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Income Tax Act 2007

Timing and quantifying rules - Life insurance rules

EY 2: Policyholder base

You could also call this:

“Income and deductions for life insurers related to policyholders”

If you are a life insurer, you can have income and deductions related to your policyholder base. This is money that comes from or is spent on your policyholders.

You can get policyholder base income from different types of policies. These include savings product policies that aren’t profit participation policies, profit participation policies, and other specific situations described in the law.

You can also have policyholder base allowable deductions. These are expenses you can subtract from your income. They come from things like managing savings product policies, providing services to policyholders, and other specific situations described in the law.

To figure out your schedular policyholder base income, you take your policyholder base income and subtract your policyholder base allowable deductions. You can only subtract as much as you have income, though. If you have more deductions than income, you can carry the extra forward to use next year.

If you transfer a life insurance policy to another life insurer, you can also transfer any unused deductions for that policy.

If you’re a life fund PIE that is a multi-rate PIE, some of your income and deductions are treated differently and aren’t included in your schedular policyholder base income.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515761.

Topics:
Money and consumer rights > Taxes
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EY 1: What this subpart does, or

“This subpart explains how life insurance companies are taxed in New Zealand”

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EY 3: Shareholder base, or

“Explains how life insurers calculate income and deductions for their shareholder base”

Part E Timing and quantifying rules
Life insurance rules

EY 2Policyholder base

  1. A life insurer has policyholder base income,—

  2. for savings product policies that are not profit participation policies, under section EY 15:
    1. for profit participation policies, under section EY 17:
      1. under section EY 27(4).

        1. A life insurer has policyholder base allowable deductions,—

        2. for savings product policies that are not profit participation policies, under section EY 16:
          1. for consideration for services provided to policyholders by the life insurer in administering and managing funds intended for use in meeting future policyholder claims under savings product policies that are not profit participation policies, under section EY 16B:
            1. for profit participation policies, under section EY 18:
              1. under section EY 27(4):
                1. under section EZ 61 (Allowance for cancelled amount: spreading):
                  1. under section LE 2B (Use of remaining credits by life insurer on policyholder base).

                    1. A life insurer’s schedular policyholder base income is the amount calculated by subtracting, from the assessable income in the policyholder base income for the income year, the amounts of policyholder base allowable deductions incurred in the income year, or available in the income year under subsection (5) or (5B), in the order in which the amounts are incurred.

                    2. Despite subsection (3), the total amount that is subtracted under subsection (3), including an amount available in the income year under subsection (5) or (5B), is no more than the amount of the assessable income in the life insurer’s policyholder base income for the income year.

                    3. An amount of policyholder base allowable deductions that cannot be subtracted under subsection (3) in the current year because of subsection (4) is carried forward to the next income year and treated as policyholder base allowable deductions for that income year.

                    4. If a life insurer (the transferor) transfers a life insurance policy to another life insurer (the transferee) in an income year and, immediately before the transfer, the transferor has an amount (the transferred amount) of policyholder base allowable deductions for the life insurance policy and the income year, at the time of the transfer—

                    5. the amount of policyholder base allowable deductions of the transferor for the income year is reduced by the transferred amount; and
                      1. the amount of policyholder base allowable deductions incurred by or available to the transferee in the income year is increased by the transferred amount, which is treated as being incurred by the transferee for the life insurance policy at the time of the transfer.

                        1. Despite subsections (3) to (5) a life insurer's schedular income derived by their life fund PIE that is a multi-rate PIE is excluded from their schedular policyholder base income, along with deductions for that income.

                        Notes
                        • Section EY 2: substituted, on , by section 185(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                        • Section EY 2(2)(ab): inserted (with effect on 1 April 2015), on , by section 80(1) (and see section 80(6) and (7)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EY 2(3): replaced (with effect on 1 April 2016 and applying for the 2016–17 and later income years), on , by section 80(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EY 2(4): amended (with effect on 1 April 2016 and applying for the 2016–17 and later income years), on , by section 80(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EY 2(5): replaced, on (applying for income years beginning after this date), by section 80(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EY 2(5B) heading: inserted (with effect on 1 April 2016 and applying for transfers occurring on or after the beginning of the 2016–17 income year), on , by section 80(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                        • Section EY 2(5B): inserted (with effect on 1 April 2016 and applying for transfers occurring on or after the beginning of the 2016–17 income year), on , by section 80(5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).