Income Tax Act 2007

Deductions - Life insurance business expenditure

DR 4: Life insurers' claims

You could also call this:

“Claims life insurers can deduct from their taxes”

If you are a life insurer, you usually can’t get a tax deduction for outstanding claims or for expenses or losses related to claims in a given year. There are two exceptions to this rule.

The first exception is explained in section EY 24, which talks about outstanding claims for certain types of insurance policies.

The second exception allows you to get a deduction for some expenses or losses. This is explained in section EY 20. You can get this deduction for the part of a claim that relates to life risk. This only applies to claims you paid during the year for life insurance policies that are not annuities and not profit participation policies.

While this rule adds to the general permission for tax deductions, other general limitations still apply. However, the capital limitation doesn’t apply in some cases. This exception to the capital limitation is for life insurers and for the life risk parts of claims under certain life insurance policies that have been transferred to the life insurer.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3111005.

Topics:
Money and consumer rights > Taxes
Business > Industry rules

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Part D Deductions
Life insurance business expenditure

DR 4Life insurers' claims

  1. For a life insurer's life insurance policies, the life insurer is denied a deduction relating to the life insurer's outstanding claims or for a claim's expenditure or loss for an income year, except as provided by—

  2. section EY 24 (Outstanding claims reserving amount: non-participation policies not annuities):
    1. subsection (2).
      1. The life insurer is allowed a deduction as provided by section EY 20 (Shareholder base allowable deductions: non-participation policies) for the amount of expenditure or loss relating to the life risk component of a claim paid for the income year under a life insurance policy that is not an annuity and not a profit participation policy.

      2. This section supplements the general permission. The general limitations still apply, except that the capital limitation does not apply for a life insurer and the life risk components of claims under life insurance policies that are not annuities and not profit participation policies and have been transferred to the life insurer.

      Notes
      • Section DR 4: added, on , by section 94(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section DR 4 heading: replaced (with effect on 1 July 2010), on , by section 39(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section DR 4(2): replaced, on , by section 39(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section DR 4(3): amended (with effect on 1 July 2010), on , by section 39(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section DR 4 list of defined terms capital limitation: inserted (with effect on 1 July 2010), on , by section 39(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section DR 4 list of defined terms life risk component: inserted (with effect on 1 July 2010), on , by section 39(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section DR 4 list of defined terms profit participation policy: inserted (with effect on 1 July 2010), on , by section 39(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).