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Friday, 12 June 1970

Mr Les Johnson (HUGHES, NEW SOUTH WALES) asked the Treasurer, upon notice:

(1)   For how long have life insurance premiums been an allowable deduction for income tax purposes and what has been the maximum amount claimable from time to time.

(2)   Are there any limitations or qualifications which apply to a life policy in order that the premiums thereon may be treated as allowable deductions.

(3)   What is the approximate cost to revenue of these deductions.

(4)   Is he aware of any abuse of the income tax provisions such as the offering by insurance companies of life policies for a short term of years.

(5)   If so, has any consideration been given to amending the conditions under which life insurance premiums qualify as tax deductions.

Mr Bury - The answer to the honourable member's question is as follows:

(1)   A concession has been available for life insurance premiums since Commonwealth income tax was introduced in 1915. The concession has taken the form of deductions against assessable income for all years of income except the years ended 30 June 1942 to 1950, inclusive, when rebates of tax were substituted for concessional deductions.

The maximum amounts that have been allowable as deductions against income or subject to rebates of tax are -

(1)   for premiums securing life insurance or deferred annuities - e years ended 30 June 1915 to 1935- £100;

(ii)   for payments of the nature specified in (i) and including also any amounts paid as contributions to superannuation funds, sustentation funds, widows funds, orphans' funds and friendly societies - e years ended 30th June 1936 to 1949- $200 e year ended 30th June 1950- $300;

(iii)   for payments of the nature specified in (i) and (ii) and including also any amounts paid as premiums for sickness insurance, personal injury or accident insurance and contributions to medical or hospital benefit funds - e years ended 30 June 1951 to 1956- $400;

(iv)   for payments of the nature specified in (i), (ii) and (iii) (other than contributions to medical or hospital benefit funds) - e years of income ended 30 June 1957 to 1959- $600 years of income ended 30 June 1960 to 1967- $800 o years of income ended 30 June 1968 to 1970- $1200.

(2)   In order that premiums .paid on a life policy may qualify for deduction, the insurance is required to be effected on the life of the taxpayer himself (being a resident of Australia) or of his spouse or child.

(3)   The latest available statistics that relate to life insurance deduction are included in the statistics of deductions for life insurance and superannuation payments, etc., allowed to taxable individuals for the 1967-68 income year. No separate statistics of life insurance deductions are available, but it has been estimated that the cost to income tax revenue of allowing deductions in respect of life insurance premiums in the 1967- 1968 income year was about $120m.

(4)   It is understood that most insurance companies do not issue ordinary endowment policies for terms shorter than ten years, except in special circumstances. In recent times, however, certain companies have been offering endowment policies for shorter terms and there has been some evidence of a growing interest in the use of these policies for tax-saving purposes.

(5)   An examination of developments in the use of the taxation concession for life insurance premiums is being made to determine whether the conditions governing the concession should be amended.

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