National Mutual Life Association of Australia Ltd v Commissioner of State Taxation - [2010] SASC 261

SUPREME COURT OF SOUTH AUSTRALIA
(Miscellaneous Appeal: Civil)
NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALIA LTD & ORS v COMMISSIONER OF STATE TAXATION
[2010] SASC 261
Judgment of The Honourable Justice Layton
25 August 2010
INSURANCE - LIFE INSURANCE - OTHER MATTERS
TAXES AND DUTIES - STAMP DUTIES - WHAT TRANSACTIONS OR INSTRUMENTS ARE LIABLE - MISCELLANEOUS INSTRUMENTS AND TRANSACTIONS - SOUTH AUSTRALIA
Four appeals against assessments of stamp duty payable in relation to premiums on insurance policies - Stamp Duties Act 1923 (SA) prescribes lower rate of duty payable on premiums "relating to life insurance" - higher rate on premiums "relating to policies of any kind (other than life insurance policies)" - duty payable on annual licence application for premiums "relating to life" and on monthly return for "any other kind" - appellants included "rider" policies such as trauma insurance and total and permanent disability insurance in their life insurance policies - Commissioner assessed these "riders" at higher rate - whether "riders" included with life insurance policies were “life insurance” for the purpose of assessing duty - whether assessment different if "riders" or stand alone - meaning of life insurance - meaning of life insurance business – relevance of insurance practice – Commissioner imposed penalty fee - whether taxpayer took reasonable care to comply with taxation law.
Held: appeals dismissed - meaning of life insurance in Stamp Duties Act is not dictated by expanding definition of “life insurance” or “life insurance business” in other legislation - Stamp Duties Act has retained same definition and approach - duty is payable on premiums corresponding to the cover of insurance within a policy - leading and principal object test not relevant - individual policy must be classified as "relating to life insurance" or "insurance other than life insurance" according to traditional definition – no error revealed in Commissioner’s imposition of a penalty fee.
Taxation Administration Act 1996 (SA) ss 30, 31, 82, 92, 97; Stamp Duties Act 1923 (SA) ss 32, 33, 34, 35, 36, 36A; Life Insurance Act 1945 (Cth) s 4; Life Insurance Act 1995 (Cth) ss 3(1), (2), 9, 11; Life Assurance Companies Act 1882 (SA) s 14; Insurance Act 1932 (Cth); Insurance Act 1973 (Cth); Life Assurance Act 1773 (Imp) 14 Geo 3, c 48; Stamp Act 1891 (Imp) 54 & 55 Vict c 39; Life Assurance Companies Act 1936 (SA) s 27; Insurance Contracts Act 1945 (Cth); Stamp Duties Amendment Act (No 4) 1990 (SA); Life Insurance Act 1993 (Cth); Stamp Duty Act 1921 (WA), referred to.
National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (1959) 102 CLR 29; AMP Life Ltd v Commissioner of State Revenue (2003) 10 VR 489, applied.
Limmer Asphalte Paving Co v Commissioner of Inland Revenue [1872] 7 Ex 211; Prudential Insurance Company v Commissioner of Inland Revenue [1904] 2 KB 658; National Mutual Life Association of Australia Ltd v The Commissioner of State Taxation (WA) (1996) 33 ATR 24, distinguished.
N M Superannuation Pty Limited v Young (1993) 41 FCR 182; Commissioner for Stamp Duty v Hopkins (1945) 71 CLR 351; JWW Nominees Pty Ltd v The Treasurer [2004] SASC 163; Dormer v Federal Commissioner of Taxation [2002] FCA 537; Oceanic Life Limited v Chief Commissioner of Stamp Duties [1999] NSWCA 416; Patterson v Powell (1832) 9 Bing 329; Dalby v The India and London Life-assurance Co (1854) 15 CB 365; Re Donaldson (1888) 23 SALR 141, considered.

WORDS AND PHRASES CONSIDERED/DEFINED
"life insurance"; "general insurance"; "riders"

NATIONAL MUTUAL LIFE ASSOCIATION OF AUSTRALIA LTD & ORS v COMMISSIONER OF STATE TAXATION
[2010] SASC 261
Layton J:
Introduction
Types of insurance
The statutory context
Background facts
ANZ facts
ING facts
AMP facts
NMLA facts
Structure of the arguments of the parties
Arguments on definition of life insurance
Industry meaning of life insurance and general insurance
Legislative history
Shepherd
Fullagar
McKenzie
Conclusions on the meaning of life insurance
The operation of the Stamp Duties Act 1923 (SA)
ANZ policies and stamp duty
ING policies and stamp duty
AMP policies and stamp duty
NMLA policies and stamp duty
Penalties
Conclusion
Introduction

This is an appeal pursuant to s 92 of the Taxation Administration Act 1996 (SA) (“the TAA”) from a determination by the Commissioner of State Taxation with respect to the assessment of stamp duty payable in relation to the premiums paid for certain insurance policies. There are four separate appeals before the Court brought by four different companies (“the Appellants”). All of the appeals raise similar questions of law. I will deal with the issue in more detail below but it is worthwhile at the outset to provide a brief overview of the common questions to be decided in these appeals. The Appellants were each engaged in the business of selling insurance services in South Australia. The Stamp Duties Act 1923 (SA) (“the Stamps Act”) provides for stamp duty to be imposed in relation to insurance business, but it provides a higher rate of duty on ‘general insurance’ (“the General Insurance Rate”) and a lower rate of duty on ‘life insurance’ (“the Life Insurance Rate”).
The Appellants issued insurance which provided protection for ‘whole life insurance’, ‘term life insurance’ and ‘endowment’ (these terms are explained later in these reasons). All of the parties agree that such policies are ‘life insurance’ for the purposes of the Stamps Act and therefore attract stamp duty at the Life Insurance Rate. However some of the products offered by the Appellants provided riders, which were other types of insurance bundled together in those insurance products. The riders were predominantly Trauma insurance and Total and Permanent Disability (“TPD”) insurance. In essence, the issue raised in these appeals is whether the existence of those riders requires stamp duty payable in relation to the Appellants’ insurance products to be assessed entirely, or in part, at the Life Insurance Rate.
The parties have not asked the Court to adjudicate on the quantum of stamp duty payable. I am informed that once a determination has been made on the legal status of the riders under the Stamps Act, the parties will attempt to agree on the amount of duty payable between themselves. For that reason, the figures used in these reasons relating to stamp duty paid by the Appellants are for illustration only.
The first, second and third appellants are ANZ Life Assurance Company Ltd (“ANZ”), ING Life Limited (“ING”) and AMP Life Ltd (“AMP”). The fourth appellant is National Mutual Life Association of Australasia Ltd (“NMLA”).
The first, second and third appellants were all represented by the same counsel and so for ease I will refer to them together, where possible, as the “the ANZ Group”. NMLA was represented by separate counsel, and so I will refer to that party simply as “NMLA”. Where necessary, I will refer to all of the first to fourth appellants together as “the Appellants”.
The respondent in each application is the Commissioner for State Taxation (“the Commissioner”).
For the reasons that follow, I dismiss each of the appeals against the Commissioner’s assessments of stamp duty.
Types of insurance
Terminology relating to different types of insurance cover is an important part of this case. Accordingly, I will set out the relevant principal types of insurance to which I will refer in these reasons. The parties and the insurance market generally tend to utilise some terms interchangeably or loosely in marketing and so these are not to be seen as strict definitions but rather general guides to the terminology that I have adopted.[1]
[1] These definitions are adopted from a combination of Exhibits P4 (Expert Report of John Shepherd); P5 (Expert Report of Col Fullagar); and agreed policy document of the parties (Exhibits P1, P2, P3, P14, P14a and P14b).
Death Cover – this is also referred to as life cover. This cover involves the payment of a certain benefit on the death of the insured and may be for the whole of the insured’s life (“whole life cover”) or for a fixed term (“term life cover”).
Endowment Cover – this cover provides for payment of a benefit upon the insured reaching a specific age.
Terminal Illness Cover (“TI”) – this cover provides for the payment of a benefit upon the occurrence of an illness for which the prognosis is a high probability of death within a short period (the policies in this case generally required a prognosis of death within 6 to 12 months).
TPD Cover – the precise scope of this cover differs between the Appellants and also generally in the insurance market but it is commonly defined as the payment of a benefit upon the occurrence of an injury or illness that renders the insured totally and permanently disabled. In practice what constitutes a total and permanent disability is defined in the insurance contract. For example, in one policy document, NMLA defines a total and permanent disability as, inter alia, when the insured becomes “unable to follow his or her own occupation for a continuous period of 6 months and, despite receiving treatment of rehabilitation, is unlikely to ever be able to follow his or her own occupation or regular duties or any occupation he or she is suited to by education, training or experience.”
Trauma Cover – this is also sometimes referred to as crisis cover. The precise scope of this cover differs amongst the Appellants and generally in the insurance market but it is commonly defined as the payment of a benefit upon the occurrence of a medical condition that is listed by the insurer to be within the cover. This usually includes conditions, or medical procedures arising from conditions, such as heart attack, stroke and cancer.
These types of insurance cover are frequently combined together in practice. For example a very common type of policy is one which consists of death cover combined with endowment. That is, the benefit is paid out at the occurrence of which ever is the earlier out of death and reaching a particular age.
Where TI Cover, TPD Cover or Trauma Cover have been added to a policy of death cover and/or endowment cover, I refer to this additional cover as a “rider” from here on. Where one or more of those types of cover are offered without death cover and/or endowment cover I refer to this as a “stand alone” policy.
The Statutory Context
Stamp duty in relation to the insurance industry in South Australia is regulated by Part 3 Division 3 in conjunction with Schedule 2 of the Stamps Act. It provides for a system of annual licensing and the lodgement of monthly returns for insurance businesses and differentiates in these respects between ‘life insurance’ and ‘general insurance’.
Section 33 requires anyone who carries on ‘assurance or insurance business’ in South Australia to take out an annual licence, regardless of the type of insurance cover they provide:
33—Annual licence required for insurance business
A company, person or firm of persons must not carry on any assurance or insurance business in any year in South Australia, whether the head office or principal place of business of that company, person or firm is in South Australia or elsewhere, unless the company, person or firm has taken out an annual licence for that year in a form determined by the Commissioner.
Maximum penalty: $10 000.
The definition of ‘assurance or insurance business’ is found in s 32 of the Stamps Act. It states:
assurance or insurance business means and includes—
(a)the granting or issuing of any life, personal accident, fire, fidelity, guarantee, livestock, plate glass, marine or other assurance or insurance policies; or
(b)the acceptance, either directly or indirectly, of any premium, renewal premium or consideration for, or in respect of, the granting or issuing or keeping alive or in force of any life, personal accident, fire, fidelity, guarantee, livestock, plate glass, marine or other policy; or
(c)the receiving of any letter or declaration of interest attaching to any life, personal accident, fire, marine or other policy issued in South Australia or elsewhere; or
(d)the carrying out, by means of assurance or insurance effected out of South Australia, of any written, verbal or implied contract or undertaking to effect assurance or insurance;
When an application is made for an annual licence, the Stamps Act provides that stamp duty is payable on the annual licence application. Sections 34 and 35 relevantly provide:
34—Application for annual licence
…
(3) A company, person or firm of persons that applies for an annual licence must, at the time of lodging the application, pay to the Commissioner the duty (if any) payable under Schedule 2 on the annual licence application.
35—Issuing and term of annual licence
(1) The Commissioner is authorised to issue an annual licence on payment of the duty (if any) payable on the annual licence application.
In addition to the annual licence scheme, anyone who carries on a ‘general insurance business’ (rather than one of ‘life insurance’), must lodge monthly returns detailing the insurance business. The Stamps Act provides that any stamp duty is payable on the monthly return. These provisions are found in s 36:
36—Monthly returns in respect of general insurance business
(1) A company, person or firm of persons that carries on general insurance business in South Australia, whether the head office or principal place of business of that company, person or firm is in South Australia or elsewhere, must lodge with the Commissioner a return in a form determined by the Commissioner, supported by such evidence as the Commissioner may require, not later than the fifteenth day of the month following each month in which the company, person or firm carries on such business.
(2) Any information or statement contained in a monthly return must be verified by statutory declaration in the same way as is required for an application for an annual licence.
(3) A company, person or firm of persons that lodges a monthly return must, at the time of lodging the monthly return, pay to the Commissioner the duty (if any) payable under Schedule 2 on the monthly return.
‘General insurance business’ is negatively defined in s 32 by what it is not. Section 32 states:
general insurance business means any assurance or insurance business not relating to life insurance policies;
Section 32 then defines “policy” as:
policy includes any instrument in the nature of a policy, an open policy, an insurance cover or any instrument in any manner covering any assurance or insurance;
It also defines the term “life insurance policy”:
life insurance policy does not include a policy covering personal accident or workers compensation or a policy complying with Part 4 of the Motor Vehicles Act 1959;
Another relevant provision of Part 3 is s 36A which provides for the insurance business to be liable to pay duty whether or not it lodges either an application for an annual licence or a monthly return. It states:
36A—Duty if annual licence application or monthly return not lodged as required
A company, person or firm that does not lodge an application for an annual licence, or does not lodge a monthly return, as required under this Act is nevertheless liable to pay duty to the Commissioner as if the company, person or firm had lodged the application or return required under this Act immediately before the end of the period allowed for such lodgment.
In summary, Part 2 provides for a scheme whereby persons carrying on both general insurance and life insurance must acquire an annual licence, but those carrying on general insurance must lodge monthly returns. The Stamps Act provides that stamp duty (if any) is payable in relation to both of these processes. As can be seen from those sections, liability for stamp duty and the amount which is payable with respect to either the annual licence application or the monthly return, is determined by Schedule 2 to the Stamps Act. Schedule 2 relevantly states:

1—Annual licence application or monthly return

(1)

Annual licence application or monthly return to be lodged by any company, person or firm of persons, whether corporate or unincorporate, which carries on or proposes to carry on in South Australia any life, personal accident, fire, fidelity, guarantee, livestock, plate glass, marine or other assurance or insurance business and whether the head office or principal place of business of that company, person or firm is in South Australia or elsewhere—

     (a)     in the case of an annual licence application where the company, person or firm has received or in any manner charged in account (whether directly or by agents) premiums relating to life insurance within the period of 12 months preceding the year for which the licence is to be taken out—for every $100 or fractional part of $100 of those premiums

$1.50

    (ab)    in the case of a monthly return where the company, person or firm has received or in any manner charged in account (whether directly or by agents) premiums relating to policies of any kind (other than life insurance policies) within the month preceding the month in which the return is required to be lodged—for every $100 or fractional part of $100 of those premiums

$11.00

    (b)     where the company, person or firm has not, prior to applying for an annual licence, transacted any assurance or insurance business—

     (i)     if the annual licence is required for the full period of twelve months

$100.00

     (ii)    if the annual licence is required for a shorter period than twelve months, a proportionate part of

$100.00

The word “premium”, which appears throughout that schedule, is defined in s 32 as follows:
"premium" means any amount paid or payable for assurance or insurance and includes—
(a)     an amount charged to a policy holder to reimburse, offset or defray the insurer's liability for GST in respect of the assurance or insurance;
(b)     a levy charged to a policy holder;
(c)     an instalment of premium.
The primary issues between the parties centred on the interpretation of the word “policy” and the term “life insurance policy” in s 32 of the Stamps Act, as well as the construction of Schedule 2. I will return to the arguments after setting out the basic facts of the present disputes.
Background facts
Many of the background facts are agreed between the parties. Due to the differences in dates and policies it will be necessary to deal with each appellant individually, however in order to avoid excessive repetition, it is worthwhile to set out a few matters common to all of the appeals.
It is common ground that each of the Appellants carried on insurance business within the meaning of ss 32 and 33 of the Stamps Act.[2] Furthermore, the Commissioner accepts that during the relevant periods, the Appellants carried on a ‘life insurance business’[3] and issued ‘life insurance policies’[4] within the meaning of s 4 of the Life Insurance Act 1945 (Cth) (“the former LIA”), prior to 30 June 1998, and thereafter pursuant to s 9 of the Life Insurance Act 1995 (Cth) (“the LIA”).
[2]    Exhibit P1, [5.3] (ING); Exhibit P2, [6.3] (ANZ); Exhibit P3, [5.3] (AMP); Exhibit P14, [5]-[6] (NMLA).
[3]    Exhibit P1, [5.1] (ING); Exhibit P2, [6.1] (ANZ); Exhibit P3, [5.1] (AMP); Exhibit P14, [4] (NMLA).
[4]    Exhibit P1, [5.2] (ING); Exhibit P2, [6.2] (ANZ); Exhibit P3, [5.2] (AMP); Exhibit P14, [4] (NMLA).
The insurance policies issued by the Appellants were generally long term policies which obliged the Appellants to provide continuous insurance cover[5] and, in the absence of breach by the insured (for example failure to pay premiums), the Appellants were not permitted to terminate the insurance agreement.[6]
[5] Exhibit P1, [13], [20] (ING) (usually to expire immediately before the insured reached 80 years of age); Exhibit P2, [14], [21] (ANZ) (usually to expire the date of the anniversary of the contract following the 75^th birthday of the insured or the policy expiry date immediately before the 75^th birthday of the insured); Exhibit P3, [13], [20] (AMP) (usually to expire immediately before the insured reached 70 years of age); Exhibit P14, [40] (NMLA).
[6] Exhibit P1, [14], [21] (ING); Exhibit P2, [15], [22] (ANZ); Exhibit P3, [14], [21] (AMP); Exhibit P14, [40] (NMLA).

The specific policies provided by each of the Appellants differed, as discussed below, but most commonly the riders provided for an accelerated payment of all or part of the insurance benefit on the occurrence of either Trauma, TPD, TI or a combination of some or all three of these.[7] Sometimes the insured would have to pay a specified additional premium for the rider and sometimes the rider would be automatically included in the cover with no additional premium identified.
[7] Other riders included what the parties called a “Buy Back” rider. This rider was generally a payment of additional premium which allowed the insured to have a right to purchase further life insurance in the event that there is an accelerated payment under a Trauma, TPD or terminal illness rider. The Commissioner considered this rider to constitute a contractual right, rather than an insurance premium. Accordingly the Commissioner did not calculate stamp duty on this amount at the General Insurance Rate and so it is not the subject of dispute. Accordingly, the parties asked that I not consider that rider: Transcript 241.8.
During the relevant years,[8] each of the Appellants acquired annual licences in accordance with s 33 of the Stamps Act.[9] The Appellants also lodged monthly returns.[10] During this period, upon lodgment of their application for an annual licence, each of the Appellants paid stamp duty at the Life Insurance Rate with respect to the premiums paid on the insurance contracts. This amount related to the entire amount of premiums paid with respect to the policies whether the cover was with or without riders.
[8] The relevant years differ for each of the Appellants and are detailed later in these reasons.
[9] Exhibit P1, [27]-[29] (ING); Exhibit P2, [25]-[27] (ANZ); Exhibit P3, [24]-[26] (AMP); Exhibit P14, [7] (NMLA).
[10] Exhibit P1, [31] (ING); Exhibit P2, [29] (ANZ); Exhibit P3, [28] (AMP); Exhibit P14, [9] (NMLA).
In each year, the Commissioner accepted the amount of duty declared by each of the Appellants and issued annual licences pursuant to s 35 of the Stamps Act.[11]
[11] Exhibit P1, [27]-[30] (ING); Exhibit P2, [25]-[28] (ANZ); Exhibit P3, [24]-[27] (AMP); Exhibit P14, [7]-[8] (NMLA).
However on 17 April 2001, the Commissioner, through RevenueSA, released a circular (“Circular 213”),[12] which expressed a concern about the practice of insurers including riders to life insurance policies in one premium with duty then being calculated at the Life Insurance Rate for the whole amount. That circular read:
[12] Exhibit P15.
ANNUAL LICENCE
RIDER BENEFITS TAKEN IN CONJUNCTION WITH LIFE COVER
The Stamp Duties Act 1923, ("the Act") requires that persons who carry on insurance business in South Australia pay stamp duty on premiums received.
The Act provides the rate of stamp duty that is to be applied to premiums received in respect of life insurance ("life rate") and the rate to be applied to general insurance business ("general rate").
"general insurance business" means any assurance or insurance business not relating to life insurance policies;
"life insurance policy" does not include a policy covering personal accident or workers compensation or a policy complying with Part 4 of the Motor Vehicles Act 1959;
This circular confirms the position of this Office in respect of the application of the general rate to premiums that provide additional benefits to life policies ("Riders").
BACKGROUND
In recent times, a view has arisen that riders attached to life policies should be subject to duty at the life rate, notwithstanding that the riders may provide a benefit that is of a general insurance nature.
Proponents of that view have argued that the decision of the Supreme Court of Western Australia in National Mutual Life Association of Australasia Ltd v Commissioner of State Taxation (unreported, Malcolm CJ, 10 June 1996) ("NMLA case"), establishes the principle that a life cover policy with a rider attached is one entire and inseverable contract and therefore the entire premium should be subject to stamp duty at the life rate.
However, the NMLA case was decided in a jurisdiction that attaches liability to pay duty to an instrument being the policy document or renewal.
That is not the case in South Australia
In contrast, under the Second Schedule to the Act, life and general insurance policies of themselves are not liable to stamp duty. Stamp duty is instead charged on the premiums disclosed in monthly or annual returns.
It is considered by this Office that the most relevant authority for this matter is the decision of the High Court in National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (1959) 102 CLR 29.
The premiums charged by the appellant were computed by adding to the amount payable for life cover, a further amount calculated by reference to the risk in providing disability or accident benefits. The total premium was expressed as a single annual sum. The High Court held that whether or not a single instrument had more than one character, was only relevant to statutes which were concerned with the characterisation of instruments. The court held that where the Income Tax Assessment Act 1936 ("ITAA") speaks of "premiums received in respect of policies of life assurance" it was not referring to the instrument recording the contract but to the contractual obligations themselves. Schedule 2 of the Act refers to the receipt or charging to the account of "premiums relating to life insurance" and therefore, is expressed in similar terms to the ITAA relating not to the policy as an instrument but to the contractual obligations themselves. The question before the Court was not the characterisation of an instrument, but whether the premiums received by NMLA were divisible and apportionable between life and general insurance. The Court concluded that, in fact, the premiums were divisible and apportionable.
The Act imposes liability on premiums received rather than on the policy document as an instrument.
RULING
Where a life policy is issued with riders of a general nature attached and a separate premium component in respect of that rider can be determined with certainty, stamp duty at the general rate is payable on that portion of the premiums attributable to the rider benefit.
Examples of rider benefits that would be liable to stamp duty at the general rate include:-
·   Total and permanent disablement benefit
·   Crisis care benefit
·   Enhanced crisis care benefit
·   Recovery cover
·   Income protection cover
The list is not exhaustive.
In accordance with the approach suggested in that circular, the Commissioner proceeded to make assessments of the stamp duty liability of each of the Appellants. I will refer to the Commissioner’s four assessments of the Appellants together as “the Assessments”. The Assessments related to all premiums received with respect to such insurance policies from 1 January 1994 to the dates of the Assessments. It is from the Assessments that the Appellants appeal to this Court.
I turn then to the specific facts relating to each of the Appellants.
ANZ facts
ANZ was first registered as a life insurer under the Former LIA in 1961 and then, after 1 July 1998, it had been continuously registered under the LIA until 30 June 2005.[13] On 30 June 2005, all of the insurance policies held by ANZ were acquired by ING.[14]
[13] Exhibit P2, [3].
[14] Exhibit P2, [5].
Subsequent to Circular 213, the Commissioner conducted an audit of the stamp duty paid by ANZ in relation to riders. On 31 May 2006, the Commissioner sent a letter to ANZ enclosing a notice of assessment (“the ANZ Assessment”).[15] The ANZ Assessment claimed that additional stamp duty of $1,345,379.61 was payable for the period beginning 1 January 1994 and ending 31 December 2005. This amount included $730,342.50 for stamp duty, representing the difference between the Life Insurance Rate and the General Insurance Rate on all premiums for riders for the relevant years; $394,067.82 in interest; and $220,969.30 in penalty fees.
[15] Exhibit P2, [30], Annexure F.
Although ANZ paid the outstanding amount claimed in the ANZ Assessment, it lodged an objection to the ANZ Assessment with the Treasurer pursuant to s 82 of the TAA on 7 August 2006.[16] The Treasurer disallowed that objection on 7 January 2007.[17]
[16] Exhibit P2, [32], [33], Annexure F.
[17] Exhibit P2, [33].
ANZ appeals to this Court in relation to the ANZ Assessment.
ING facts
ING was first registered as a life insurer under the Former LIA in 1946 and has been continuously registered as such since (after 1 July 1998, under the LIA).[18] Prior to March 2001, ING was known as Mercantile Mutual Life Insurance Company Limited.[19]
[18] Exhibit P1, [3]-[4].
[19] Exhibit P1, [1].
Subsequent to Circular 213, the Commissioner conducted an audit of the stamp duty paid by ING in relation to riders. On 31 May 2006, the Commissioner sent a letter to ING enclosing a notice of assessment (“the ING Assessment”).[20] The ING Assessment claimed that additional stamp duty of $6,791,953.89 was payable for the period beginning 1 January 1994 and ending 31 December 2005. This amount included stamp duty of $3,863,536 representing the difference between the Life Insurance Rate and the General Insurance Rate on all premiums for riders for the relevant years; $1,816,308.29 in interest; and $1,112,109.60 in penalty fees.
[20] Exhibit P1, [32], Annexure G.
Although ING paid the outstanding amount claimed in the ING Assessment, it lodged an objection to the assessment with the Treasurer pursuant to s 82 of the TAA on 7 August 2006.[21] The Treasurer disallowed that objection on 7 January 2007.[22]
[21] Exhibit P1, [33], [34], Annexure H.
[22] Exhibit P1, [34].
ING appeals to this Court in relation to the ING Assessment.
AMP facts
AMP was first registered as a life insurer under the Former LIA in 1946 and has been continuously registered as such since (after 1 July 1998, under the LIA).[23]
[23] Exhibit P3, [2]-[4].
Subsequent to Circular 213, the Commissioner obtained voluntary disclosure from AMP of documents relating to premiums for the purpose of determining whether AMP had payed stamp duty on riders at a lower rate. On 5 September 2002, the Commissioner sent a letter to AMP enclosing a notice of assessment (“the AMP Assessment”).[24] The AMP Assessment claimed that additional stamp duty of $332,155.12 was payable for the period beginning 1 January 1994 and ending 31 December 1999. This amount included outstanding stamp duty only as no interest or penalty was charged to AMP.
[24] Exhibit P3, [29], Annexure G.
Although AMP paid the outstanding amount claimed in the AMP Assessment, it lodged an objection to the assessment with the Treasurer pursuant to s 82 of the TAA on 4 November 2002.[25] The Acting Treasurer disallowed that objection on 7 January 2007.[26]
[25] Exhibit P3, [30], [31], Annexure G.
[26] Exhibit P3, [32].
AMP appeals to this Court in relation to the AMP Assessment.
NMLA facts
At all times during the relevant period, NMLA has been registered as a life insurer under the Former LIA (until 1 July 1998 and thereafter under the LIA).[27]
[27] Exhibit P14, [3].
Subsequent to Circular 213, the Commissioner conducted an audit of the stamp duty paid by NMLA in relation to riders. On 20 April 2006, the Commissioner sent a letter to NMLA enclosing a notice of assessment (“the NMLA Assessment”).[28] The NMLA Assessment claimed that stamp duty of $3,372,758.44 was payable for the period beginning 1 January 1994 and ending 31 December 2003. This amount included stamp duty of $1,966,574.50 representing the difference between the Life Insurance Rate and the General Insurance Rate on all premiums for riders for the relevant years; $772,140.24 in interest; and $634,043.70 in penalty fees.
[28] Exhibit P16.
NMLA lodged an objection to the assessment with the Treasurer pursuant to s 82 of the TAA on 16 June 2006.[29] The Treasurer disallowed that objection on 2 December 2006.[30]
[29] Exhibit P17.
[30] Exhibit P18.
NMLA appeals to this Court in relation to the NMLA Assessment.
Structure of the arguments of the parties
The Appellants argue that the Assessments should be set aside on a number of grounds. Generally, the Appellants say that the Commissioner in the Assessments should have considered the premiums corresponding to the riders to be within the phrase “premiums relating to life insurance” in Schedule 2(1)(a) of the Stamps Act and therefore should have assessed stamp duty to be payable at the Life Insurance Rate.
The primary argument put by the Appellants is that the term ‘life insurance’, as it is understood in the Stamps Act, is wide enough to include insurance cover for TPD and trauma. This submission was put most forcefully by the ANZ Group. They submitted that the Stamps Act adopts the common law definition of life insurance and that that definition now incorporates TPD and Trauma insurance. NMLA put the argument slightly differently,[31] saying that the Stamps Act deals with ‘life insurance business’ and that this may be broader than the common law definition of ‘life insurance’. In any event, NMLA adopted the argument that trauma cover and TPD cover are properly included within the meaning of “premiums relating to life insurance” for the purposes of the Stamps Act. If the Appellants are successful in this argument, then not only would the policies which include riders be taxed at the Life Insurance Rate, but so too will any stand alone policies providing for TPD, Trauma and/or TI cover.
[31] Transcript, 229-231.
The second argument put by the Appellants is that, even if the definition of ‘life insurance’ does not include trauma or TPD, the operation of the Stamps Act is such that it is not proper for the Commissioner to apportion stamp duty between the Life Insurance Rate and the General Insurance Rate, when the insurance cover is included in the same policy document. This argument is put in slightly different ways by the ANZ Group and NMLA. If the Appellants are successful in this argument then the Appellants may be partially or entirely successful in impugning the Assessments, however this argument cannot render ‘stand alone’ policies of trauma and/or TPD to be subject to the Life Insurance Rate.
Thirdly, ANZ and ING argue that regardless of the success or otherwise of the above argument, the Commissioner erred in imposing a penalty on them.[32]
[32] ING and ANZ initially disputed calendar years 1994 and 1995 but this was abandoned at the hearing: Transcript, 3.
There was also initially an additional submission on behalf of the ANZ Group that the assessment was out of time, but that argument is no longer pursued.[33]
[33] Transcript, 3.
Arguments on definition of life insurance
The Commissioner’s position is that the term “life insurance” in the Stamps Act should be given its common law meaning and that that meaning does not include trauma or TPD cover. The Commissioner contends that the common law meaning of life insurance can be found in the familiar definition given by Bunyon in his text, A Treatise upon the Law of Life Assurance,[34] where the author said (at 17):
The contract of Insurance has been defined by Tindal, C.J., to be that in which a sum of money “as a premium is paid in consideration of the insurers incurring the risk of paying a larger sum upon a given contingency.”[35] The contract of life insurance may be further defined to be that in which one party agrees to pay a given sum upon the happening of a particular event contingent upon the duration of human life, in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments by another. This consideration in money is termed the premium or premiums, and is paid either in one sum, when it is termed a single premium, or by a succession of periodical instalments.
(Emphasis added.)
[34] Charles John Bunyon, A Treatise upon the Law of Life Assurance (1854).
[35] Patterson v Powell (1832) 9 Bing 329.
Thus, the Commissioner says, the common law definition of life insurance relates only to events that are ‘contingent upon the duration of human life’ (“the traditional Bunyon definition”). This definition properly includes whole life cover, term life cover and endowment cover. But it does not extend to trauma, TPD or TI.
The Commissioner relies on the decision of the High Court in National Mutual Life Association of Australasia v Federal Commissioner of Taxation (1959) 102 CLR 29 (“NMLA v FCT”) in support of his position. In that case, the appellant had received premiums in respect of insurance policies consisting primarily of death and endowment cover but also providing riders of TPD and accidental death cover. The income tax legislation in effect at the time provided that a life assurance company could exclude from its assessable income any “premiums received in respect of policies of life assurance”. The question for the Court was whether the portion of the premium that corresponded to the riders could come within that provision, or whether the Commissioner of Taxation could apportion the premium between that received for life insurance and that received for the riders.
The High Court endorsed the traditional Bunyon definition of life insurance[36] and found that the premiums received for riders were not “premiums received with respect to life insurance” for the purposes of income tax legislation.
[36] National Mutual Life Association of Australasia v Federal Commissioner of Taxation (1959) 102 CLR 29, 44.
The ANZ Group however say that the Court’s finding in NMLA v FCT, that TPD was not life insurance, rested upon the manner in which the insurance industry operated in 1959, when that case was decided. They further argued that this case was decided in an income tax framework and therefore does not have relevance to the stamp duties regime. In particular the ANZ Group referred to the following statements by Windeyer J (with whom Dixon CJ, McTiernan and Kitto JJ agreed) (at 42):
Today several other forms of contract, equally properly called life insurances, form a great part of the business of all life offices. The generally recognized differences between the various classes of insurance arise partly from essential differences in the nature of the contracts, partly from an insistent emphasis on distinctions which are the historical result of different forms of insurance having become commercially available in different periods of history and having been, for the most part, originally made available by insurance offices conducting one class of business only.
Further, Windeyer J said (at 43):
Baron Parke's often-quoted description of "the contract commonly called life-assurance" in Dalby v. The India and London Life-Assurance Co. (1854) 15 CB 365, at p 387 (139 ER 465, at p 474) was not when he gave it a comprehensive definition; it was probably not intended to be; it certainly is not today. It was merely a description of the usual form of a whole of life policy. Today several other forms of contract, equally properly called life insurances, form a great part of the business of all life offices. The generally recognized differences between the various classes of insurance arise partly from essential differences in the nature of the contracts, partly from an insistent emphasis on distinctions which are the historical result of different forms of insurance having become commercially available in different periods of history and having been, for the most part, originally made available by insurance offices conducting one class of business only.
The ANZ Group said that this recognition of a broader range of contracts beyond traditional life insurance contracts as well as the relevance of what is commonly understood by the insurance industry as life insurance policies were also displayed in the judgment of Bundley J in the earlier case of Re Donaldson (1888) 23 SALR 141. In that case, his Honour rejected a restrictive definition of life insurance as follows (at 151):
The only authority to which I think it necessary to refer, and which at first sight may appear to conflict with the proceeding ones, is Dalby v The India and London Life Assurance Company (2 Smith’s Leading Cases 8^th ed 282), where Parke B defined the contract commonly called life assurance as follows:- ‘The contract to pay a certain sum of money on the death of a person, in consideration of the due payment of a certain annuity for his life, the amount of the annuity being calculated in the first instance according to the probable duration of the life’; this may or may not have been a complete definition of what life assurance meant nearly forty years ago, but I do not think it covers the whole meaning of the term at the present day… Possibly an endowment policy was unknown at that date (1854). Life assurance, like every other class of insurance business, has greatly expanded within the last quarter of a century.
(Emphasis added.)

Further reliance was put on the decision of Oceanic Life Limited v Chief Commissioner of Stamp Duties [1999] NSWCA 416 (“Oceanic Life”) where Sheller JA (Beazley JA agreeing) said “[t]he definition of life insurance accords with the common understanding of persons conversant with insurance”. (emphasis added)
The ANZ Group says that these statements support a dynamic definition of life insurance that is, at least in part, determined by reference to the operation of the insurance industry itself. Thus, the argument continues, if certain types of insurance were to become regarded by the insurance industry as life insurance, then this common understanding would influence the common law meaning of life insurance. Moreover, the ANZ Group argue that, since the Court’s decision in NMLA v FCT, such an evolution in the insurance industry has occurred and that now the industry regards the riders in this case as life insurance.
Accordingly, the ANZ Group argue that this Court should adopt a definition of life insurance that incorporates the types of insurance provided for in the riders. The consequence of this argument is that all premiums received in relation to TPD, Trauma and/or TI would attract stamp duty at the Life Insurance Rate whether such cover is offered as a rider to life insurance or as a stand alone policy.
Before considering whether the ANZ Group are correct in their submission that the common law definition of life insurance is susceptible to change by virtue of the practice of the insurance industry, I will first consider whether the Appellants have made good the threshold argument that the insurance industry both in law and practice now regards the riders included in life insurance policies as life insurance.
Industry meaning of life insurance and general insurance
At the hearing, the parties produced extensive submissions and evidence about the history and background of life insurance and general insurance industries. This was in part derived from the legislative history.
I was addressed on English legislation dating from 1774 leading through to the life insurance legislation in South Australia, commencing with the Life Assurance Companies Act 1882 (SA) and its developments through to the commencement of the Commonwealth legislation which took over in 1945 with the passing of the Life Assurance Act 1945 (Cth) and its developments. I was also taken through the commencement of regulation of insurance business in Australia which commenced with the Insurance Act 1932 (Cth) as well as the latter Insurance Act 1973 (Cth) and finally the Insurance Contracts Act 1984 (Cth) and its amendments.
In addition, the ANZ Group called two witnesses, Mr John Shepherd (“Mr Shepherd”) and Mr Col Fullagar (“Mr Fullagar”). Mr Shepherd was called as an expert to give evidence on the evolution of life insurance and general insurance as well as current practices in those industries. Mr Fullagar was called to address the evolution of personal accident insurance and whether it was regarded in practice as being life insurance or general insurance. The Commissioner, in response, called Mr Peter MacKenzie (“Mr MacKenzie”) to give evidence about the historical developments and distinctions between life insurance and general insurance.
The parties agreed that the witnesses would be called on the unusual basis that neither party concedes the admissibility of the other party’s witness(es) as expert evidence. The parties agreed that I should hear the witnesses’ testimony and, if I were to conclude that their evidence were inadmissible as expert evidence, then I should simply regard the information provided by the witnesses, so far as possible, as submissions rather than evidence.[37]
[37] Transcript, 4-5.
NMLA, to the extent that it was relevant to their arguments, also relied on the evidence adduced by the ANZ Group.[38]
[38] Transcript, 8.228-31.
In view of the conclusion which I reach on this appeal, it is not necessary to set out the elaborate and detailed arguments which were addressed to me in full; instead I will address the salient points which are relevant to my reasoning process.
Legislative history
Life insurance has historically been distinguished and treated differently from general insurance (often referred to as “other insurance”). This difference is manifested in legislation, insurance practice, actuarial treatment and the requirements for companies which write insurance, notably matters to promote continual solvency for the protection of insured persons.
The early legislation such as the Life Assurance Act 1774 (UK),[39] which applied to Australia before and in the early years of the colonisation of South Australia, was directed to preventing polices being taken out on the lives of persons as a form of gaming or wagering. There was a distinct element of discouragement of such policies. Other forms of named insurance were not so prohibited.
[39] (Imp) 14 Geo 3, c 48.
Not long after colonisation of South Australia, state legislation was passed. In 1882 the Life Assurance Companies Act 1882 (SA) was passed. This Act stated that its purpose was to encourage persons to insure and also to protect persons assured. This twofold purpose recognised that “life assurance business” was different from other insurance business. There was no definition of “life assurance business” other than simply referring to the “granting of policies” and the word “policy” was defined to mean “any contract for assurance, endowment, or annuity on human life”. The legislation also contained a number of provisions to ensure that companies were appropriately solvent. The legislation also recognised that companies which conducted “life assurance business” could extend their business to transact “other business besides life assurance business” so long as it kept a separate account in relation to each.[40]
[40] Life Assurance Companies Act 1882 (SA) s 14.
This 1882 Act was amended in 1936 by the Life Assurance Companies Act 1936 (SA). This Act similarly recognised that a company could carry on insurance business other than life insurance business. There was no change in definition of either “life assurance business” or “policy” from the 1882 Act. It also contained a similar provision to that of the 1882 Act which anticipated a company conducting life assurance business[41] also to conduct “other business besides life assurance”, so long as separate accounts are kept.[42]
[41] Whilst the section only refers to a “company”, this word is defined in s 3 to mean any “persons, corporate or unincorporated, who grant assurances, endowments, or annuities upon human life”. This corresponds to the defined meaning of “life assurance business” in s 3.
[42] Life Assurance Companies Act 1936 (SA) s 27.
In the meantime, the Commonwealth passed nationally applicable legislation. In 1932 the Insurance Act 1932 (Cth) was enacted. This Act covered all types of insurance. “Insurance business” was defined in a manner which was broader than simply “life insurance business”. The term “life insurance business” was defined exclusively as being “life policies and any business in relation thereto”. “Life policy” was in turn defined as meaning a policy on death or contingent upon termination or continuance of human life (which I have for convenience been referring to as the “traditional Bunyon description”) and it expressly excluded death by accident or specified sickness. The latter excluded aspects were separately included in the definition of “accident insurance business”. In short this Act recognised the difference between “life policies” and “life insurance business” on the one hand, and “other insurance” such as accident insurance business, on the other hand.
Also at the Commonwealth level, the Life Insurance Act 1945 (Cth) was passed in 1945. This Act both in its original form as well as its later amendments up until 1995, approached “life policy”, “life insurance business” and “insurance business” in a manner which was complementary and by and large kept pace with the Insurance Act 1932 (Cth) as amended up to and including the Insurance Act 1973 (Cth).
As viewed from 1973, “insurance business” in the Life Insurance Act 1945 (Cth) was expressly indicated to have the same meaning as in the Insurance Act 1973 and “life business” meant the business of issuing “life policies”. “Life policy” was defined exclusively and described the traditional Bunyon description whether with or without a continuous disability insurance contract and excluded death by accident or sickness. “Continuous disability insurance” in turn was defined[43] to be a contract of more that one year’s duration incorporated into a “life policy” in respect of either death by accident or sickness or disability, or disability by way of sickness or accident.
[43] Through the linked definition of “continuous disability insurance contract”.
“Life insurance business” was given an expanded definition and included “continuous disability insurance” which in turn was defined by reference to the definition of “continuous disability insurance contract”. Therefore life insurance business was extended to include what may be regarded as TPD and also disability due to accident or sickness on a conditional basis, while the definition of “life policy” still retained a traditional meaning.
In 1984 the Insurance Contracts Act 1984 (Cth) was passed. The definition of a life insurance contract was expanded to include a continuous disability insurance contract which was not necessarily a rider to a life policy. It included a stand alone contract for continuous disability insurance on a conditional basis if written by a life insurer. This approach differed from the other Commonwealth legislation discussed above which permitted riders only, but not a stand alone continuous disability contract. There was no definition of “life insurance business”.
Finally, coming to the Life Insurance Act 1995 (Cth), s 3(1) stated that the object of the Act was “to protect the interests of the owners and prospective owners of life insurance policies in a manner consistent with the continued development of a viable, competitive and innovative life insurance industry”. Further s 3(2) of the Act expressed that the principal means for achieving this object was by:
(a)restricting the conduct of life insurance business to companies that are able to meet certain requirements as to suitability;
(b)imposing on life companies requirements designed to promote prudent management of the life insurance business of such companies, including requirements designed to ensure the solvency and capital adequacy of statutory funds;
(c)providing for the supervision of life companies by the Insurance and Superannuation Commissioner;
(d)providing for judicial management of life companies whose continuance may be threatened by unsatisfactory management or an unsatisfactory financial position;
(e)making provision to ensure that, in the winding-up of a life company, the interests of policy owners are adequately protected;
(f)providing for the supervision of transfers and amalgamations of life insurance business by the Court.
Section 9 of the Act defined “life policy” by describing that it was a contract of insurance in terms using the traditional Bunyon description, but it also included “continuous disability policy” as described in Schedule 1. Schedule 1 in turn defined “continuous disability policy” as being a policy of more than three years duration and it recognised within it that the benefit could be payable in respect of not only death by accident or injury, but also disability by way of accident or sickness. These definitions greatly extended the notion of “life policy” and “life insurance business.” Section 11 defined “life insurance business” as the business of issuing life policies.
This summary displays that the Commonwealth legislation has progressively expanded what falls within the ambit of life insurance. But it is also clear that the legislation tends to draw a distinction between what is called a “contract of life insurance” or a “life policy” on the one hand and “life insurance business” on the other; the latter encompassing more than merely the business of providing the former. Put another way, the legislation anticipates that life insurance business will be broader than merely the offering of life insurance.
I turn then to the evolution of the insurance provisions of the Stamps Act in South Australia.
Prior to the passing of the Stamp Duties Amendment Act (No 4) 1990 (SA), which introduced the definition of “life insurance policy” and “general insurance business” in the form that it is at the present time, the approach taken in the Stamps Act was the same and it differed from the Commonwealth legislation.
Whilst the Commonwealth legislation was progressing and extending the definition of “life insurance business” in this way, the Stamp Duties Act 1923 (SA), from 1923 through to 1990, remained the same. During this period, the Act provided for one regime for all insurers in South Australia. The Act required a person to take out an annual licence if the person “carries on or desires to carry on … any … assurance or insurance business whatever”.[44] Stamp duty was payable on the annual licence.[45]
[44] Stamp Duties Act 1923 (SA) (1923-1936 Reprint) s 33.
[45] Stamp Duties Act 1923 (SA) (1923-1936 Reprint) s 33. The duty was payable on the “annual licence” up until 1996, after which it has been payable on the “annual licence application” (see Statutes Amendment (Taxation Administration) Act 1996 (SA) ss 98, 99, 133).
The definition of “assurance or insurance business” was very wide.[46] It included “the granting of life, personal accident, fire, fidelity, guarantee, live stock, plate glass, marine or other assurance or insurance policies.” The definition of “policy” was in effect the same as it currently stands.
[46] Stamp Duties Act 1923 (SA) (1923-1936 Reprint) s 32.
There was no procedure for the lodging of monthly returns; however, even during this period the Stamps Act provided for a differentiated level of duty depending on the type of premium received. Schedule 2 during that period provided that duty is payable at 25s for every £100 of net premiums received, “except life and personal accident insurance premiums, the licence on which shall be 10s for every £100”.
In order for the Commissioner to determine which premiums were received by the insurer in respect of “life and personal accident insurance” and which were received in respect of other insurance, s 35 required the insurer to provide the Commissioner with a statutory declaration as to “the nature and exact amount of all the assurance or insurance business transacted”.
Therefore “life insurance” was not defined and “life insurance business” was not defined, but the latter was specifically referred to and was distinct from other insurance business.
In 1990 the South Australian Parliament passed the Stamp Duties Amendment Act (No 4) 1990 (SA). This Act introduced into the Stamps Act and articulated the distinction between “general insurance business” and “life insurance”, as well as the procedure for Monthly Returns in the case of the former. Accordingly, this amendment also introduced the new format of Schedule 2, to reflect that stamp duty is payable on the annual licence and the monthly return.
Section 32 defined “general insurance business” in a negative way, as “any assurance or insurance business not relating to life insurance policies”. At the same time, it expressly stated that “life insurance policy” does not include “personal accident or workers compensation” or a motor vehicle accident policy.
The points to note are that from the genesis of the Stamps Act in 1923 to date, the definition of “assurance or insurance business” has remained essentially the same and there has been, and still is, a distinction made between “life insurance policies” and other insurance policies. After the 1990 amendment, this distinction was made more prominent. This distinction is maintained with particular respect to the premiums received for such insurance. Unlike the legislation discussed above relating to Commonwealth insurance regulation, at no time did the Stamps Act attempt to provide a definition of “life insurance” other than by exclusion.
In summary, the legislation of the Commonwealth was expanding its definition of “life policy” and “life insurance business” at marked points over the past 150 years, while the Stamp Duties Act 1923 (SA) as amended in South Australia has retained its same definitions and approach, which is overtly different.
This Commonwealth legislative expansion approach is mirrored in many ways by the insurance practice over this period which was the subject of oral evidence by Mr Shepherd, Mr Fullagar and Mr McKenzie.
Shepherd
Mr Shepherd is now an Associate Professor of Actuarial Studies at Macquarie University. His employment history includes that from 1972 to 1980 he was employed by a life insurance company which issued general insurance through a subsidiary company. He gained a practical understanding of the two types of insurance from both an actuarial practice as well as his practical experience and knowledge of both types of insurance. Since that time he has continued to involve himself in insurance practice through lecturing and research, notably in the actuarial side of insurance work.
His report provided an interesting historical overview commencing in ancient Babylonian times in 1750BC through to ‘modern’ times which begin in his report from around the 1970s. I did not regard this early history as being part of his expertise, but instead was generally relevant background to the modern practices with which he is familiar.
I am satisfied that he is qualified to give expert evidence to this Court on the practice in the insurance industry in Australia from the 1970s to date.
In giving his report and evidence, Mr Shepherd drew upon this background and identified seven factors that he considered to be relevant in determining whether the industry would regard a particular type of insurance cover as life insurance business. Those indicators were said to be: [47]
·Duration of the term of the policy: the term of a general insurance policy is generally less than 12 months and can be renewed at the end of each term whereas life insurance policies are for a longer set period of time, usually more than 5 years or the life of the insured.
·Application of the principle of utmost good faith: the insured does not usually have an ongoing duty to inform the insurer of changes to their position during the period of the term whereas the insured of a general insurance policy must do so at the time of renewal.
·The right of insurers to vary premiums at each renewal: insurers of general insurance may vary the amount of premium when the policy is renewed whereas a life insurer cannot review the premium charged.
·Manner of determination of amount of claim: life insurance contracts set out the amount that is to be paid upon the happening of a particular event whereas general insurance policies are generally contracts of indemnity which will pay an amount equal to the insured’s loss.
·Pattern of variation of risk: insurance policies generally relate to events which increase in likelihood throughout the term of the insurance whereas the risk of an event occurring to which general insurance relates generally remains steady.
·Continuation of policy following claim: the happening of the event that triggers payment under a life insurance policy usually brings that policy to an end whereas general insurance usually continues following a claim.
·Surrender value of claim: a life insurance policy will generally have a surrender (cash) value, which is to be paid out to the insured in the event that the insured voluntarily discontinues the policy.
[47] Exhibit P4 (Expert Report of John Shepherd) 12-14. These factors were said to be derived from Bernard Benjamin, General Insurance (1977).

Generally, Mr Shepherd said:[48]
Many of the fundamental differences between the two types of insurance arise from the nature of the risks assumed by insurers in each case. Life insurance focuses on risks associated with the person – the risk of dying too early, the risk of surviving too long, the risk of losing some quality of life (eg through disablement, illness, etc). General insurance is primarily concerned with risks of loss of or damage to property and risks of incurring liability to compensate another party.
[48] Exhibit P4, 11.
Mr Shepherd went on to explain that the skills required of an actuary in life insurance are very different from the actuarial skills required for general insurance.
He concluded that there was “little room for doubt”[49] that the insurance policies presently in question are considered by the life insurance industry to be life insurance. He said:[50]
Rider benefits like [Disability Income Insurance], trauma cover and TPD have been regarded by the insurance industry as life insurance business.
And continued:[51]
Trauma cover, [Disability Income Insurance] and other Relevant Benefits are forms of continuous disability insurance and thus they are forms of life insurance.
[49] Exhibit P4, 17.
[50] Exhibit P4, 17.
[51] Exhibit P4, 18.
In summary, Mr Shepherd acknowledged that these indicators were heavily based upon the text of General Insurance by Bernard Benjamin.[52] In Benjamin, those same features are discussed in a chapter in which the author summarises the similarities and differences between life insurance contracts and general insurance contracts. But it is interesting to note that this is in a context in which he is seeking to describe what general insurance is. He is not seeking to describe what life insurance is.
[52] Bernard Benjamin, General Insurance (1977).
In particular the author indicates that the traditional Bunyon definition of life insurance is: [53]
not only uninformative but it is not entirely accurate because, in some kinds of general insurance, death although the outcome of a contingency (injury) and therefore not itself the contingency which brings the contract to fruition may nevertheless determine the amount of the liability to be met. Indeed in some cases of death arising from employment it may be difficult to separate the contingency from the outcome.
[53] Bernard Benjamin, General Insurance (1977), [1.1].
This illustrates the point that general insurance may include sickness and accident which results in death (the death being linked to life insurance), but no example is given where life insurance is said to include aspects of general insurance.
In short, the list of distinguishing features is one which may assist the characterisation of a policy as to whether it is a life insurance policy or a general insurance, but is mostly referring to the consequences or trappings associated with policies rather than going to the heart of the risk which is being insured.
Fullagar
Mr Fullagar has been employed in the insurance industry for over 30 years in different capacities with a number of different insurers, including, for some, time, employment with AMP. Of the three claimed experts, he had the better practical knowledge of the practice of the insurance industry. His roles have included product design, administration, underwriting, claims management and marketing. I accept him as an expert in the practice of the insurance industry.
Mr Fullagar gave evidence of the manner in which riders are regarded by the life insurance industry. He gave some account of the history of the provision of the riders and concluded that “term life insurance, TPD and trauma insurance possess [the] features [set out below] which were, and still are, generally regarded as being possessed by life insurance policies”. [54]
[54] Exhibit P5, 30.
Mr Fullagar then provided a list of the salient features of these riders which suggest to the insurance industry that they are life insurance:[55]
·each provides protection when an insured event has a major impact on a human life e.g. by way of disability or death;
·each is of a long duration and with this being underpinned by the presence of both a guarantee of renewability and a non-cancellable guarantee;
·each is able to be held within a superannuation fund;
·each was introduced to the insurance market only by life insurance companies and each was subsequently developed only by life insurance companies;
·each could only be distributed by agents and advisors authorised to represent life insurance policies; and
·each could only have disputes involving it adjudicated on by the dispute resolution body responsible for life insurance.
[55] Exhibit P5, 30.
There are obviously some similarities between this list and the one proffered by Mr Shepherd.
Mr Fullagar, in contrast to Mr Shepherd, specifically focussed on the riders and the approach, or perhaps more the justification, for life insurance companies embracing aspects of what traditionally had been other or general insurance, as appropriate attachments for life insurance policies.
McKenzie
Mr McKenzie is a solicitor who has been practising as a principal of firms for 20 years primarily in the area of insurance and superannuation. Since 1978, he was employed in the role of legal counsel and in similar roles at two insurance companies, Friends’ Provident Life and the Prudential Assurance Company Ltd.
The McKenzie report which he compiled was largely one which relied on statutory interpretation rather than industry practice. I have therefore not viewed his report as being that of an expert but rather I have had regard to it as part of the submissions of the Commissioner. In short, Mr McKenzie supported the view of the Commissioner that “life insurance” refers back to the Bunyon definition which has remained the same. On the other hand, life insurance business has increased its products which it has put forward through life insurance companies which have developed general insurance products as riders to a life insurance policy. In his view, it did not alter the definition of life insurance but rather it showed that life insurance business had extended.
Conclusions on the meaning of life insurance
Having regard to the evidence of the experts and the legislative changes discussed above, I accept that life insurance business as practised by life insurance companies has extended beyond the traditional Bunyon definition of “life insurance”. It is clear from the expert evidence that life insurance business and the products on offer in the marketplace as riders to life insurance policies have changed dramatically over time. There is obviously a close relationship between the changes to the Commonwealth legislation which have extended the definition of life insurance and life insurance business and its practice by the insurance industry. Further, the types of riders which have been added so far, appear to have some complementarity with life insurance, largely because of them relating to human wellbeing rather from for example, property. But, like their Honours in NMLA v FCT, I reject the proposition that the meaning of life insurance in the Stamps Act is dictated by the expanding ambit of life insurance under the Life Insurance Act 1993 (Cth). The very fact that Commonwealth legislation has sought to define life insurance in an extended way suggests that, absent legislative recognition, life insurance would not otherwise be described so as to include the added features. Moreover, as discussed above at [75] – [86], generally the language of the Commonwealth legislation regulating the insurance industry anticipates that life insurance business will be broader than merely the offering of life insurance. It is therefore difficult to see how this legislation supports an argument that a life insurance policy should be determined by identification of the policies which are offered by life insurers in the market. In fact it suggests the opposite.
As expressed in the purposes section of the Life Insurance Act 1993 (Cth), the Commonwealth legislation is seeking to regulate and ensure protection for people who buy insurance and to strengthen the industry. I therefore do not accept that this extended meaning found in the Life Insurance Act, being a different regime for a different purpose, reflects the common law meaning of “life insurance”.
I agree with the Commissioner’s argument that so far as the Stamps Act in South Australia is concerned, it is not so much concerned with the packaging of insurance products but with revenue raising, based on the amount of the premiums received for policies of life insurance as distinct from premiums received for other insurance.
I consider that the correct approach to the meaning of life insurance in the Stamps Act is that espoused by the High Court in the NMLA v FCT case. In reaching that conclusion, a number of matters should be mentioned about that case. First, the case concerned income tax legislation and Windeyer J drew a distinction between such legislation and stamp duty legislation, in that the former is concerned with assessing tax on the income received by an insurance company whereas the latter is assessing duty on the instrument.[56] That distinction is clearly correct, but it does not change the principles which are relevant to the approach to be taken when there is no statutory definition.
[56] National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (1959) 102 CLR 29, 50.
Secondly, the principle which emerges from the decision is that when, as was the case in NMLA v FCT, there is no definition of “policies of life assurance” and “premiums”, then it is appropriate to look at the accepted connotation in the industry.[57]
[57] National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (1959) 102 CLR 29, 42.
Thirdly, it was accepted in that case that there was a “generally accepted distinction between life insurance and accident insurance”.[58] That concession was not made in respect of TPD.
[58] National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (1959) 102 CLR 29, 42.
Fourthly, the Court recognised that the industry included riders of TPD and accident in the policies issued by life insurance companies but concluded that such practices did not alter the meaning of “life insurance”, which remained that as set out by Bunyon.
Fifthly, the Court rejected that the extended definition of “life policy” in the Life Insurance Act 1943, which incorporated “continuous disability insurance” should influence the concept of life insurance as referred to in the income tax legislation.[59]
[59] National Mutual Life Association of Australasia Ltd v Federal Commissioner of Taxation (1959) 102 CLR 29, 52.
Given the reasons of their Honours in that case, including the reliance on the traditional Bunyon definition, there is no relevant difference between the TPD and accidental death riders in that case and the riders in this case, which would lead me to treat them any differently.
The ANZ Group tried to argue that the traditional Bunyon definition of life insurance must be flawed because to define life insurance in that manner would allow accidental death insurance to “pass through the logic gate”. That is to say that life insurance cannot simply be Bunyon’s definition of life insurance, as that which is “contingent upon the duration of human life”, because if it were, then accidental death insurance would be within that definition, however such insurance is not life insurance.
In responding to this argument I note that “death by accident” has traditionally been treated as simply an anomalous qualification to the general description. In N M Superannuation Pty Limited v Young (1993) 41 FCR 182, Hill J said (at 195):
Although a policy of insurance against death by accident may be said to be a policy relating to the life of a person insured, such a policy has never been seen as being a policy of life insurance: see Re Farley; Holden v Johnson [1933] VLR 271; Re Kerr [1943] SASR 8; Re Packer (1958) 18 ABC 97.
This anomaly is merely a reminder that it may not always be possible to accurately define life insurance in an exhaustive manner. As Sheller JA said in Oceanic Life (at [10]):
The statutory definition and these cases demonstrate that whether a policy is one of life insurance cannot always accurately be determined by words of general definition.
But even though it may be difficult to express a universally accurate definition of life insurance, this does not hinder the ability of a Court to find, as the High Court did in NMLA v FCT, that certain types of insurance fall outside of life insurance. I am satisfied that insurance cover for TPD, Trauma and TI fall outside this definition.
In summary on this point, I reject the ANZ Group’s argument that the common law interpretation of life insurance has changed. I conclude that it remains as the High Court endorsed it in NMLA v FCT. I conclude that the meaning of “life insurance” in the context of the Stamps Act is the same common law interpretation. Although they are part of the accepted practice of life insurance companies in life insurance business, I reject the argument that TPD or Trauma cover as stand alone or as riders to a life insurance policy form part of the common law interpretation of life insurance.
A further matter which I raise rhetorically is if the interpretation of the Stamps Act was to be argued to have changed at common law because of marketplace practice, from what date or time is that said to apply and in relation to what policies?
Also, life insurance cannot simply become whatever the insurance industry regards it to mean as at a particular time. That approach would not only be too indefinite but would be self-fulfilling and enable life insurers to dictate the operation of the Stamps Act (as well as other Acts, particularly relating to taxation) and upset the policy considerations which lie behind such legislation.
Finally, as I have said above, NMLA put the submission on this point slightly differently to the ANZ Group. It was submitted by NMLA that whilst the common law meaning of life insurance may not have changed, at very least the meaning of life insurance in the Stamps Act has changed. That is to say that the Stamps Act intends a meaning of life insurance that encompasses all of the business of a life insurer, rather than being restricted to any common law meaning of life insurance. This submission does not alter my conclusions above. Unlike the Commonwealth legislation to which I have referred, the clear intention of the Stamps Act is to maintain a distinction between life insurance and general insurance which is not dictated by the expanding business of life insurers. This answer to NMLA’s submission is reinforced by my conclusions on the operation of the Stamps Act discussed below.
I turn then to the second part of the Appellants’ arguments that deals with the operation of the Stamps Act.
The operation of the Stamp Duties Act 1923 (SA)
I refer back to the earlier discussion of the definition of “life insurance policy” and “general insurance business” in the Stamps Act. The Stamps Act provides for stamp duty to be payable on an “instrument”.[60] In relation to insurance, the relevant “instrument” is either the annual licence application (pursuant to ss 34, 35) or the monthly return (pursuant to s 36). This much is not disputed by the parties.
[60] Stamp Duties Act 1923 (SA) s 4.
It is also accepted by the parties that the stamp duty payable on the relevant instrument is calculated on the “premium” by virtue of Schedule 2. This is because Schedule 2 specifically states that the stamp duty is calculated by reference to “premiums” which are “received or in any manner charged in account” by insurers. Clause 1(a) of Schedule 2 states that stamp duty payable on the annual licence application is to be calculated on “premiums relating to life insurance” and clause 1(ab) of Schedule 2 states that stamp duty payable on the monthly return is to be calculated on “premiums relating to policies of any kind (other than life insurance policies)”.
It is worthwhile to note here that Schedule 2 is not referring to a “policy document”. The word “policy” as it is used in clause 1(ab) is defined in s 32 and it is clearly not limited to a particular policy document as the Appellants contend. Rather, that definition is inclusive. The definition of “policy” in s 32 is similar to the Victorian provision discussed in AMP Life Ltd v Commissioner of State Revenue (2003) 10 VR 489. In particular, it was decided in that case that “a single instrument can cover more than one component of insurance, while at the same time covering another component of insurance, and thus contain two or more ‘policies’”.[61] Interpolating this into the present context, this means that a single “policy document” can include more than one insurance “policy”, each of which covers different risks. Another way of expressing the argument is that if the policy is looked at in context of the overall contract, the contractual terms of the contract can contain within it particular obligations with regard to different types of insurance risk.
[61] AMP Life Ltd v Commissioner of State Revenue (2003) 10 VR 489, [97] 519 (Hansen J).
Clauses (1)(a) and (ab) of Schedule 2 are intended to cover the field, in the sense that they are intended to capture all premiums received by insurers.[62] Accordingly, premiums must be classified in one way or another as subject to stamp duty in relation to either life insurance or general insurance. Therefore, it is necessary to look at whether a premium in question “relates to life insurance” or whether it is a premium which “relates to insurance other than life insurance”.
[62] This was accepted by the parties: Transcript, 384.
The thrust of the Appellants’ argument was that the correct approach to determining whether premiums should be assessed under clause 1(a) or 1(ab) of Schedule 2 is to have regard to the policy document pursuant to which premiums are paid and to determine the “leading and principal object”[63] of that document, in accordance with the test in Limmer Asphalte Paving Co v Commissioner of Inland Revenue [1872] 7 Ex 211 (“Limmer Asphalte”).[64] The Appellants argued that under this approach the premiums received in relation to the riders would not be stamped at the General Insurance Rate because they are merely accessory and merely ancillary to the leading and principal object of the policy document, namely the object of life insurance.
[63] Limmer Asphalte Paving Co v Commissioner of Inland Revenue [1872] 7 Ex 211, 217.
[64] NMLA submissions [31]; ING Submissions [201]; ANZ Submission, [201]; AMP Submission, [193]. This is of course not argued to be the case in relation to stand alone Trauma and TPD policies.
However, it is not correct to say that Limmer Ashpalte requires a consideration of the leading and principal object of the policy document in this case. That test is only relevant to the assessable “instrument”, which in this case is either the annual licence application or the monthly return. Therefore, under this scheme, the Limmer Ashpalte test has no practical relevance because, of their very nature, the annual licence application applies to life insurance and the monthly return applies to other than life insurance. In short the insurance policy document is not relevant either to liability for duty or to the amount of the duty. As indicated, the focus of the legislation is on the “instrument”, which is the annual licence application or the monthly return, and the amount of duty which is related to the “premiums”. This interpretation is supported by the fact that the word ‘premium’ is defined in s 32 of the Act to mean, inter alia, “any amount paid or payable for assurance or insurance and includes … an instalment of premium.” This definition requires only that the amount is paid (or payable) for insurance, not that it is paid pursuant to a policy document. (emphasis added)

In support of their interpretation of the Stamps Act, the Appellants sought to rely on comments of Channell J in Prudential Insurance Company v Commissioner of Inland Revenue [1904] 2 KB 658 where his Honour said (at 664):
It seems to me that for the purpose of determining whether that contract comes within the definition [of life insurance] we must look at it as a whole, and not split it up into two separate parts.
I do not find that case to be of much assistance. That case related to the British Stamp Act 1891[65] and the issue was essentially whether an agreement for endowment insurance was properly to be characterised as life insurance. Unlike the present case, life insurance was defined in the Act as “insurance upon any life or lives or upon any event or contingency relating to or depending upon any life or lives”.[66] Most importantly, the instrument that was to be presented for stamping in that case was the policy of insurance and “Policy of insurance” was defined to mean “every writing whereby any contract of insurance is made”.[67] Therefore in that case the legislation specifically required a characterisation of the written document. There was no relevant licensing or returns scheme upon which stamp duty was payable.
[65] (Imp) 54 & 55 Vict c 39.
[66] [1904] 2 KB 658, 662.
[67] [1904] 2 KB 658, 662.
Reference was also made to National Mutual Life Association of Australasia Ltd v The Commissioner of State Taxation (WA) (1996) 33 ATR 24 (“NMLA v Commissioner (WA)”). That case raised very similar considerations to the present case. In that case, Malcolm CJ in the Supreme Court of Western Australia was determining whether stamp duty was payable as life insurance or as general insurance on premiums received under policies containing life insurance and rider benefits. The riders in question were an accelerated payment of the entire insurance cover in the case of TPD and an accelerated payment of 50% in the case of trauma.
The Chief Justice articulated the test as follows (at 37):
If the supplementary premiums paid for the supplementary benefits are properly to be characterised as consideration for payment of the conversion or whole of the part of the life cover to other cover under certain circumstances and merely accessory or merely ancillary to the provision of the life cover, the policy would retain its characterisation as a policy of life insurance. Consequently, duty would be charged on the total amount of the basic premium plus the supplementary premiums under s 96(2).
His Honour concluded that the whole of the premiums (including premiums relating to riders) should be regarded as life insurance because the relevant policy (at 39):
does not provide for an additional benefit. It enables a portion of the sum insured in respect of the life cover to be paid in advance in the event of disablement or trauma. The life cover is secured by payment of the life premium. The supplementary premium paid for each rider is not a separate or additional premium … because the premium in respect of the trauma or disablement benefits is neither fixed by the policy nor apportionable because the supplementary premium is dependant upon payment of and takes into account the amount of the premium paid for the life cover. In my judgment, therefore, the policy in this case does not in truth constitute combined policies capable of independent operation both as life insurance and general insurance. Contrary to the submission on behalf of the Commissioner, the considerations by way of premiums for the supplementary benefits represented by the disablement benefit and trauma benefit are not separate but integrated and interlocked with the transaction of life insurance and the premiums paid for the life cover. The interrelationship between the supplementary premiums paid for the ability to obtain advance payment of portion of the life cover in the event of disablement or trauma and the premium paid for the life cover could not be severed by expressing the cover in respect of such supplementary benefits in a separate instrument. Similarly the interrelationship between the amount of the life cover and the disablement or trauma cover could not be so severed. In my opinion, the two rider benefits obtained by payment of the supplementary premiums are both merely accessory and merely ancillary to the life cover. Consequently, the relevant instrument should be characterised as, a policy of life insurance for the purposes of the relevant provisions of the Stamp Act [WA]. It is not possible to charge the supplementary premiums with the duty applicable to a policy of general insurance.
The Appellants urge this Court to reach a similar conclusion. However, again, that case concerned a quite different stamp duty regime. First, the Stamp Duty Act 1921 (WA) (“the WA Act”) defined ‘life insurance’. Secondly, and more importantly, the WA Act specifically called for stamp duty to be payable on the policy document rather than a licence application. The fact that there was also provision for duty to be payable on returns at the time under the WA Act is not to the point. The differences between the WA legislative regime and the present legislative regime make that case unhelpful except by way of comparison.
The clear intention of the Act in South Australia for determining stamp duty payable by an insurer is to distinguish between premiums that are received for cover of life insurance and premiums that are not. Whether premiums relate to life insurance depends on the contingent risk for which the premiums are paid. The necessary enquiry is therefore to determine whether the precise insurance cover for which a premium is paid relates to life insurance according to the traditional Bunyon approach or whether it does not. That enquiry will determine whether stamp duty is payable at the Life Insurance Rate or at the General Insurance Rate.
When an insurer lodges an annual licence application or a monthly return, the Commissioner can look at whether or not the “premiums” which are declared in that instrument have in fact been properly classified as premiums in relation to life insurance or whether they should be classified as premiums which are not in relation to life insurance policies.[68]
[68] Commissioner for Stamp Duty v Hopkins (1945) 71 CLR 351, 360 and 366; JWW Nominees Pty Ltd v the Treasurer [2004] SASC 163, [91] (Perry J).
Insurance companies cannot have carte blanche for the way in which they characterise the premiums which they have included in the annual licence application. In practice, the Commissioner will normally take the instrument as correct, but the Commissioner is able to challenge it and, as indicated earlier, they can challenge whether or not the premiums have been in fact received in relation to life insurance or not.
Often insurance policy documents have the premiums for each type of insurance cover separately set out and then aggregated into a total premium. This assists the process of the Commissioner being able to know the amount of the premiums that have been characterised under the separate risks involved within a policy document. If this amount is not so specified, the Commissioner may have his/her own actuaries look at the overall policy document and the premiums charged and determine what rate applies with regard to each of the risks.
I will therefore consider each of the Appellants’ policies and how they were treated by the Commissioner.
ANZ policies and stamp duty
There were two relevant periods for ANZ. The first period was between 1 January 1994 (the beginning of the period in ANZ Assessment) and 31 October 1996. During this period ANZ issued insurance policies in accordance with terms set out in a customer brochure, which was entitled ‘ANZ Life Term Insurance’.[69] After 31 October and until the acquisition by ING on 30 June 2005, ANZ issued insurance policies in accordance with terms set out in a customer brochure, which was entitled ‘ANZ Life Insurance’.[70]
[69] Exhibit P2, [11]-[17], Annexure A.
[70] Exhibit P2, [18]-[24], Annexure B.
Under the ANZ Life Term Insurance, there were four different types of cover which were issued.[71] The first comprised straight death cover. Clearly this fits the traditional Bunyon definition of life insurance and must be stamped at the Life Insurance Rate. This was accepted by the Commissioner.
[71] Exhibit P2, [13].
Then there were three additional types of insurance cover, each with an additional rider. The first provided for an accelerated payment of the death benefit if the insured were to suffer TPD, the second provided for an accelerated payment for Trauma and the third provided for accelerated payment upon either TPD or Trauma. In each case, if the TPD or Trauma occurred first, the balance of the death benefit would still be payable on death. In the case of each of these riders, ANZ would identify in the policy document the additional amount of premium which is payable for the rider requested by the insured.
Based on my reasoning above, these riders are not life insurance and the premiums received in relation to these riders attract stamp duty at the General Insurance Rate. The Commissioner was correct as assessing them as such in the ANZ Assessment.
The principal changes after the ANZ Life Insurance was implemented, related to the inclusion of TI cover and the introduction of a new benefit payment scheme, the quantum of which is dependant on the duration of life following a trauma (“increased benefit payment scheme”).[72] The TI cover provided for 80% of the death benefit to be paid out upon the occurrence of terminal Illness, and for the balance to be paid upon death. This cover was included in each of the policies described above automatically and ANZ did not specifically charge an additional premium for this rider. The Commissioner elected not to charge any amount of the premium at the General Insurance Rate by virtue of this rider, because there was no express increase in the premium charged. As this did not result in a higher rate of duty, it is not the subject of dispute in this case. However in accordance with my findings above, it would be appropriate for the Commissioner to have done so if a proportion of the premium could be said to have related to that rider.
[72] Exhibit P2, [20].
The benefit payment scheme introduced with the ANZ Life Insurance, provided that if Trauma occurred before death and an advance was paid to the insured, then upon death, the insured would receive an amount ranging between the amount of any death benefit over the lump sum already paid and the total death benefit, depending on the duration of the insured’s life after the trauma. As above, the premiums received in relation to this rider were clearly not related to life insurance and the Commissioner was correct to assess them as such in the ANZ Assessment.
In accordance with my conclusions above, I consider that there was no error in the Commissioner’s assessment of the stamp duty payable by ANZ.
ING policies and stamp duty
There were also two relevant periods for ING. The first period was between 1 January 1994 (the beginning of the period in the ING Assessment) and 28 February 1997. During this period ING issued insurance policies in accordance with terms set out in a customer brochure, which was entitled ‘Leading Life Insurance’ (“the former ING policy”).[73] After 28 February 1994, and up until the end of the period of the Commissioner’s assessment, ING issued insurance policies in accordance with terms set out in a customer brochure, which was also entitled ‘Leading Life Insurance’ (“the latter ING policy”).[74]
[73] Exhibit P1, [11]-[17], Annexure A.
[74] Exhibit P1, [18]-[24], Annexure B.
Under the former ING policy, there were two different types of cover which were issued.[75] The first was death cover with an additional cover for accelerated payment on terminal illness. Again, there is no doubt that premiums relating to death cover are to be stamped at the Life Insurance Rate. With respect to the additional benefit of payment upon terminal illness, ING did not specifically charge an additional premium for this rider. The Commissioner elected not to charge any amount of the premium at the General Insurance Rate by virtue of this rider, presumably because there was no express increase in the premium charged. Similarly to ANZ, as this did not result in a higher rate of duty, it is not the subject of dispute in this case. However in accordance with my findings above, it would be appropriate for the Commissioner to have done so if a proportion of the premium could be said to have related to that rider.
[75] Exhibit P1, [12].
The second policy was the same as the first but provided an additional rider of TPD cover for which it charged a specifically stated additional premium. As discussed above, the riders on this policy document are not life insurance and the premiums received in relation to any such rider attracts stamp duty at the General Insurance Rate.
When ING implemented the latter ING policy in 1997, it retained the above policies but also offered riders of Trauma cover or Trauma and TPD cover.[76] With respect to the Trauma riders, ING also implemented a rider that operated in a manner similar to what I have referred to above as an increased benefit payment scheme. ING charged additional premiums for the inclusion of these riders. Again these riders would attract the General Insurance Rate. As each of those policies had an additional accelerated TI payment, the premiums received with respect to this cover would be treated in the same manner as I have described for the former ING policy above.
[76] Exhibit P1, [19].
I therefore find that there was no error in the Commissioner’s assessment of the stamp duty payable by ING.
AMP policies and stamp duty
There were also two relevant periods for AMP. The first period was between 1 January 1994 (the beginning of the period in the AMP Assessment) and 31 August 1997. During this period AMP issued insurance policies in accordance with terms set out in a customer brochure, which was entitled “AMP Term Life Insurance”.[77] After 31 August 1997, and up until the end of the period of the Commissioner’s assessment, AMP issued insurance policies in accordance with terms set out in a customer brochure, which was entitled “AMP Firstcare Insurance”.[78]
[77] Exhibit P3, [10]-[16], Annexure A.
[78] Exhibit P3, [17]-[23], Annexure B.
Under the AMP Term Life Insurance, AMP offered a death cover.[79] As above, there is no doubt that premiums relating to death cover are to be stamped at the Life Insurance Rate.
[79] Exhibit P3, [12].
During this period AMP also offered a TPD rider which could be provided in the manner of what I have been calling an increased benefit payment scheme. Again, this is not life insurance and so the Commissioner was right to treat premiums received in relation to this rider as general insurance.
The implementation of the AMP Firstcare Insurance in 1997 saw the introduction of three stand alone policies.[80] They were a TPD cover policy, a Trauma cover policy and a TPD and Trauma cover policy. On account of the conclusions I have made with respect to the common law interpretation of life insurance at [130] above, these stand alone policies are not life insurance.
[80] Exhibit P3, [19].
In addition, the AMP Firstcare Insurance offered death cover with riders of Trauma, TPD or Trauma and TPD. The insured could elect for these riders to operate in a manner similar to what I have referred to above as an increased benefit payment scheme. Again, the Commissioner was correct in assessing premiums received in respect of these riders as general insurance.
All of these policies also included an automatic rider of TI cover for which no additional premium was specifically stated to be charged. This was generally by way of an advance of 80% of the death benefit, but under the AMP Firstcare Insurance in 1997 there was the possibility of this advance being up to 100% of the death cover. Again, the Commissioner elected not to charge any amount of the premium at the General Insurance Rate on account of the TI rider as there was no express increase in the premium charged by AMP. As this did not result in a higher rate of duty, it is not the subject of dispute in this case. However in accordance with my findings above, it would be appropriate for the Commissioner to have charged a proportion of the premium at the General Insurance Rate if it could be said to have related to that rider.
In addition, AMP also offered an extra called the ‘waiver of premium option’ which could be attached to any of the types of cover outlined above under both the AMP Term Life Insurance and the AMP Firstcare Insurance. The waiver of premium option operated by permitting the insured to elect not to pay premiums under the policy that become due while the insured is suffering a ‘total disablement’.[81] Whilst there is minimal practical difference between the waiver of premium and a TPD rider, I was asked not to consider this premium as it was not the basis of any assessment of additional stamp duty.[82]
[81] Exhibit P3, [12.4], [19.11].
[82] Transcript, 510.
I therefore find that there was no error in the Commissioner’s assessment of the stamp duty payable by AMP.
NMLA policies and stamp duty
Though NMLA adopted different terminology throughout the relevant period, the products provided can be summarised as follows.
All relevant policies provided a form of death cover, often combined with a form of endowment cover.[83] As with the above insurers, it is accepted by the Commissioner that the stamp duty for premiums received by NMLA with respect to Death Cover, whether or not combined with endowment cover, should be calculated at the Life Insurance Rate.
[83] Examples of policies were tendered as exhibits P14a and 14b.
NMLA also offered different types of riders that it called “Optional Benefits”. These riders provided for an accelerated payment of all or part of the benefit upon the occurrence of a Trauma or TPD, or a combination of the two. Each of these riders was optional for the insured and attracted a specifically identified additional premium.[84] As I have said above, premiums received in respect of such riders attract the General Insurance Rate.
[84] Exhibit P14, [15] and [17].
There were also two more riders that were included in the policies offered. First, generally speaking NMLA’s policies provided for an accelerated payment of all or part of the benefit upon the occurrence of a terminal illness. This additional TI cover was usually automatically included in the policy and it was not stated to be the subject of an additional or increased premium.[85] Secondly, with respect to policies containing a rider of the kind covering for Trauma, NMLA would generally include an additional rider referred to as the “Health Insurance Benefit”. This rider provided for NMLA to pay an additional amount over the Trauma benefit to pay the insured’s health insurance premiums if the insured had private health insurance on the occurrence of a Trauma. This rider was designed to encourage insureds to acquire private health insurance in addition to their NMLA policy. Where it was included, it was added automatically and not stated to be the subject of an additional or increased premium.[86] The Commissioner elected not to charge any amount of the premium at the General Insurance Rate by virtue of these two riders. As this did not result in a higher rate of duty, it is not the subject of dispute in this case. However in accordance with my findings above, it would be appropriate for the Commissioner to have done so if a proportion of the premium could be said to have related to that rider.
[85] Exhibit P14, [19].
[86] Exhibit P14, [15] and [18].
I therefore find that there was no error in the Commissioner’s assessment of the stamp duty payable by NMLA.
Penalties
ANZ and ING each dispute the imposition of a penalty tax on the additional stamp duty assessed to be payable on the ANZ Assessment and the ING Assessment respectively.

A taxpayer may become liable for penalty tax under s 30(1) of the TAA. That section says:
30—Penalty tax in respect of certain tax defaults
(1)If a tax default occurs, the taxpayer is liable to pay penalty tax in addition to the amount of the tax unpaid.
The amount of penalty tax payable by the taxpayer is determined by s 31:
31—Amount of penalty tax
(1)     The amount of the penalty tax payable in respect of a tax default is—
(a)     in the case of a deliberate tax default—75 per cent of the amount of tax unpaid; or
(b)     in any other case—25 per cent of the amount of tax unpaid.
This rate may be subject to increase or decrease on account of the conduct of the taxpayer under s 31(2). Of particular relevance here, there is a different discount to the rate determined by whether the taxpayer made sufficient disclosure of the default prior to or after a tax audit. Section 31(2) says:
(2)The penalty tax payable in respect of a tax default is subject to adjustment according to the conduct of the taxpayer as follows:
(a)     if the taxpayer made a sufficient disclosure of the tax default while not subject to a tax audit—the penalty tax is to be reduced by 80 per cent;
(b)     if the taxpayer made a sufficient disclosure of the tax default while subject to a tax audit—the penalty tax is to be reduced by 20 per cent;
(c)     if the taxpayer engaged in obstructive conduct while subject to a tax audit—the penalty tax may be increased by the Commissioner by 20 per cent.
Whether or not a taxpayer is “subject to a tax audit” is explained in s 31(3)(a) which says:
a taxpayer becomes subject to a tax audit in relation to a tax default under a taxation law when the Commissioner serves written notice on the taxpayer advising that the Commissioner is to investigate the tax liability of the taxpayer under that taxation law, and the taxpayer remains subject to the tax audit for 28 days after service of the notice on the taxpayer or such longer period as the Commissioner may specify by written notice;
The Commissioner in this case did not consider the default to be deliberate and so imposed penalty tax at the lower s 31(1)(b) rate of 25%. The Commissioner then reduced this rate by 20% (i.e. a total reduction of 5%) pursuant to s 31(2)(b) because both the disclosures by ANZ and ING were after the Commissioner had served notice of audit on those companies. Therefore the Commissioner assessed penalty tax to be payable at the rate of 20%.
In written submissions, on appeal the Commissioner originally stated that the assessment of penalty tax had taken place pursuant to s 31(2)(c),[87] but that submission was withdrawn in subsequent written submissions as being inaccurate. No error is displayed by this change of position.[88] Even if the Commissioner’s changing of the basis of the assessment of penalty tax was an appealable error (which is not revealed in this case), it is trite to say that the written submissions are not evidence of the basis upon which the Commissioner made his determination. Given that the Appellants have the onus of proof,[89] the claim that the Commissioner changed the basis of his assessment has not been made out.
[87] Respondent Submissions, [103] (ING) and [115] (ANZ).
[88] Contrary to the argument of counsel for ANZ and ING: Transcript, 503-4.
[89] Taxation Administration Act 1996 (SA) s 97.
Section 30(2) of the TAA excuses the taxpayer from penalty tax if the Commissioner is satisfied that the default giving rise to the penalty tax is not deliberate and the taxpayer took reasonable care to comply with the law. That section reads:
(2)Penalty tax is not payable in respect of a tax default if the Commissioner is satisfied that the tax default was not a deliberate tax default and did not result, wholly or partly, from any failure by the taxpayer, or a person acting on the taxpayer's behalf, to take reasonable care to comply with the requirements of a taxation law.
As I have said, the Commissioner was satisfied that the default was not deliberate. However penalty tax was imposed in the Assessments because the Commissioner was not satisfied that ANZ and ING took reasonable care to avoid the default. ANZ and ING argue that there was no basis upon which the Commissioner could conclude that the default resulted wholly or partly from a failure by the taxpayer to take reasonable care.[90] They say, in particular, that they exercised due care because the default was in reasonable, albeit, mistaken reliance on the authority of NMLA v Commissioner (WA) which held that riders attract the Life Insurance Rate.[91]
[90] Transcript 509.
[91] Cf Dormer v Federal Commissioner of Taxation [2002] FCA 537.
ANZ and ING have not displayed any error in the Commissioner’s determination that the default was the result of a failure by ANZ and ING to take reasonable care. As I have said above the decision of NMLA v Commissioner (WA) related to a very different statutory scheme, wherein the policies themselves were the instruments presented for stamping. In addition, the Commissioner gave an indication of his interpretation of the South Australian legislation in 2001 through Circular 213. The bulk of that Circular is set out above at [34]. At the end of the circular, the Commissioner offered an amnesty to insurers who had been paying stamp duty on rider premiums at the Life Insurance Rate. It read:[92]
PENALTY AND INTEREST AMNESTY
Where persons have paid stamp duty on rider premiums in respect of general insurance cover at life rates rather than general rates, a schedule of such amounts included in annual returns in respect of premiums received in the years ended 31 December 1994 to 31 December 1999 should be prepared in the following format and lodged with this Office by 1 July 2001.
AUDIT ACTIVITY
After conclusion of the amnesty period, RevenueSA will conduct audits of licence applications lodged by persons who carry on insurance business in South Australia to ensure that stamp duty on premiums attributable to riders has been paid at the general insurance rate, either in the appropriate monthly return or pursuant to the above-mentioned amnesty.
Any tax defaults not declared during the amnesty and detected after the amnesty period will attract penalty and interest at the rates prescribed in the Taxation Administration Act 1996.
[92] Exhibit P15.
ANZ and ING did not take advantage of the amnesty and provide an updated schedule of rider premiums. Rather, they continued to claim that stamp duty was payable at the Insurance Rate on the riders, and to so claim on the annual licence application.
For those reasons I conclude that it was open to the Commissioner to conclude that the default was the result of a failure by ANZ and ING to take reasonable care. I therefore dismiss the appeal in relation to the imposition of penalty tax on the ANZ and ING Assessments.
Conclusion
I therefore conclude as follows:
1I dismiss each of the appeals in relation to the Assessments.
2I refer to [3] and give leave to the parties to agree the assessments which should be made by the Commissioner following these reasons

1—Annual licence application or monthly return
(1)	Annual licence application or monthly return to be lodged by any company, person or firm of persons, whether corporate or unincorporate, which carries on or proposes to carry on in South Australia any life, personal accident, fire, fidelity, guarantee, livestock, plate glass, marine or other assurance or insurance business and whether the head office or principal place of business of that company, person or firm is in South Australia or elsewhere—
(a) in the case of an annual licence application where the company, person or firm has received or in any manner charged in account (whether directly or by agents) premiums relating to life insurance within the period of 12 months preceding the year for which the licence is to be taken out—for every $100 or fractional part of $100 of those premiums	$1.50
(ab) in the case of a monthly return where the company, person or firm has received or in any manner charged in account (whether directly or by agents) premiums relating to policies of any kind (other than life insurance policies) within the month preceding the month in which the return is required to be lodged—for every $100 or fractional part of $100 of those premiums	$11.00
(b) where the company, person or firm has not, prior to applying for an annual licence, transacted any assurance or insurance business—
(i) if the annual licence is required for the full period of twelve months	$100.00
(ii) if the annual licence is required for a shorter period than twelve months, a proportionate part of	$100.00