NEW BUSINESS TAX SYSTEM (MISCELLANEOUS) ACT (NO. 2) 2000 - SCHEDULE 2 Life insurance companies

(6A) If, during the year of income, an amount referred to in subsection ( 6) is received during the eligible period in relation to an eligible policy held by the trustee of a non - complying superannuation fund (within the meaning of Part IX):

(b) the amount is included in the assessable income of the fund of the year of income.

(ba) the eligible policy is issued by a life assurance company and the company's liabilities under the policy are to be discharged out of:

(2A) A deduction is not allowable under subsection ( 2) for a loss on the disposal or redemption of traditional securities that are:

(b) segregated current pension assets (as defined in Part IX) of a complying superannuation fund (as defined in that Part); or

(2A) Subsection ( 2) does not apply to a partnership loss if the partner's interest in the partnership at the end of the income year is:

(b) a segregated current pension asset (as defined in Part IX) of a complying superannuation fund (as defined in that Part); or

After "any capital gain", insert "(excluding a discount capital gain within the meaning of the Income Tax Assessment Act 1997 but including, in respect of a life assurance company that is a beneficiary of a trust estate, any capital gain notionally included under subsection 115 - 215(3) of that Act)".

"non-exempt modified discount capital gain" for a notional CGT event means any discount capital gain within the meaning of the Income Tax Assessment Act 1997 (including, in respect of a life assurance company that is a beneficiary of a trust estate, any capital gain notionally included under subsection 115 - 215(3) of that Act) that would (apart from this Division) arise from the event if Division 10 of Part IX applied in respect of the event, reduced as follows:

(a) if, had the gain instead been ordinary income derived when the gain was made, some or all of the ordinary income would have been exempt income under section 112C:

(i) reduce the gain by so much of that ordinary income as would have been so exempt; and

(ii) further reduce the rest of the gain (if any) by the proportion worked out using the formula in section 112A;

(b) otherwise--reduce the gain by the proportion worked out using the formula in section 112A.

After "any capital gain", insert "(including, in respect of a life assurance company that is a beneficiary of a trust estate, any capital gain notionally included under subsection 115 - 215(3) of the Income Tax Assessment Act 1997 )".

Omit "as has", substitute "and non - exempt modified discount capital gains as have".

If the year of income of a life assurance company in which 1 July 2000 occurs ends after that date, the period beginning at the start of that year of income and ending at the end of 30 June 2000 is taken for the purposes of this Division to be a year of income of the company.

After "non - exempt modified capital gain", insert ", non - exempt modified discount capital gain".

(b) the losses (if any) that, under subsections ( 3) to (6), are to be applied in reduction of the CS/RA class;

(7A) The non - exempt modified capital gains and the non - exempt modified discount capital gains are reduced by the amounts respectively applied in respect of them in accordance with the choices made under subsection ( 7).

(7B) After making the reductions referred to in subsection ( 7A), the assessable income of the CS/RA class includes:

(b) two - thirds of the amount left over of the non - exempt modified discount capital gains.

"modified capital gain" for a notional CGT event means any capital gain (excluding a discount capital gain within the meaning of the Income Tax Assessment Act 1997 but including, in respect of a registered organisation that is a beneficiary of a trust estate, any capital gain notionally included under subsection 115 - 215(3) of that Act) that would (apart from this Division) arise from the event if Division 10 of Part IX of this Act applied in respect of the event.

"modified discount capital gain" for a notional CGT event means any discount capital gain within the meaning of the Income Tax Assessment Act 1997 (including, in respect of a registered organisation that is a beneficiary of a trust estate, any capital gain notionally included under subsection 115 - 215(3) of that Act) that would (apart from this Division) arise from the event if Division 10 of Part IX of this Act applied in respect of the event.

"ordinary capital gain" for a notional CGT event means any capital gain (including, in respect of a registered organisation that is a beneficiary of a trust estate, any capital gain notionally included under subsection 115 - 215(3) of the Income Tax Assessment Act 1997 ) that would (apart from this Division) arise from the event.

(b) the losses (if any) that, under subsections ( 3) to (5), are to be applied in reduction of the CS/RA class;

(6A) The modified capital gains and the modified discount capital gains are reduced by the amounts respectively applied in respect of them in accordance with the choices made under subsection ( 6).

(6B) After making the reductions referred to in subsection ( 6A), the assessable income of the CS/RA class includes:

(b) two - thirds of the amount left over of the modified discount capital gains.

(1) An association of persons formed for the purpose of insuring those persons against loss, damage or risk of any kind is taken, for the purposes of this Act, to be a company carrying on the business of insurance.

(2) The assessable income of such a company includes all premiums derived by it, whether from its members or not.

(ii) if the year of income is the 2002 - 03 year of income or a later year of income--30%; or

(iii) if the year of income is the 2002 - 03 year of income or a later year of income--30%.

(3) A complying superannuation fund cannot deduct an amount (otherwise than under section 279) for fees or charges incurred in respect of:

Note: RSA providers that are life assurance companies are covered by Division 320 of the Income Tax Assessment Act 1997 .

"untainted policy liabilities" means so much of the company's policy liabilities, as defined in the Valuation Standard (within the meaning of the Income Tax Assessment Act 1997 ), as calculated by a Fellow or Accredited Member of the Institute of Actuaries of Australia, for the statutory accounting period as is referable to life assurance policies that do not give rise to tainted services income of the company of any statutory accounting period.

(1) The amendments made by items 4, 5, 25 and 26 apply to amounts received (within the meaning of section 26AH of the Income Tax Assessment Act 1936 ) on or after 1 July 2000.

(2) The amendments made by items 6 and 7 apply to losses arising on or after 1 July 2000.

(3) The amendments made by items 8 to 22 apply to assessments for the year of income in which 21 September 1999 occurs and later years of income.

(4) The amendments made by items 23, 24, 35, 36 and 53 apply to income derived on or after 1 July 2000.

(6) The amendments made by items 58 to 61 apply in calculating passive income that is derived on or after 1 July 2000.

The income of a * friendly society covered by item 4.1 that is derived from * life insurance business (other than business relating to the issuing of * income bonds, * funeral policies or * scholarship plans) is not exempt from income tax under section 50 - 1.

; (d) life insurance companies, in relation to discount capital gains for CGT events in respect of CGT assets that are virtual PST assets.

(9) Also, for the purpose of working out the * capital gain of a * life insurance company from a * CGT event happening after 30 June 2000 in respect of a * CGT asset that is a * virtual PST asset, the cost base includes indexation only if the life insurance company chooses that the cost base includes indexation.

Note: Section 110 - 25 of the Income Tax (Transitional Provisions) Act 1997 provides that, in working out the capital gain from a CGT event after 11.45 am on 21 September 1999 and before 1 July 2000 in respect of an asset of a life insurance company or registered organisation, the cost base includes indexation only if the company or organisation chooses it.

(3) Indexation is not relevant to the * capital gain of a * life insurance company from a * CGT event happening after 30 June 2000 in respect of a * CGT asset that is a * virtual PST asset unless the company has chosen that the * cost base include indexation for the purposes of section 110 - 25.

Note: Section 114 - 5 of the Income Tax (Transitional Provisions) Act 1997 provides that indexation is not relevant to the capital gain of a life insurance company or registered organisation from a CGT event after 11.45 am on 21 September 1999 and before 1 July 2000 unless the company or organisation chooses it.

; or (d) a * life insurance company in relation to a * discount capital gain from a * CGT event in respect of a * CGT asset that is a * virtual PST asset.

Note: Section 115 - 10 of the Income Tax (Transitional Provisions) Act 1997 provides that a capital gain made by a life insurance company or registered organisation after 11.45 am on 21 September 1999 and before 1 July 2000 may be a discount capital gain in certain circumstances.

(ii) by a trust (other than a trust that is a * complying superannuation entity); or

(ii) by a * life insurance company from a * CGT asset that is a * virtual PST asset.

Omit " * life insurance policy", substitute "policy of insurance on the life of an individual".

Omit "life insurance policy", substitute "policy of insurance on the life of an individual".

A * capital gain or * capital loss that a * life insurance company makes from a * CGT event happening in relation to a * segregated exempt asset is disregarded.

A * capital gain or * capital loss that a * complying superannuation entity makes from a * CGT event happening in relation to a segregated current pension asset (as defined in Part IX of the Income Tax Assessment Act 1936 ) is disregarded.

A * capital gain or a * capital loss that a * pooled superannuation trust makes from a * CGT event happening in relation to a segregated exempt superannuation asset (as defined in Part IX of the Income Tax Assessment Act 1936 ) is disregarded.

(b) a * life insurance company and, just before the event happened, the unit must have been a * virtual PST asset or a * segregated exempt asset of the company.

320 - H Segregation of assets to discharge exempt life insurance policy liabilities

This Division provides for the taxation of life insurance companies in a broadly comparable way to other entities that derive similar kinds of income.

Because of the nature of the business of life insurance companies, the Division contains special rules for working out their taxable income.

Those rules:

• include certain amounts in assessable income;

• identify certain amounts of exempt income;

• identify specific deductions.

The taxable income of life insurance companies is divided into 2 classes:

• the complying superannuation class, which contains taxable income that relates to complying superannuation business and is taxed at the rate of tax that applies to complying superannuation funds

• the ordinary class, which contains the rest of the taxable income and is taxed at the company tax rate.

The Division also contains rules for segregating the assets of life insurance companies into:

• assets that relate to complying superannuation business;

• assets that relate to immediate annuity and other exempt business.

(1) The object of this Division is to provide for the taxation of * life insurance companies in a broadly comparable way to other entities that derive similar kinds of income.

(a) identifies certain amounts that are included in the assessable income, or are exempt income, of a * life insurance company; and

(c) identifies the part of the taxable income of a life insurance company that relates to complying superannuation business and allocates that income to the * complying superannuation class of the company's taxable income; and

(d) allocates the rest of the taxable income to the * ordinary class of the company's taxable income; and

(e) contains other provisions necessary to enable the taxable income of a life insurance company to be worked out.

Note: Section 320 - 5 of the Income Tax (Transitional Provisions) Act 1997 provides that the tax consequences of certain transfers of assets of a life insurance company that is a friendly society to a complying superannuation fund are to be disregarded.

This Subdivision provides for certain amounts to be included in a life insurance company's assessable income and for certain other amounts to be exempt income.

320 - 20 Assessable income--asset transferred from virtual PST assets to segregated exempt assets and subsequently disposed of

320 - 25 Assessable income--asset transferred from virtual PST assets to segregated exempt assets and subsequently transferred

320 - 40 Exemption of one - third of certain management fees received under contracts made before 1 July 2000

320 - 45 Tax treatment of gains or losses from CGT events in relation to virtual PST assets

(a) the total amount of the * life insurance premiums paid to the company in the income year; and

(b) amounts received or recovered under * contracts of reinsurance to the extent to which they relate to the * risk components of claims paid under * life insurance policies; and

(c) any amount received or recovered that is a refund, or in the nature of a refund, of the life insurance premium paid under a * contract of reinsurance; and

(d) any amount received under a profit - sharing arrangement contained in, or entered into in relation to, a contract of reinsurance; and

(e) if an asset (other than money) is transferred from or to a * virtual PST under subsection 320 - 180(1) or (2), to a virtual PST under section 320 - 185 or from a virtual PST under subsection 320 - 195(2) or (3)--the amount (if any) that is included in the company's assessable income of the income year in which the asset was transferred because of section 320 - 200; and

(f) the * transfer values of assets transferred from the company's * segregated exempt assets under subsection 320 - 235(1) or 320 - 250(2); and

(g) if an asset (other than money) is transferred to the company's segregated exempt assets under subsection 320 - 235(2) or section 320 - 240--the amount (if any) that is included in the company's assessable income because of section 320 - 255; and

(h) if the * value, at the end of the income year, of the company's liabilities under the * net risk components of life insurance policies is less than the value, at the end of the previous income year, of those liabilities--an amount equal to the difference; and

Note: Where the value at the end of the income year exceeds the value at the end of the previous income year, the excess can be deducted: see section 320 - 85.

(k) fees and charges (not otherwise included in the company's assessable income) imposed by the company in respect of life insurance policies; and

(l) if the company is an * RSA provider-- * taxable contributions made to * RSAs provided by the company.

(1) This section applies to a * life insurance company for each of the following income years (each a relevant income year ):

(a) the * value of the company's liabilities at the end of 30 June 2000 under its * continuous disability policies (being the value used by the company for the purposes of its return of income);

(b) the value of the company's liabilities at the end of 30 June 2000 under the * net risk components of its continuous disability policies as calculated under subsection 320 - 85(4);

the company's assessable income for each relevant income year includes an amount equal to one - fifth of the excess.

(3) However, if a * life insurance company ceases in a relevant income year to carry on * life insurance business or to have any liabilities under the * net risk components of * continuous disability policies, subsection ( 2) does not apply for that income year or any future income years but the company's assessable income for that income year includes so much of the excess referred to in subsection ( 2) as has not been included in the company's assessable income for any previous relevant income years.

(1) The following amounts received by a * life insurance company are exempt from income tax:

(a) amounts of * ordinary income and * statutory income accrued before 1 July 1988 that were derived from assets that have become * virtual PST assets;

(b) amounts of ordinary income and statutory income derived from * segregated exempt assets, being income that relates to the period during which the assets were segregated exempt assets;

(c) amounts of ordinary income and statutory income received from the * disposal of units in a * pooled superannuation trust;

(d) if an * Australian/overseas fund or an * overseas fund established by the company derived * foreign establishment amounts--the non - resident proportion of the foreign establishment amounts;

(e) if the company is an * RSA provider--any amounts that, except for the operation of subsections 320 - 155(3) and (4), would have been taken into account under subsection 320 - 155(1) in calculating the * RSA component of the * complying superannuation class of the company's taxable income;

(i) amounts received before 1 July 2001 that are exempt from income tax under section 50 - 1; and

(ii) amounts received on or after that date that are attributable to * income bonds, * funeral policies or * scholarship plans issued before 1 December 1999.

(2) For the purposes of paragraph ( 1)(d), the non - resident proportion of the * foreign establishment amounts is the amount worked out using the formula:

"all foreign establishment policy liabilities" means the total of the policy liabilities (as defined in the * Valuation Standard), calculated by an * actuary, for all * life insurance policies included in the class of * life insurance business to which the company's * Australian/overseas fund or * overseas fund relates that were issued by the permanent establishment of the company in the foreign country.

"non-resident foreign establishment policy liabilities" means the total of the company's policy liabilities (as defined in the Valuation Standard), calculated by an actuary, for * non - resident life insurance policies.

(1) One - third of a * life insurance company's * specified management fees for the income year in respect of * life insurance policies constituted by contracts made with the company before 1 July 2000 are exempt from income tax.

(2) This section does not apply to amounts that become * specified management fees after 30 June 2005.

(3) There are no * specified management fees in respect of * life insurance policies that, at 30 June 2000, were:

(a) policies under which amounts are to be paid only on the death or disability of a person; or

(i) the policies provide for * participating benefits or * discretionary benefits;

(ii) the policies do not become policies under which the company's liabilities are to be discharged out of its * virtual PST assets or its * segregated exempt assets.

(4) The specified management fees for the income year in respect of * life insurance policies to which subsection ( 3) does not apply are so much of the sum of the amounts applicable in respect of the policies under subsections ( 5), (6) and (7) (the applicable amounts ) as does not exceed any fees or charges made by the * life insurance company that the company was entitled to make under the terms of the policies as applying immediately before 1 July 2000.

(5) The applicable amount for * virtual PST life insurance policies where the company's liabilities under the policies are to be discharged out of its * virtual PST assets is:

(a) the sum of the amounts transferred from the * virtual PST in the income year under subsection 320 - 180(1) or 320 - 195(3);

(i) any amounts transferred to the virtual PST in the income year under subsection 320 - 180(2) or 320 - 185(1); and

(ii) any of the amounts referred to in paragraph ( a) that related to the company's liability to pay amounts on the death or disability of a person;

(6) The applicable amount for * exempt life insurance policies where the company's liabilities under the policies are to be discharged out of its * segregated exempt assets is:

(a) the total amount transferred from the segregated exempt assets in the income year under subsection 320 - 235(1) or 320 - 250(2);

(b) so much of the total amount transferred to the segregated exempt assets in the income year under subsection 320 - 235(2) or 320 - 240(1) as does not exceed the amount referred to in paragraph ( a).

(a) the sum of the * life insurance premiums received in respect of the policies in the income year;

(ii) the * risk components of claims paid under those policies in the income year;

(8) An amount that is exempt from income tax under this section is taken to be assessable income of the * life insurance company for the purposes of section 8 - 1.

If a * CGT event happens in respect of a * CGT asset that is a * virtual PST asset of a * life insurance company, Division 10 of Part IX of the Income Tax Assessment Act 1936 applies for the purpose of working out the amount of any * capital gain or * capital loss that arises from the event.

This Subdivision specifies particular deductions that are available to a life insurance company, specifies particular amounts that a life insurance company cannot deduct and contains provisions relating to a life insurance company's capital losses.

320 - 55 Deduction for life insurance premiums where liabilities under life insurance policies are to be discharged from virtual PST assets

320 - 60 Deduction for life insurance premiums where liabilities under life insurance policies are to be discharged from segregated exempt assets

320 - 65 Deduction for life insurance premiums in respect of life insurance policies that provide for participating or discretionary benefits

320 - 70 No deduction for life insurance premiums in respect of certain life insurance policies payable only on death or disability

320 - 85 Deduction for increase in value of liabilities under net risk components of life insurance policies

320 - 90 Deduction where asset transferred from virtual PST assets to segregated exempt assets and subsequently disposed of

320 - 95 Deduction where asset transferred from virtual PST assets to segregated exempt assets and subsequently transferred

320 - 100 Deduction for life insurance premiums paid under contracts of reinsurance

320 - 120 Capital losses from assets other than virtual PST assets or segregated exempt assets

(1) This section applies to a * life insurance company in respect of * life insurance policies where the company's liabilities under the policies are to be discharged out of * virtual PST assets.

(a) the amounts of the * life insurance premiums received in respect of the policies that are transferred to its * virtual PST assets in the income year;

(b) so much of those amounts as relate to the company's liability to pay amounts on the death or disability of a person.

(3) The amount of a * life insurance premium that relates to the company's liability mentioned in paragraph ( 2)(b) is:

(a) if the * life insurance policy states that the whole or a specified part of the premium is payable in respect of such a liability--the whole or that part of the premium, as the case may be; or

(i) where the policy provides for * participating benefits or * discretionary benefits--nil; or

(ii) where the policy is an * endowment policy and does not provide for participating benefits or discretionary benefits--10% of the premium; or

(iii) where the policy is a * whole of life policy and does not provide for participating benefits or discretionary benefits--30% of the premium; or

(iv) otherwise--so much of the premium as an * actuary determines to be attributable to the liability.

A * life insurance company can deduct the amounts of * life insurance premiums transferred in the income year to its * segregated exempt assets under subsection 320 - 240(3).

A * life insurance company can deduct the amounts of * net premiums received in respect of * life insurance policies (other than * virtual PST life insurance policies or * exempt life insurance policies) that provide for * participating benefits or * discretionary benefits.

(1) A * life insurance company cannot deduct any part of the amounts of * life insurance premiums received in respect of * life insurance policies under which amounts are to be paid only on the death or disability of a person.

(2) This section does not apply to * life insurance policies that provide for * participating benefits or * discretionary benefits.

(1) This section applies to a * life insurance company in respect of * life insurance policies to which sections 320 - 55, 320 - 60, 320 - 65 and 320 - 70 do not apply.

(2) In respect of policies issued on or after 1 July 2001, the company can deduct, in respect of * life insurance premiums received in the income year, the lesser of the following amounts:

(a) the amounts specified in the policies to be the capital components of those premiums, less any adjustments to be made because of * contracts of reinsurance;

(b) the sum of the * net premiums less so much of the net premiums as an * actuary determines to be attributable to fees and charges.

(3) In respect of policies issued before 1 July 2001, the company can deduct, in respect of * life insurance premiums received in the income year, the sum of the * net premiums less so much of the net premiums as an * actuary determines to be attributable to fees and charges.

(4) In making a determination referred to in paragraph ( 2)(b) or subsection ( 3), an * actuary is to have regard to the changes over the income year in the sum of the * net current termination values of the policies and the movements in those values during the income year.

(1) A * life insurance company can deduct the amounts paid in respect of the * risk components of claims paid under * life insurance policies during the income year.

(i) the policy does not provide for * participating benefits or * discretionary benefits; and

(iii) an amount is payable under the policy only on the death or disability of the insured person;

the amount paid under the policy as a result of the occurrence of that event; or

(b) if the policy provides for participating benefits or discretionary benefits or is an exempt life insurance policy--nil; or

(c) otherwise--the amount paid under the policy as a result of the death or disability of the insured person less the * current termination value of the policy (calculated by an * actuary) immediately before the death, or the occurrence of the disability, of the person.

(3) Except as provided by subsection ( 1), a * life insurance company cannot deduct amounts paid in respect of claims under * life insurance policies.

(1) A * life insurance company can deduct the amount (if any) by which the * value, at the end of the income year, of its liabilities under the * net risk components of * life insurance policies exceeds the value, at the end of the previous income year, of those liabilities.

Note 1: Where the value at the end of the income year is less than the value at the end of the previous income year, the difference is included in assessable income: see paragraph 320 - 15(h).

Note 2: Section 320 - 85 of the Income Tax (Transitional Provisions) Act 1997 makes special provision in respect of the calculation of the value of a life insurance company's liabilities under the net risk components of life insurance policies at the end of the income year immediately preceding the income year in which 1 July 2000 occurs.

(2) A * life insurance company can deduct an amount under this section in respect of a * life insurance policy only if the company can deduct under section 320 - 80 an amount for the * risk components of claims paid under the policy.

(3) If a * life insurance policy is a * disability policy (other than a * continuous disability policy), the value at a particular time of the liabilities of the * life insurance company under the * net risk component of the policy is the * current termination value of the component at that time (calculated by an * actuary).

(4) In the case of * life insurance policies other than policies to which subsection ( 3) applies, the value at a particular time of the liabilities of the * life insurance company under the * net risk components of the policies is the amount calculated by an * actuary to be:

(a) the sum of the policy liabilities (as defined in the * Valuation Standard) in respect of the net risk components of the policies at that time;

(b) the sum of any cumulative losses (as defined in the Valuation Standard) for the net risk components of the policies at that time.

If an asset (other than money) is transferred from a * virtual PST under subsection 320 - 180(1) or 320 - 195(2) or (3), or is transferred to a virtual PST under subsection 320 - 180(2) or section 320 - 185, the * life insurance company can deduct the amount (if any) that it can deduct because of section 320 - 200.

A * life insurance company can deduct amounts paid in the income year as * life insurance premiums under * contracts of reinsurance.

(1) A * life insurance company can deduct the * transfer values of assets transferred in the income year to the company's * segregated exempt assets under subsection 320 - 235(2) or 320 - 240(1).

(2) If an asset (other than money) is transferred to a * life insurance company's * segregated exempt assets under subsection 320 - 235(2) or section 320 - 240, the company can deduct the amount (if any) that it can deduct because of section 320 - 255.

A * life insurance company that is a * friendly society can deduct interest credited in the income year to the holders of * income bonds issued after 30 November 1999 where the interest accrued on or after 1 July 2001.

A * life insurance company that is an * RSA provider cannot deduct amounts credited to * RSAs.

(1) This section applies to assets ( ordinary assets ) of a * life insurance company other than:

(2) In working out a * life insurance company's * net capital gain or * net capital loss for the income year, * capital losses from ordinary assets can be used only to reduce * capital gains from ordinary assets.

(3) If some or all of a * capital loss from an ordinary asset cannot be applied in an income year, the unapplied amount can be applied in the next income year in which the company's * capital gains from ordinary assets exceed the company's capital losses (if any) from ordinary assets.

(4) If the company has 2 or more unapplied * net capital losses from ordinary assets, the company must apply them in the order in which they were made.

(1) In working out a * life insurance company's * net capital gain or * net capital loss for the income year, * capital losses from * virtual PST assets can be used only to reduce * capital gains from virtual PST assets.

(2) If some or all of a * capital loss from a * virtual PST asset cannot be applied in an income year, the unapplied amount can be applied in the next income year in which the company's * capital gains from * virtual PST assets exceed the company's capital losses (if any) from virtual PST assets.

(3) If the company has 2 or more unapplied * net capital losses from * virtual PST assets, the company must apply them in the order in which they were made.

This Subdivision provides for a life insurance company's taxable income to be divided into an ordinary class and a complying superannuation class and explains what is included in each class.

The taxable income of a * life insurance company for an income year is divided into 2 classes:

The ordinary class is the total taxable income less the * complying superannuation class.

The complying superannuation class is the part of the taxable income that consists of:

(b) if the company has established a * virtual PST--the * virtual PST component; and

This Subdivision explains how the RSA component of the complying superannuation class of a life insurance company's taxable income is worked out.

(1) The RSA component of the * complying superannuation class of the taxable income for an income year of a * life insurance company that is an * RSA provider is the sum of all amounts (other than contributions that are not * taxable contributions) credited during the income year to * RSAs provided by the company, reduced by any amounts debited from the RSAs other than benefits paid to, or in respect of, the holders of the RSAs.

(2) In calculating the * RSA component, any amount of tax paid in respect of an * RSA is taken not to have been an amount paid from the RSA.

(3) If an * annuity was being paid from an * RSA in respect of the whole of the income year, or the whole of the part of the income year in which the RSA existed, amounts credited to the RSA during the income year are, in calculating the sum referred to in subsection ( 1), taken not to have been credited.

(4) If an * annuity was being paid from an * RSA in respect of a part, but not the whole, of the portion of the income year in which the RSA existed, amounts worked out using the following formula are, in calculating the sum referred to in subsection ( 1), taken not to have been credited:

(a) a * life insurance company that is an * RSA provider has no taxable income; or

(b) the taxable income of a life insurance company that is an RSA provider does not include any * complying superannuation class; or

(c) the complying superannuation class of the taxable income of a life insurance company that is an RSA provider is less than the * RSA component.

(2) If, apart from this subsection, a * life insurance company that is an * RSA provider has no taxable income or its taxable income is less than the * RSA component:

(a) the company is taken to have both a taxable income and a * tax loss for the income year; and

(c) the tax loss is taken to be the amount that would have been the company's tax loss if the RSA component had not been income derived by the company; and

(d) the * complying superannuation class of the taxable income is taken to be equal to the RSA component; and

(3) If, apart from this subsection, the taxable income of a * life insurance company that is an * RSA provider is equal to or greater than the * RSA component:

(a) the * complying superannuation class of the taxable income is taken to be equal to the RSA component; and

(b) an amount equal to the difference between the RSA component and the amount that would, apart from this subsection, have been the complying superannuation class of the taxable income is to be applied in reducing the * ordinary class of taxable income.

This Subdivision explains:

• how a life insurance company can segregate assets (to be known as a virtual PST ) to be used for the sole purpose of discharging its complying superannuation liabilities

• how the virtual PST component of the complying superannuation class of taxable income is worked out.

320 - 185 Transfer of assets to virtual PST otherwise than as a result of an annual valuation

320 - 195 Transfer of assets and payment of amounts from a virtual PST otherwise than as a result of an annual valuation

(1) A * life insurance company may, on or after 1 July 2000, segregate in accordance with subsections ( 2) and (3) any of its assets for the sole purpose of discharging its * virtual PST liabilities out of those assets.

Note: Section 320 - 170 of the Income Tax (Transitional Provisions) Act 1997 provides that a life insurance company may transfer a part of an asset to a virtual PST before 1 October 2000.

(1A) Except as provided by section 320 - 170 of the Income Tax (Transitional Provisions) Act 1997 , an asset is taken not to be included in the * virtual PST assets unless the whole of the asset is included among those assets.

(2) The assets segregated must, at the time of the segregation, be a representative sample of all the company's assets that support its * virtual PST liabilities immediately before the segregation.

(3) The assets segregated must have, at the time of the segregation, a total * transfer value that does not exceed the sum of:

(b) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of the assets segregated; and

(c) the total amount of any unpaid * PAYG instalments relating to the * virtual PST component of the * complying superannuation class of the company's taxable income for the income year.

(4) A * life insurance company that segregates assets as mentioned in subsections ( 1) to (3) at a time after 1 July 2000 but before 1 October 2000 is taken to have segregated those assets in accordance with those subsections on 1 July 2000.

(5) If a segregation of assets is made in accordance with the above subsections, the company must use the segregated assets, and any other assets afterwards included among the segregated assets, only for the purpose of discharging its * virtual PST liabilities.

(6) The assets from time to time segregated are together to be known as a virtual pooled superannuation trust or a virtual PST and each asset from time to time included among the segregated assets is to be known as a virtual PST asset .

(i) is a reference to the inclusion of the asset among the segregated assets, or the exclusion of an asset from the segregated assets, as the case may be; and

(ii) includes a reference to the transfer of money to, or from, the virtual PST, as the case may be; and

(b) if an asset transferred to or from the virtual PST is money, a reference to the * transfer value of the asset transferred is a reference to the amount of the money.

(1) A * life insurance company that has established a * virtual PST must cause the * transfer values of the * virtual PST assets to be calculated as at the following times ( valuation times ):

(2) A calculation for a valuation time is to be made not later than 60 days after that time.

(1) If the total * transfer value of the * virtual PST assets at a valuation time exceeds the sum of:

(b) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of those assets; and

(c) the total amount of any unpaid * PAYG instalments relating to the * virtual PST component of the * complying superannuation class of the company's taxable income for the income year;

the company must, within 30 days after the day on which the valuations of the transfer values of those assets are made, transfer, from the * virtual PST, assets of any kind having a total transfer value equal to the excess.

(2) If the total * transfer value of the * virtual PST assets at a valuation time is less than the sum of:

(b) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of those assets; and

(c) the total amount of any unpaid * PAYG instalments relating to the * virtual PST component of the * complying superannuation class of the company's taxable income for the income year;

the company can transfer, to the * virtual PST, assets of any kind that have a total transfer value not exceeding the difference.

(3) A transfer of assets under subsection ( 1) is taken to have been made in the income year at the end of which the valuation time occurred.

(4) If a transfer of assets under subsection ( 2) is made within 30 days after the day on which the valuations of the * transfer values of those assets are made, the transfer is taken to have been made in the income year at the end of which the valuation time occurred.

(1) If a * life insurance company determines, at a time other than a valuation time, that the total * transfer value of the * virtual PST assets is less than the sum of:

(b) any reasonable provision made by it in its accounts for liability for tax on unrealised gains in respect of those assets; and

(c) the total amount of any unpaid * PAYG instalments relating to the * virtual PST component of the * complying superannuation class of the company's taxable income for the income year;

the company can transfer, to the * virtual PST, assets of any kind having a total transfer value not exceeding the difference.

(2) A * life insurance company can at any time transfer an asset of any kind to a * virtual PST in exchange for an amount of money equal to the * transfer value of the asset at the time of the transfer.

(3) A * life insurance company can transfer to a * virtual PST in an income year assets of any kind having a total * transfer value not exceeding the total amount of the * life insurance premiums paid to the company in that income year for the purchase of * virtual PST life insurance policies.

(4) Except as provided by this section and subsection 320 - 180(2), a * life insurance company cannot transfer an asset to a * virtual PST.

(1) The amount of the * virtual PST liabilities of a * life insurance company is to be worked out in accordance with subsection ( 2) in respect only of * life insurance policies issued by the company:

(b) the liabilities under which are to be discharged out of the company's * virtual PST assets.

(2) The amount of the virtual PST liabilities of a * life insurance company at a particular time is the sum of the following amounts at that time, as calculated by an * actuary:

(a) for policies providing for * participating benefits or * discretionary benefits:

(i) the values of supporting assets, as defined in the * Valuation Standard; and

(a) a * life insurance policy issued by a * life insurance company becomes an * exempt life insurance policy; and

(b) immediately before the policy became an exempt life insurance policy, the policy was a policy referred to in subsection 320 - 190(1);

the company can transfer from a * virtual PST, to its * segregated exempt assets, assets of any kind whose total * transfer value does not exceed the sum of:

(d) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of the assets transferred under this subsection.

(2) A * life insurance company can at any time transfer an asset from a * virtual PST in exchange for an amount of money equal to the * transfer value of the asset at the time of the transfer.

(b) imposes any fees or charges in respect of * virtual PST life insurance policies other than policies:

(i) that provide death or disability benefits, within the meaning of Part IX of the Income Tax Assessment Act 1936 , that are * participating benefits; and

(ii) the liabilities under which are to be discharged out of the company's * virtual PST; or

(c) determines, at a time other than a valuation time, that the total * transfer value of the virtual PST assets exceeds the sum of:

(ii) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in relation to those assets; and

(iii) the total amount of any unpaid * PAYG instalments relating to the * virtual PST component of the * complying superannuation class of the company's taxable income for the income year;

the company must, when the fees or charges are imposed or the excess is determined, as the case may be, transfer, from the * virtual PST, assets having a total transfer value equal to the fees, charges or excess, as the case may be.

(a) any liabilities arise for the discharge of which a * life insurance company's * virtual PST is established; or

(b) any expenses are incurred by a life insurance company directly in respect of * virtual PST assets in relation to a period during which the assets are virtual PST assets; or

(c) there are any unpaid * PAYG instalments relating to the * virtual PST component of the * complying superannuation class of a life insurance company's taxable income for the income year;

the life insurance company must pay from the virtual PST any amounts required to discharge the liabilities, amounts equal to the expenses, or amounts equal to the total amount of the unpaid PAYG instalments, as the case may be.

(a) an asset (other than money) is transferred from a * virtual PST under subsection 320 - 180(1) or 320 - 195(2) or (3); or

(b) an asset (other than money) is transferred to a virtual PST under subsection 320 - 180(2) or section 320 - 185.

(a) for the purposes of this Act (other than Parts 3 - 1 and 3 - 3) whether an amount is included in, or can be deducted from, the assessable income of a * life insurance company in respect of the transfer of the asset; or

(i) whether the company made a * capital gain in respect of the transfer of the asset; or

(ii) whether the company made a * capital loss in respect of the transfer of the asset;

(c) to have sold, immediately before the transfer, the asset transferred for a consideration equal to its * market value; and

(d) to have purchased the asset again at the time of the transfer for a consideration equal to its market value.

(3) If, apart from this subsection and section 320 - 55, a * life insurance company could deduct an amount or make a * capital loss as a result of a transfer of an asset to or from its * virtual PST, the deduction or capital loss is disregarded until:

(b) the asset, or a greater than 50% interest in it, is * acquired by an entity other than an entity that is an * associate of the company immediately after the transfer.

(1) The virtual PST component of the * complying superannuation class of a * life insurance company's taxable income for an income year is the sum of the amounts of the company's assessable income for the income year referred to in subsection ( 3), reduced by the sum of the amounts of the reductions referred to in subsection ( 4).

(2) However, if the sum of the amounts of the company's assessable income for the income year referred to in subsection ( 3) is less than the sum of the amounts of the deductions referred to in subsection ( 4):

(a) the company cannot apply the difference to reduce the * complying superannuation class of the company's taxable income for the income year; but

(b) the company can apply the difference to reduce any * virtual PST component of the complying superannuation class of the company's taxable income for a later income year.

(a) amounts of * ordinary income and * statutory income derived by the company during the income year from the investment of * virtual PST assets where the amounts relate to the period during which those assets were virtual PST assets; and

(b) the * transfer values of any assets transferred by the company during the income year to the * virtual PST under subsection 320 - 180(2) or 320 - 185(1) or (3); and

(c) if an asset (other than money) is transferred from a virtual PST under subsection 320 - 180(1) or 320 - 195(2) or (3)--the amount (if any) that is included in the company's assessable income because of section 320 - 200; and

(d) amounts included in the company's assessable income for the income year under section 275 of the Income Tax Assessment Act 1936 ; and

(e) * specified roll - over amounts paid to the company during the income year for the purchase of * deferred annuities where the * life insurance premiums relating to those annuities have been transferred to a virtual PST under subsection 320 - 185(3).

(a) the amounts that the company can deduct in respect of * life insurance premiums under section 320 - 55; and

(b) any losses (other than * capital losses) made during the income year from the investment of * virtual PST assets where the losses relate to the period during which the assets were virtual PST assets; and

(c) the * transfer values of any assets transferred by the company during the income year from the * virtual PST under subsection 320 - 180(1) or 320 - 195(3); and

(ca) if an asset (other than money) is transferred from a virtual PST under subsection 320 - 180(1) or 320 - 195(2) or (3)--the amount (if any) that the company can deduct because of section 320 - 87; and

(d) deductible expenses incurred by the company during the income year directly in respect of virtual PST assets where the expenses relate to the period during which the assets were virtual PST assets; and

(e) the proportion of the amount that the company can deduct under subsection 115 - 215(6) for the income year that is attributable to capital gains that the company is taken to have under subsection 115 - 215(3) in respect of virtual PST assets that are interests in trust estates.

This Subdivision explains how the specified roll - over component of the complying superannuation class of a life insurance company's taxable income is worked out.

The specified roll - over component of the * complying superannuation class of a * life insurance company's taxable income for an income year consists of the * specified roll - over amounts that:

This Subdivision explains how a life insurance company can segregate assets to be used for the sole purpose of discharging its liabilities under life insurance policies where the income derived by the company from those policies is exempt from income tax.

320 - 225 Segregation of assets for purpose of discharging exempt life insurance policy liabilities

320 - 240 Transfer of assets to segregated exempt assets otherwise than as a result of annual valuation

320 - 250 Transfer of assets and payment of amounts from segregated exempt assets otherwise than as a result of an annual valuation

320 - 255 Consequences of transfer of assets to or from segregated exempt assets

(1) A * life insurance company may, on or after 1 July 2000, segregate in accordance with subsections ( 2) and (3) any of its assets for the sole purpose of discharging its * exempt life insurance policy liabilities out of those assets.

Note: Section 320 - 225 of the Income Tax (Transitional Provisions) Act 1997 provides that a life insurance company may transfer a part of an asset to its segregated exempt assets before 1 October 2000.

(1A) Except as provided by section 320 - 225 of the Income Tax (Transitional Provisions) Act 1997 , an asset is taken not to be included in the segregated assets under this Subdivision unless the whole of the asset is included among the segregated assets.

(2) The assets segregated must, at the time of the segregation, be a representative sample of all the company's assets that support its * exempt life insurance policy liabilities immediately before the segregation.

(3) The assets segregated must have, at the time of the segregation, a total * transfer value that does not exceed the sum of:

(b) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of assets transferred to its * segregated exempt assets under subsection 320 - 195(1).

(5) If a segregation of assets is made in accordance with the above subsections, the company must use the * segregated exempt assets, and any other assets afterwards included among the segregated assets, only for the purpose of discharging its * exempt life insurance policy liabilities.

(a) a reference to the transfer of an asset to, or from, a * life insurance company's * segregated exempt assets:

(i) is a reference to the inclusion of an asset among the segregated exempt assets, or the exclusion of an asset from the segregated exempt assets, as the case may be; and

(ii) includes a reference to the transfer of money to, or from, those assets, as the case may be; and

(b) if an asset transferred to or from those assets is money, a reference to the * transfer value of the asset transferred is a reference to the amount of the money.

(1) A * life insurance company that has segregated any of its assets in accordance with section 320 - 225 must cause the * transfer values of its * segregated exempt assets to be calculated as at the following times ( valuation times ):

(2) A calculation for a valuation time is to be made not later than 60 days after that time.

(1) If the total * transfer value of the company's * segregated exempt assets at a valuation time exceeds the sum of:

(b) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of assets transferred to its segregated exempt assets under subsection 320 - 195(1);

the company must, within 30 days after the day on which the valuations of the transfer values of those assets are made, transfer, from the segregated exempt assets, assets of any kind having a total transfer value equal to the excess.

(2) If the total * transfer value of the company's * segregated exempt assets at a valuation time is less than the sum of:

the company can transfer, to the segregated exempt assets, assets of any kind having a total transfer value not exceeding the difference.

(3) A transfer of assets under subsection ( 1) is taken to have been made in the income year at the end of which the valuation time occurred.

(1) If a * life insurance company determines, at a time other than a valuation time, that the total * transfer value of its * segregated exempt assets is less than the sum of:

the company can transfer, to the segregated exempt assets, assets of any kind having a total transfer value not exceeding the difference.

(2) A * life insurance company can at any time transfer an asset of any kind to its * segregated exempt assets in exchange for an amount of money equal to the * transfer value of the asset at the time of the transfer.

(3) A * life insurance company can transfer, to its * segregated exempt assets in an income year, assets of any kind having a total * transfer value not exceeding the total amount of the * life insurance premiums paid to the company in that income year for the purchase of * exempt life insurance policies.

(4) Except as provided by this section and subsections 320 - 195(1) and 320 - 235(2), a * life insurance company cannot transfer an asset to its * segregated exempt assets.

(1) The amount of the * exempt life insurance policy liabilities of a * life insurance company is to be worked out in accordance with subsection ( 2) in respect only of * life insurance policies issued by the company:

(b) the liabilities under which are to be discharged out of the company's * segregated exempt assets.

(2) The amount of the exempt life insurance policy liabilities of a * life insurance company at a particular time is the sum of the following amounts at that time, as calculated by an * actuary:

(a) for policies providing for allocated benefits (other than * participating benefits or * discretionary benefits)--the * current termination values;

(b) for policies providing for participating benefits or discretionary benefits:

(i) the values of supporting assets, as defined in the * Valuation Standard; and

(ii) is a segregated current pension asset (within the meaning of Part IX of the Income Tax Assessment Act 1936 ) of the holder of the policy; and

(i) is held by a * life insurance company other than the life insurance company that issued the policy; and

(ii) is a * segregated exempt asset of the life insurance company that issued the policy; and

(1) A * life insurance company can at any time transfer an asset from its * segregated exempt assets in exchange for an amount of money equal to the * transfer value of the asset at the time of the transfer.

(b) imposes any fees or charges in respect of * exempt life insurance policies where the liabilities under the policies are to be discharged out of the company's segregated exempt assets; or

(c) determines, at a time other than a valuation time, that the total * transfer value of the segregated exempt assets exceeds the sum of:

(ii) any reasonable provision made by the company at that time in its accounts for liability for tax on unrealised gains in respect of assets transferred to its segregated exempt assets under subsection 320 - 195(1);

the company must, when the fees or charges are imposed or the excess is determined, as the case may be, transfer from the segregated exempt assets, assets having a total transfer value equal to the fees, charges or excess, as the case may be.

(a) any liabilities arise for the discharge of which a * life insurance company has * segregated exempt assets; or

(b) any expenses are incurred by a life insurance company directly in respect of segregated exempt assets in relation to a period during which the assets are segregated exempt assets;

the life insurance company must pay from the segregated exempt assets any amounts required to discharge the liabilities or amounts equal to the expenses, as the case may be.

(4) A * life insurance company can pay from its * segregated exempt assets any liability for tax on realised gains in respect of assets transferred to the segregated exempt assets under subsection 320 - 195(1).

(a) an asset (other than money) is transferred from the company's * segregated exempt assets under subsection 320 - 235(1) or 320 - 250(1) or (2); or

(b) an asset (other than money) is transferred to the company's * segregated exempt assets under subsection 320 - 235(2) or section 320 - 240.

(a) for the purposes of this Act (other than Division 42 and Parts 3 - 1 and 3 - 3) whether an amount is included in, or can be deducted from, the assessable income of a * life insurance company in respect of the transfer of the asset; or

(c) to have sold, immediately before the transfer, the asset transferred for a consideration equal to its * market value; and

(d) to have purchased the asset again at the time of the transfer for a consideration equal to its market value.

(3) If, apart from this subsection, section 320 - 60 and subsection 320 - 105(1), a * life insurance company could deduct an amount or apply a * capital loss as a result of the transfer of an asset to its * segregated exempt assets, the deduction or capital loss is disregarded until:

(b) the asset, or a greater than 50% interest in it, is * acquired by an entity other than an entity that is an * associate of the company, immediately after the acquisition.

(4) A * life insurance company cannot deduct an amount or apply a * capital loss as a result of the transfer of an asset from its * segregated exempt assets.

(5) If an asset that is a unit of * plant is transferred from the * segregated exempt assets of a * life insurance company, the company must assume, for the purposes of Division 42, that:

(a) the unit had, at all times during the period beginning when the asset was acquired or constructed by the company and ending immediately before the time of the transfer, been used by the company wholly for the purpose of producing assessable income; and

(b) the company had deducted amounts for depreciation in respect of the asset during that period by using the formula in subsection 42 - 160(3) or 42 - 165(2A).

(6) If an asset that is a unit of * plant is transferred to the * segregated exempt assets of a * life insurance company, then, in determining for the purposes of Division 42 whether an amount is included in, or can be deducted from, the company's assessable income as a result of the transfer, the company is taken:

(a) to have, at the time immediately before the transfer, sold the asset for a consideration equal to its * market value at that time; and

(b) to have, at the time of the transfer, purchased the asset again for a consideration equal to its market value at that time.

(7) If an asset that is a unit of * plant that has been included in the * segregated exempt assets of a * life insurance company since the asset was acquired by the company or the initial segregation of those assets took place is transferred from those assets, then the company must assume for the purposes of Division 42 that:

(a) if the asset's * market value at the time of the transfer is greater than its * notional undeducted cost at that time, the company:

(i) had, at the time immediately before the transfer, sold the asset for a consideration equal to its notional undeducted cost at that time; and

(ii) had, at the time of the transfer, purchased the asset again for a consideration equal to its notional undeducted cost at that time; or

(b) if the asset's market value at the time of the transfer is equal to or less than its notional undeducted cost at that time, the company:

(i) had, at the time immediately before the transfer, sold the asset for a consideration equal to its market value at that time; and

(ii) had, at the time of the transfer, purchased the asset again for a consideration equal to its market value at that time.

(8) If an asset that is a unit of * plant that was previously transferred to the * segregated exempt assets of a * life insurance company is transferred from those assets, then, the company must assume, for the purposes of Division 42 that:

(a) if the asset's * market value at the time of its transfer from those assets is greater than its market value at the time when it was transferred to those assets, the company:

(i) had, at the time immediately before the transfer from those assets, sold the asset for a consideration equal to its market value at the time when it was transferred to those assets; and

(ii) had, at the time of the transfer from those assets, purchased the asset again for a consideration equal to its market value at the time when it was transferred to those assets; or

(b) if the asset's market value at the time of its transfer from those assets is equal to or less than its market value at the time when it was transferred to those assets, the company:

(i) had, at the time immediately before the transfer from those assets, sold the asset for a consideration equal to its market value at that time; and

(ii) had, at the time of the transfer from those assets, purchased the asset again for a consideration equal to its market value at that time.

For the purpose of working out the * capital gain of a * life insurance company or a * registered organisation from a * CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000, the * cost base includes indexation only if the company or organisation chooses that the cost base includes indexation.

Indexation is not relevant to the * capital gain of a * life insurance company or a * registered organisation from a * CGT event happening after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and before 1 July 2000 unless the company or organisation has chosen that the * cost base include indexation for the purposes of section 110 - 25 of the Income Tax Assessment Act 1997 .

(a) a * life insurance company (other than a * registered organisation), in relation to a non - exempt modified discount capital gain from a notional CGT event in respect of a * CGT asset where the event occurred during the period starting immediately after 11.45 am (by legal time in the Australian Capital Territory) on 21 September 1999 and ending immediately before 1 July 2000; or

(b) a * registered organisation, in relation to a modified discount capital gain from a notional CGT event in respect of a CGT asset where the event occurred during that period.

(2) In paragraph ( 1)(a), non - exempt modified discount capital gain and notional CGT event have the meanings that were given by Division 8 of Part III of the Income Tax Assessment Act 1936 as in force when the relevant * CGT event occurred.

(3) In paragraph ( 1)(b), modified discount capital gain and notional CGT event have the meanings that were given by Division 8A of Part III of the Income Tax Assessment Act 1936 as in force when the relevant * CGT event occurred.

320 - H Segregation of assets for the purpose of discharging exempt life insurance policies

(a) any assets held by the benefit funds of a * life insurance company that is a * friendly society for the purpose of providing superannuation benefits to its members are transferred before 1 July 2001 to a * complying superannuation fund; and

(b) the persons who had interests in those assets immediately before the transfer had substantially the same interests in the assets after the transfer;

(1) In working out the amount that a * life insurance company can deduct, in respect of * life insurance policies that are * disability policies (other than * continuous disability policies) under subsection 320 - 85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the * value of the company's liabilities under the * net risk components of the policies at the end of the previous income year is taken to be the value of the liabilities as at the end of 30 June 2000 relating to those policies that was used by the company for the purposes of its return of income.

(2) In working out the amount that a life insurance company can deduct, in respect of life insurance policies (other than policies to which subsection ( 1) applies) under subsection 320 - 85(1) of the Income Tax Assessment Act 1997 for the income year in which 1 July 2000 occurs, the value of the company's liabilities under the net risk components of the policies at the end of the previous income year is taken to be the value of the company's liabilities as at the end of 30 June 2000 under the net risk components relating to those policies as calculated under subsection 320 - 85(4) of that Act.

(1) This section applies to an asset (an approved asset ) of a * life insurance company if:

(b) the asset is held in an * Australian fund or an * Australian/overseas fund of the company; and

(ii) whichever is the greater of 2% of the value of that fund at that date or $5,000,000.

(2) If the * life insurance company wishes to include a part of an approved asset in its * virtual PST before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the virtual PST.

(3) If the * life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company.

(a) a * life insurance company had a liability before 1 July 2000 under a * life insurance policy; and

(b) the liability or a part of it becomes a liability that is to be discharged out of the company's * virtual PST assets;

then, the transfer of any of the company's assets to the * virtual PST is to be disregarded to the extent to which the assets are transferred to meet the liability or that part of it, as the case may be.

(2) If a life insurance company that is a friendly society establishes a virtual PST in the 2000 - 01 income year, the calculation of the transfer values of the company's virtual PST assets as at the end of that income year is to be made not later than 90 days after the end of that income year.

(1) This section applies to an asset (an approved asset ) of a * life insurance company if:

(b) the asset is held in an * Australian fund or an * Australian/overseas fund of the company; and

(ii) whichever is the greater of 2% of the value of that fund at that date or $5,000,000.

(2) If the * life insurance company wishes to include a part of an approved asset in its * segregated exempt assets before 1 October 2000, the company must, before that date, certify in writing the part (if any) of the asset to be included in the segregated exempt assets.

(3) If the * life insurance company so certifies, the part of the asset stated in the certificate is to be treated as a separate asset of the company.

(a) a * life insurance company had a liability before 1 July 2000 under a * life insurance policy where the income of the company attributable to the liability was exempt from tax before that date; and

(b) the liability or a part of it becomes a liability that is to be discharged out of the company's * segregated exempt assets;

then the transfer of any of the company's assets to the segregated exempt assets is to be disregarded for any purpose of the Income Tax Assessment Act 1997 to the extent to which the assets are transferred to meet the liability or that part of it, as the case may be.

(2) If a life insurance company that is a friendly society segregates any of its assets in accordance with section 320 - 225 of the Income Tax Assessment Act 1997 in the 2000 - 01 income year, the calculation of the transfer values of the company's segregated exempt assets as at the end of that income year is to be made not later than 90 days after the end of that income year.

The amendments made by items 85 and 86 apply to assessments for the income year in which 21 September 1999 occurred and later income years.

"AD/RLA component" has the meaning that was given by Division 8 of Part III of the Assessment Act as in force immediately before 1 July 2000.

"complying superannuation class" of the taxable income of a life insurance company has the same meaning as in the Income Tax Assessment Act 1997 .

(a) for a life insurance company--has the meaning that was given by Division 8 of Part III of the Assessment Act as in force immediately before 1 July 2000; or

(b) for a registered organisation--has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

"EIB component" has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

"general fund component" has the meaning that was given by Division 8 of Part III of the Assessment Act as in force immediately before 1 July 2000.

(a) for a life insurance company--has the meaning that was given by Division 8 of Part III of the Assessment Act as in force immediately before 1 July 2000; and

(b) for a friendly society--has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

"ordinary class" of the taxable income of a life insurance company has the same meaning as in the Income Tax Assessment Act 1997 .

"registered organisation" has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

"RSA category A component" has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

"RSA category B component" has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

"RSA combined component" has the meaning that was given by Division 8A of Part III of the Assessment Act as in force immediately before 1 July 2000.

(a) for a life insurance company--has the meaning that was given by Division 8 of Part III of the Assessment Act as in force immediately before 1 July 2000; or

Subject to sections 23B and 23C, the rates of tax in respect of the taxable income of a life insurance company are:

(i) for the 2000 - 01 year of income--33% for a company that is a friendly society and 34% for any other life insurance company; and

(b) in respect of the complying superannuation class for the 2000 - 01 year of income and all later years of income--15%.

(1) This section applies to a life insurance company other than a friendly society.

(2) If the 2000 - 01 year of income of a life insurance company starts before 1 July 2000, the rates of tax in respect of parts of the company's taxable income for the period starting at the start of the company's 2000 - 01 year of income and ending at the end of 30 June 2000 are as follows:

(a) the part of the CS/RA component equal to the amount that would be the CS/RA component if that period were a year of income--15%;

(b) the part of the AD/RLA component equal to the amount that would be the AD/RLA component if that period were a year of income--39%;

(c) the part of the RSA component of the general fund component equal to the amount that would be that RSA component if that period were a year of income--15%;

(d) the part of the standard component of the general fund component equal to the amount that would be that standard component if that period were a year of income:

(i) if the company is a mutual life assurance company (within the meaning of section 110 of the Assessment Act as in force immediately before 1 July 2000) at the end of the period--39%; or

(e) the part of the NCS component equal to the amount that would be the NCS component if that period were a year of income--47%.

(3) If the 2000 - 01 year of income of a life insurance company starts before 1 July 2000, the rates of tax in respect of parts of the company's taxable income for the period starting on 1 July 2000 and ending at the end of the company's 2000 - 01 year of income are as follows:

(a) the part of the ordinary class equal to the amount that would be the ordinary class if that period were a year of income--34%;

(b) the part of the complying superannuation class equal to the amount that would be the complying superannuation class if that period were a year of income--15%.

(4) If the 2000 - 01 year of income of a life insurance company starts after 1 July 2000, the rates of tax in respect of parts of the company's taxable income for the period starting at the start of the company's 1999 - 2000 year of income and ending at the end of 30 June 2000 are as follows:

(a) the part of the CS/RA component equal to the amount that would be the CS/RA component if that period were a year of income--15%;

(b) the part of the AD/RLA component equal to the amount that would be the AD/RLA component if that period were a year of income--39%;

(c) the part of the RSA component of the general fund component equal to the amount that would be that RSA component if that period were a year of income--15%;

(d) the part of the standard component of the general fund component equal to the amount that would be that standard component if that period were a year of income:

(i) if the company is a mutual life assurance company (within the meaning of section 110 of the Assessment Act as in force immediately before 1 July 2000) at the end of the period--39%; or

(e) the part of the NCS component equal to the amount that would be the NCS component if that period were a year of income--47%.

(5) If the 2000 - 01 year of income of a life insurance company starts after 1 July 2000, the rates of tax in respect of parts of the company's taxable income for the period starting on 1 July 2000 and ending at the end of the company's 1999 - 2000 year of income are as follows:

(a) the part of the ordinary class equal to the amount that would be the ordinary class if that period were a year of income--36%;

(b) the part of the complying superannuation class equal to the amount that would be the complying superannuation class if that period were a year of income--15%.

(1) This section applies to a friendly society that is a life insurance company.

(2) If the 2000 - 01 year of income of a friendly society starts before 1 July 2000, the rates of tax in respect of parts of the society's taxable income for the period starting at the start of the society's 2000 - 01 year of income and ending at the end of 30 June 2000 are as follows:

(a) the part of the CS/RA component equal to the amount that would be the CS/RA component if that period were a year of income--15%;

(b) the part of the EIB component equal to the amount that would be the EIB component if that period were a year of income--33%;

(c) the part of the RSA category A component equal to the amount that would be that RSA category A component if that period were a year of income--15%;

(d) the part of the RSA category B component equal to the amount that would be that RSA category B component if that period were a year of income--34%;

(e) the part of the NCS component equal to the amount that would be the NCS component if that period were a year of income--47%.

(3) If the 2000 - 01 year of income of a friendly society starts before 1 July 2000, the rates of tax in respect of parts of the society's taxable income for the period starting on 1 July 2000 and ending at the end of the society's 2000 - 01 year of income are as follows:

(a) the part of the ordinary class equal to the amount that would be the ordinary class if that period were a year of income--33%;

(b) the part of the complying superannuation class equal to the amount that would be the complying superannuation class if that period were a year of income--15%.

(4) If the 2000 - 01 year of income of a friendly society starts after 1 July 2000, the rates of tax in respect of parts of the society's taxable income for the period starting at the start of the society's 1999 - 2000 year of income and ending at the end of 30 June 2000 are as follows:

(a) the part of the CS/RA component equal to the amount that would be the CS/RA component if that period were a year of income--15%;

(b) the part of the EIB component equal to the amount that would be the EIB component if that period were a year of income--33%;

(c) the part of the RSA category A component equal to the amount that would be the RSA category A component if that period were a year of income--15%;

(d) the part of the RSA category B component equal to the amount that would be the RSA category B component if that period were a year of income--36%;

(e) the part of the NCS component equal to the amount that would be the NCS component if that period were a year of income--47%.

(5) If the 2000 - 01 year of income of a friendly society starts after 1 July 2000, the rates of tax in respect of parts of the society's taxable income for the period starting on 1 July 2000 and ending at the end of the society's 1999 - 2000 year of income are as follows:

(a) the part of the ordinary class equal to the amount that would be the ordinary class if that period were a year of income--33%;

(b) the part of the complying superannuation class equal to the amount that would be the complying superannuation class if that period were a year of income--15%.

(2A) The instalment income of a * life insurance company for a period also includes:

(a) any part of its * statutory income that is reasonably attributable to that period and is included in the * complying superannuation class of its taxable income for the income year that is or includes that period; and

(b) any part of its statutory income (other than * net capital gains) that is included in the * ordinary class of its taxable income for that income year.

(6) If the * base year is the income year immediately preceding the income year in which 1 July 2000 occurred, subsections ( 4) and (5) apply for the purpose of working out the * base assessment instalment income of a * life insurance company in the same way as they apply for the purpose of working out such a company's * notional tax.

(3) The adjusted taxable income of a * life insurance company for the * base year is worked out as follows:

Method statement

Step 1. Recalculate the * ordinary class of the taxable income for the * base assessment on the basis that the assessable income that relates to the class did not include any * net capital gain.

Step 2. Add to the step 1 result the * complying superannuation class of the taxable income for the * base assessment.

Step 3. Add to the step 2 result the deductions for * tax losses used in making the * base assessment.

Step 4. Reduce the step 3 result by the amount of any tax loss, to the extent that the life insurance company can carry it forward to the next income year.

(3) The adjusted assessed taxable income of a * life insurance company for the variation year is worked out as follows:

Method statement

Step 1. Recalculate the * ordinary class of the taxable income for the variation year on the basis that the assessable income that relates to the class did not include any * net capital gain.

Step 2. Add to the step 1 result the * complying superannuation class of the taxable income for the variation year.

21	A CGT asset is transferred to or from a life insurance company's virtual PST	First element of cost base and reduced cost base	Division 320
22	A CGT asset is transferred to or from the segregated exempt assets of a life insurance company	First element of cost base and reduced cost base	Division 320
23	A CGT asset is transferred to or from the segregated current pension assets of a complying superannuation fund	First element of cost base and reduced cost base	section 273H
24	A CGT asset is transferred to or from the segregated exempt superannuation assets of a PST	First element of cost base and reduced cost base	section 273H

11	A CGT asset is transferred to or from a life insurance company's virtual PST	at the time of the transfer	Division 320
12	A CGT asset is transferred to or from the segregated exempt assets of a life insurance company	at the time of the transfer	Division 320
13	A CGT asset is transferred to or from the segregated current pension assets of a complying superannuation fund	at the time of the transfer	section 273H
14	A CGT asset is transferred to or from the segregated exempt superannuation assets of a PST	at the time of the transfer	section 273H

Commonwealth Consolidated Acts

NEW BUSINESS TAX SYSTEM (MISCELLANEOUS) ACT (NO. 2) 2000 - SCHEDULE 2