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EY 4: Apportionment of income of particular source or nature, and of tax credits
or “Splitting income and tax credits between policyholder and shareholder bases for insurance policies”
You could also call this:

“How to calculate taxes for part of a year if you're a life insurer”

If you’re a life insurer, you might need to do special tax calculations for part of the year if 1 July 2010 isn’t the first day of your income year. This is called a part-year tax calculation.

When you do these calculations, you treat the year as if it’s split into two parts: before 1 July 2010 and after 1 July 2010. You use different rules for each part.

These calculations might result in income and deductions for your income year, but you don’t need to file separate tax returns for each part. It’s all part of one tax return for the whole year.

If you transfer your life insurance business to another insurer, there are special rules about how to do these calculations. The insurer receiving the business might need to do calculations as if they were you.

If you’re transferring the business, you do a calculation right before the transfer. If you’re receiving the business, you do a calculation starting from the day of the transfer.

For some policies, you might need to do part-year calculations if certain rules stop applying to the policy before the end of the income year.

Remember, these are complicated rules about taxes for life insurance companies. If you’re not sure about something, it’s a good idea to ask a grown-up or a tax expert for help.

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or “The Commissioner can seek expert advice on financial calculations and risks”
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Part E Timing and quantifying rules
Life insurance rules

EY 5Part-year tax calculations

  1. For their life insurance and for their general insurance contracts outstanding claims reserve, a life insurer does part-year tax calculations, described in subsection (2), if they do not have an early life regime application day and 1 July 2010 is not the first day of their income year.

  2. For calculating their income tax liability for the tax year that corresponds to the income year that includes 1 July 2010, where 1 July 2010 is not the first day of the income year, the life insurer treats references, in the rules for life insurers, to an income year or a tax year as if they are references to 2 separate tax years and corresponding income years (the part-years) within that first tax year, divided by 1 July 2010 (for example: a rule to calculate an amount of policyholder income for an income year under the replaced rules means the calculation is done for the relevant part-year before 1 July 2010. A rule to calculate an opening reserve amount under sections EY 23 to EY 27 at the beginning of an income year under the new rules means the calculation is done on 1 July 2010, at the beginning of the relevant part-year).

  3. The part-year calculations may give rise to income and deductions for the income year, but they do not create any part-year tax return obligations. The 2 part-year calculations compose 1 income tax liability for 1 income year.

  4. Subsections (3C) to (5) apply where a life insurer (the transferor) transfers life insurance business to another life insurer (the transferee) and sections EY 23 to EY 27 apply to either or both of the transferor and transferee.

  5. If sections EY 23 to EY 27 apply to the transferee but not to the transferor, the transferee—

  6. does the calculations that would be required under this section for the transferor if sections EY 23 to EY 27 applied to the transferor; and
    1. uses the results of the calculations in the way required under this section for a transferee.

      1. A transferor to whom sections EY 23 to EY 27 apply does a part-year calculation immediately before the transfer, as described in subsection (2), for each class of policy in the transferred business, but only for their part-year ending on the day the transfer occurs. A transferee to whom sections EY 23 to EY 27 apply also does a part-year calculation for the transferred policies, as described in subsection (2), but only for their part-year starting on the day the transfer occurs. The transferee's relevant opening part-year reserve amounts under sections EY 23 to EY 27 equal the transferor's relevant closing part-year reserve amounts immediately before the transfer, and if the life reinsurance associated with a class of policies is not assigned by the transferor to the transferee, those reserve amounts are calculated without subtracting relevant life reinsurance amounts.

      2. If a class of policies (the class) is transferred by a transferor to whom sections EY 23 to EY 27 do not apply to a life insurer (the insurer) to whom sections EY 23 to EY 27 apply, the opening value of the reserve amounts for the class under sections EY 23 to EY 27 for the insurer is the closing value that the reserve amounts would have for the transferor if sections EY 23 to EY 27 applied to the transferor.

      3. Transferor's and transferee's part-year calculations may give rise to income and deductions for the income year, but they do not create any part-year tax return obligations.

      4. If, for a life insurance policy, the transitional adjustment under section EY 30(7) is calculated for part of an income year, because section EY 30 ceases to apply to the policy before the end of the income year, the life insurer does part-year tax calculations for the policy for the income year, as described in subsection (2), but the income year is divided by the day that section EY 30 ceases to apply. The effect of the part-year calculations is described in subsection (3).

      5. Repealed
      Notes
      • Section EY 5: substituted, on , by section 185(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section EY 5(2): amended (with effect on 1 July 2010), on , by section 53 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section EY 5(3) heading: amended (with effect on 1 July 2010), on , by section 45(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section EY 5(3B) heading: inserted, on , by section 57(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(3B): inserted, on , by section 57(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(3C) heading: inserted, on , by section 57(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(3C): inserted, on , by section 57(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(4): amended, on , by section 57(2)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(4): amended, on , by section 57(2)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(4): amended (with effect on 1 July 2010), on , by section 53(b) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
      • Section EY 5(4): amended (with effect on 1 July 2010), on , by section 45(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section EY 5(4B) heading: inserted, on , by section 57(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(4B): inserted, on , by section 57(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section EY 5(6) heading: substituted (with effect on 1 July 2010), on , by section 45(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section EY 5(6): substituted (with effect on 1 July 2010), on , by section 45(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section EY 5(7) heading: repealed (with effect on 1 July 2010), on , by section 45(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
      • Section EY 5(7): repealed (with effect on 1 July 2010), on , by section 45(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).