Tax Newsletter

National Mutual Life Association & Ors v Comr of State Taxation - SA stamp duty: "rider" insurance policies assessable at general insurance rate [St5]

The Full Court of the SA Supreme Court has dismissed the appeals of 3 taxpayers (ING Life, ANZ Life Assurance and AMP Life), but allowed the appeal of 1 taxpayer (National Mutual Life), against the decision of the SA Supreme Court which had affirmed the Commissioner's assessment of stamp duty concerning certain "rider" policies using the higher "general insurance" rate.

The 4 taxpayers sell life insurance products. The life insurance policies can be bundled with "rider" policies, such as TPD cover, terminal illness cover and trauma cover. The taxpayers applied for annual licences as required under the then Stamp Duties Act 1923 (SA) and paid duty at the lower "life insurance" rate. The amount of duty was calculated with respect to the premiums paid on the insurance contracts regardless of whether the cover was with or without riders.

In April 2001, the Commissioner issued Circular 213, which expressed concern about insurers including riders to life insurance policies in one premium, with duty then being calculated at the life insurance rate for the whole amount.

For each of the taxpayers, the Commissioner issued an assessment concerning relevant monthly returns claiming additional stamp duty for the riders at the general insurance rate. The majority of the assessments also included penalties and interest. The amount in dispute totalled some $11.8m (including interest and penalties).

The Full Court held the premiums received for trauma insurance and for TPD insurance should be characterised as premiums received as "premiums relating to policies of any kind (other than life insurance policies)", and accordingly, found the Commissioner was correct to assess duty on the relevant instruments (ie monthly returns) at the general insurance rate in accordance with Sch 2 (ab) of the Stamp Duties Act.

However, the Full Court noted that in the case of National Mutual Life, a number of assessments in part related to premiums that did not fall within the terms of Sch 2 (ab). Accordingly, the Full Court allowed the appeal by National Mutual Life for the limited purpose of allowing the Commissioner to reconsider the relevant assessments.

(National Mutual Life Association & Ors v Comr of State Taxation [2011] SASCFC 106, Supreme Court of South Australia, Full Court, Gray, Sulan, Vanstone JJ, 30 September 2011.)

[LTN 193, 6/10]




 

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