mortality assumed in the company's last actuarial valuation, all liability (other than any liability reinsured) under the policy in force on the date for which the valuation is made, if:

(a) the amount were accumulated at the rate of interest assumed in that last actuarial valuation; and

(b) the future premiums (other than any reinsurance premiums), were accumulated at that rate.".

 

NOTES

1. Notified in the Commonwealth of Australia Gazette on 31 October 1990.

2. Statutory Rules 1936 No. 94 as amended to date. For previous amendments see Note 2 to Statutory Rules 1990 No. 19 and see also Statutory Rules 1990 No. 5, 19, 126, 151, 152 and 192.

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