Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) Notwithstanding anything contained in this Act other than section 177F, but subject to this section, where a person carrying on the business of insurance in Australia reinsures out of Australia the whole or part of any risk with a non - resident:
(a) the premiums paid or credited in respect of the reinsurance shall not be:
(i) an allowable deduction to the person carrying on the business of insurance in Australia; or
(ii) included in the assessable income of the non - resident; and
(b) the income of the person carrying on the business of insurance in Australia shall not include sums recovered from that non - resident in respect of a loss on any risk so reinsured.
(2) A person carrying on the business of insurance in Australia who reinsures out of Australia the whole or part of any risk with a non - resident may elect, in accordance with this section, that the provisions of subsection (1) shall not be applied in arriving at that person's taxable income, and thereupon:
(a) those provisions shall not apply in arriving at that person's taxable income of a year of income to which the election applies; and
(b) that person shall be liable to furnish returns, and to pay tax, in accordance with the succeeding provisions of this section, as agent for all non - residents with whom that person so reinsures.
(3) Where a person makes an election under subsection (2), he or she shall, subject to subsection (5), be assessed and liable to pay tax as agent, on an amount equal to 10% of the sum of the gross amounts of the premiums paid or credited by him or her in the year of income (being a year of income to which the election applies) to non - residents in respect of all such reinsurances, as if that amount were the taxable income of a non - resident company (not being a private company) not carrying on business in Australia by means either of a principal office or a branch.
(4) A person who has made an election under this section shall, as agent, furnish to the Commissioner, within the prescribed time, or within such further time as the Commissioner allows, in respect of every year of income to which the election applies:
(a) a return showing the gross amounts of the premiums paid or credited by that person to non - residents in respect of all such reinsurances; or
(b) 2 returns, of which:
(i) one shall show the gross amounts of such premiums paid or credited by that person to non - residents which are companies; and
(ii) the other shall show the gross amounts of such premiums paid or credited by that person to non - residents who are not companies.
(5) Where returns are furnished by a person in accordance with paragraph (4)(b), there shall be excluded from the amount on which that person shall be assessed and liable to pay tax as agent in pursuance of subsection (3) an amount equal to 10% of the sum of the gross premiums properly shown in the return specified in subparagraph (4)(b)(ii), and that person shall, in addition to any other tax which that person is liable under this section to pay as agent, be assessed and liable to pay tax as agent on the amount so excluded as if it were the taxable income of a non - resident company (being a private company) not carrying on business in Australia by means either of a principal office or a branch.
(6) An election for the purposes of this section shall:
(c) be made on or before the last day for the furnishing of the taxpayer's return of income of the year of income in respect of which the election is first to apply, or within such further time as the Commissioner allows;
(d) first apply in respect of a year of income which shall be specified in the election; and
(e) apply in respect of all subsequent years of income.
(7) An assessment for the purposes of subsection (3) or (5) shall be made and notified separately from any other assessment.
(8) Where a person is liable, in pursuance of an assessment for the purposes of this section, to pay tax, in respect of any premiums, as agent for more than one non - resident, the amount which that person shall be liable to pay as agent for any one of those non - residents shall be so much of the tax so payable as bears to the whole of that tax the same proportion as the total amount of such of those premiums as were paid to that non - resident bears to the total amount of those premiums.
(9) Where a person is or may become liable under this section to pay tax as agent for a non - resident in respect of any premium paid or credited by that person to that non - resident:
(a) that person shall, for the purposes of section 254, be deemed to have received the premium in that person's representative capacity immediately before it was so paid or credited; and
(b) if that person pays or credits the premium before arrangements have been made to the satisfaction of the Commissioner for the payment of any tax which may be assessed in respect of that premium, that person shall be personally liable to pay that tax.
Application to a life assurance company
(10) This section applies to a life assurance company in relation to the whole or a part of a risk if, and only if, the risk or that part of the risk:
(a) is covered by a disability policy as defined in subsection 995 - 1(1) of the Income Tax Assessment Act 1997 ; and
(b) relates to a benefit that is payable in an event mentioned in that definition.